New research by Moody’s Analytics shows that the threat to reputation is a key driver of investment in supplier risk detection and highlights a lack of sophistication in third-party risk management.
Key findings from the research include:
- 69 percent of businesses say they do not have the necessary visibility over their supply chains to uncover risk in their organizational networks to avoid reputational harm.
- 70 percent of businesses are growing their investment in third-party risk management.
- 74 percent rated their third-party risk management sophistication as either poor or mediocre.
Businesses pointed to a range of factors driving these results: a lack of data, difficulty evaluating every organization in a supplier network, and the responsibility for supply chain visibility being spread across departments.
Identifying risks associated with suppliers buried in the supply chain is crucial to corporate responsibility and to protecting reputations, especially for consumer-facing businesses and regulated organizations which are particularly sensitive to reputational risk. Yet gaining visibility into operations and suppliers in lower tiers of the supply chain is a challenge, with their data unavailable or firms not required to release information.
The qualitative research found four key advantages of improved third-party risk management:
- Avoidance of reputational damage
- Improved operational resilience
- Avoidance of fines
- Faster time to supply chain recovery following disruption.
More details (PDF).