After the immediate survival phase of the COVID-19 outbreak has passed, companies will turn their focus to recovery, and rebuilding the third-party partnerships that constitute their global supply chain networks is a crucial step in this process. Many third parties will no longer exist, and others will have adopted new tactics to survive. Companies will likely pursue a strategy of vendor diversification to mitigate the now-obvious risks of geographic concentration.
Post COVID-19, traditional methods of managing an enterprise-wide due diligence process will no longer suffice. Using spreadsheets to track third-party onboarding processes, storing vendor questionnaires and documents in random computer files and relying on emails for decision making and “audit trails” are cumbersome, error-prone and resource-intensive. Instead, companies will need to digitize their supply chain due diligence processes to rapidly rebuild their global supply chains and compete effectively.
Supply Chain Networks after COVID-19
Supply chain networks will be altered in several ways in the aftermath of the COVID-19 crisis:
- Bankruptcies will eliminate many traditional third-party partnerships
- Divestiture and restructuring may impact current partners’ capabilities to meet your needs
- Ownership changes may affect a third-party’s risk profile
- Local outbreaks and a potential “second wave” of the virus will continue to disrupt third parties and supply chains
- Geographic diversity will be emphasized as a cure for over-concentration of third parties
As a result, third-party compliance programs will experience new pressures to:
- Screen and onboard large numbers of new third parties rapidly and efficiently
- Conduct due diligence on third parties in potentially new, unfamiliar jurisdictions
- Monitor third-party risk profiles after initial onboarding to help prevent later exposure to risk
- Develop an effective and efficient due diligence process while simultaneously controlling costs
Given these challenges, a holistic, organized and systemic approach to manage your supply chain is essential. Digitizing your due diligence process will make supply chain oversight quicker, cheaper and more efficient. So, how can technology help?
Assess Risks More Efficiently
Technology can help your organization understand key exposures early in the onboarding process. As organizations re-assess their supply chains post the COVID-19 crisis, paying close attention to your business partners will be more important than ever. It’s neither possible nor recommended to scrutinize all your third parties equally. Rather, a technology-enabled, risk-based approach can help you focus your limited resources on the riskiest parts of your supply chain. Solutions like questionnaires and automated risk-scoring, for example, can identify lower-risk third parties that require a lighter due diligence touch.
Leverage Fewer Resources, Spend Less Time
In our most recent Anti-Bribery and Corruption Benchmarking Report, almost 40% of respondents said they lack the resources to ensure success of their compliance program. Without effective digitization, resource-constrained teams will be hard-pressed to keep up. In just one example, consider third party tracking: without automation, all new third parties must be manually tracked, necessitating an unwieldy system of spreadsheets and cognitive labor. A technological solution can reduce the resource and time requirements, risk of error and costs of meeting your organization’s regulatory obligations.
Provide Visibility Across the Enterprise
A post COVID-19 rethink of your supply chain should include a review of where all of your third-party documents (e.g., due diligence documentation, contracts) are stored. Digitizing your supply chain process will site all your documents in a central location that is readily accessible to cross-functional teams. In addition, a technology solution can alert your compliance team if additional documentation is required from a supplier or if a questionnaire is overdue.
Streamline Supplier Ethics and Compliance Reviews
Now more than ever, suppliers must align themselves to your business’ ethics and compliance policies. Screening, questionnaire and attestation functionality within a digitized solution will empower your organization to assess, review, approve and/or reject third parties. Ongoing monitoring can also ensure third parties’ commitment to your enterprise’s values.
Integrate Smoothly with Your Systems
Organizations beholden to dozens of separate systems to meet their compliance needs will experience a significant drag on the recovery of their global supply chains. Open-architected technology offers interoperability, allowing for seamless information exchange between systems. In an ideal design, a single sign-on dashboard allows access to all relevant applications, and information updates in one system cascade fluidly to the other applications.
Manage Supply Chain Risk Using Data Analytics
A potential supplier realignment post COVID-19 necessitates a data-driven approach to managing business risk. A comprehensive technology platform can help manage, track and report on the enormous amount of data you need to effectively manage your third-party population. Since speedy remediation depends on quick identification of areas of potential supply chain risk, the creation of these platforms is critical to ensuring your organization’s regulatory compliance and safeguarding its hard-earned reputation.
As part of a firm’s supply chain management team, compliance officers and those responsible for third-party due diligence have an important part to play in helping their firms rebuild their supply chain network and in fortifying them against future shocks. Digitizing your supply chain due diligence processes can be a powerful step toward more efficiently, quickly and cost-effectively fulfilling that role. Ultimately, companies that adopt a comprehensive approach to third-party risk management may emerge from the COVID-19 crisis with enhanced capacity to achieve their supply chain management objectives.