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The Consequences of Inadequate Due Diligence

 

Operating a world business immediately requires efficiently managing a network of third-party partners that supply product parts, run operations in overseas markets, operate call facilities, or act as outside consultants or agents.

 

 

The huge array of capabilities and specialised skill sets of a well-maintained third-party network makes operations easier for each the group and its customers. However many organizations, from small companies to multi-national companies, can hardly ever afford the time and effort required in-house to manage these typically complex third-party relationships.

 

 

Because of this, the risk of unethical business practices, bribery and different business corruption doubtlessly increases if inadequate due diligence is conducted on third-party partners. The ramifications of a scandal related to a third-party partner can simply take down a corporation, resulting in such risks as a damaged popularity and brand devaluation, to regulatory violations, legal proceedings and potential fines and jail terms for directors. The only way to completely protect the company's assets, therefore, is thru a robust and viable third-party risk management program.

 

 

Building a third-party risk management program will not be a passive process. It requires effort and time on a continuing basis, as the risks associated with third-party partnerships consistently evolve.

 

 

Consider the events of this previous summer, throughout which the legislators of three separate nations signed new compliance rules and standards into law. Without a doubt, in case your group's third-party risk administration program is unable to quickly adjust to those new laws (or just isn't designed to anticipate future legislative movements) your group is really at risk.

 

 

Cutting corners: not worth the risk

 

 

Still, far too many organizations are willing to tempt fate by reducing corners on development and implementation of their third-party risk administration program. Definitely, building a strong risk management program requires a significant investment of time and resources (each internally and from the outside), but the consequences of not doing it right could be dramatically severe.

 

 

One way organizations try to chop corners is by relying on outdated or stagnant instruments to monitor, detect and prevent risks. Virtually always, hiring outside trade professionals with proven track records of successful due diligence expertise is necessary.

 

 

Relying too closely on "desktop" due diligence is one other harmful shortcut. Desktop due diligence is an important initial step of the investigative process, involving background checks, lien searches, regulatory filing investigations and environmental reports. And while it is a vital part of any effective due diligence program, it's not practically enough to thoroughly evaluate a third-party.

 

 

Really understanding a potential partner's business requires a considerable amount of time spent face-to-face with the outside organization's leadership, operations administration and even current customers. This "boots on the ground" process will detect potential risks which are often hidden from a distance, and undetectable by way of web-based discovery tools.

 

 

The "boots on the ground" approach additionally helps to establish a relational dynamic required for ongoing negotiations and provides clear insight into of the fastest-growing issues in third-party risk management: bribery and labor management.

 

 

Bribery as a compliance concern

 

 

Anti-bribery and anti-corruption compliance is a fast-moving target. New anti-bribery laws and rules are being decreed all over the world at a relentless pace. Complicating matters further, many nations may have laws in place however lack the ability to adequately enforce them. When this is the case, the responsibility falls to your group's due diligence program to make sure detection and protection.

 

 

High profile investigations in recent years have contributed to the fast emergence of bribery and corruption as a societal issue. Never before has such a distinction been drawn so dramatically on a global stage between people who interact in bribery and those that endure as a result. Any group that finds itself blended up in a scandal involving bribery has more than a legal mess to contend with. It has an extended battle to win back the trust of its shareholders, employees, prospects and the public.

 

 

Conducting ample due diligence surrounded by such various factors is work that have to be performed in person. Gaining perception into a potential partner's company culture requires a level of immersion with the group's leadership, administration and staff. When it comes to evaluating bribery risk, some warning signs can only be discovered on-site.

 

 

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Website: https://www.bnsgoglobal.com/global-due-diligence/

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