Third-Party Vendors: Great Value with Great Risk
Your business must move quickly to evaluate opportunities, enter markets, develop products, ramp up sales, respond to customer needs and complaints, and a host of other challenges that make the difference between success and failure.
Leveraging third-party partners, such as suppliers, contractors, consultants, agents, distributors, representatives, and other parties, is now more important than ever for a business is to move grow rapidly and confidently in today’s fast-paced world.
What would you do?
These third-party partnerships can create both the potential for great value and chance of great risk. What would you do in the following situations?
- A vendor with lax information security controls led to significant personal data disclosures of customers and the customers’ end-consumers
- An agent you have recruited to seek business from foreign governments on your behalf is engaging in bribery.
- You receive shoddy or defective parts from your subcontractors or found unsafe components or raw materials built into products for end-consumers.
- As an exporter you discover that partners violating international trade requirements.
There are a multitude of scenarios that your employees, in various roles in your company, could encounter when working with third-party vendors and these can put your organization in a great deal of risk.
What could happen?
While your company may not be the source of the problem in the above scenarios, it is still going to bear the brunt of the fallout which can result in:
- Failure to meet your obligations to customers
- Inability to meet expectations to stakeholders
- Damage to your company’s reputation for integrity
- Suspension, restrictions or debarment from certain opportunities
What should you be doing?
As a company, you should be addressing the specific challenges in relationships with suppliers, contractors, agents, representatives, distributors, and other partners and educating all employees throughout an organization that work directly or indirectly with third parties to be educated on these relationships.
Such training would be particularly valuable to:
- Leadership charged with building and maintaining relationships with third parties
- Sales staff who work with agents, representatives, and distributors
- Procurement or purchasing staff who work closely with third parties
- Operations staff who interact regularly with third parties
- Functional staff who manage contractors and consultants
- International trade staff who work with agents, brokers, and similar partners
These partnerships can create both the potential for great value and chance of great risk in maintaining an ethical reputation. In order to safeguard against potential problems, companies need to develop more sophisticated ways to evaluate, establish, and maintain third-party relationships to protect from unanticipated risk and, in turn, help them best achieve their goals from the relationship.