Joe Mont, 9/28/15
Rare is the business these days that can afford to be cavalier about the regulatory scrutiny on its supply chain. Rarer still is the enterprise not working hard to gain more visibility into its extended family of vendors and suppliers.
But are they doing what needs to be done effectively and efficiently?
A recent survey of companies by MetricStream on managing, measuring, and monitoring supplier compliance found that even though more than 90 percent of respondents have a supply chain compliance program in place, nearly 50 percent have still suffered from recent incidents of supplier non-compliance.
Even a single slip-up can be disastrous in the current regulatory environment. Bank regulators have made abundantly clear that financial institutions bear responsibility for the actions and deficiencies of the third parties they use. Federal and state laws regarding conflict minerals, human trafficking, and child labor affect the manufacturing sector and beyond. Activist scrutiny, customer concerns, reputation risk, and class-action lawsuits are all unwanted supplements to an enforcement action.
How do non-compliant vendors and suppliers still manage to fall through the cracks? The reasons vary. Many are globally disparate and have suppliers of their own—and those fourth or fifth parties can still haunt you directly. Companies may also focus on immediate regulatory priorities (conflict minerals, for example), while neglecting broader issues. Others may have such a fractured, siloed system of vendor management that a holistic view of risk is nearly impossible.
“Doing nothing is not an option,” says Randy Stephens, vice president of advisory services for NAVEX. “No matter how challenging it is, you need to find ways to break it down into its component parts and get started.”
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