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- November 06, 2020
From the global pandemic to shifting trade alliances and evolving regulatory requirements, effectively managing your third parties is more challenging than ever. Deloitte’s survey on extended enterprise risk management (EERM) found that while organizations were faced with challenges to manage third-party risk before COVID-19, the pandemic demonstrated the huge strategic impact of third-party failures and how quickly some risks from unexpected events can strike. Kristian Park and Ryan Flynn from Deloitte recently joined Coupa for a webinar to discuss the survey results and how businesses can better manage third-party risk.
In the webinar, Park and Flynn share guidance on the following topics:
- How to get the right visibility into supply chains and third-party ecosystems while establishing the proper controls to get ahead of increasing risk. Plus, how to be prepared to respond proactively to future potential risk events—including recommendations on preparations to make for 2021 to swiftly recover and thrive.
- The cost of failure: Quantifying the cost of failure, the benefits of preventing failures, and why organizations are so willing to invest in minimizing their third-party risk today. Why the cost of failures can be up to $1 billion, with a 10% reduction in stock price on top of that. This is resulting in a major trend: a big push upwards in the accountability for the cost of failure, right up to the Board level.
A wider focus: An across-the-enterprise and ecosystem focus on third-party risk, because risk management should not be an isolated function. Why the evolution of EERM into a wider discipline is the next logical step to establish holistic mechanisms that manage all types of risks across all categories of third parties.
Visions for transformation are about striking a balance: The goal is resilient supply chains, while balancing planning for supply disruption with efficiency
This year we have all learned the need to have alternative sources of essential supplies in different geographies, with a growing trend to look for alternative suppliers closer to home. Deloitte expects, in response to the pandemic, many governments will push for or require businesses to utilize domestic, closer-to-home sources of supply.
Many companies have become overloaded this year as they work to find, qualify, and certify new suppliers. They are often hampered by disparate, siloed supplier data and management systems, making the work to onboard qualified new suppliers time intensive. In response to this, Flynn summarized a predominant vision of many organizations today: Businesses want to “get to a single source of truth, a centralized repository of supplier data and intelligence, built on cutting edge technology.”
Managing risk powers performance
Reflecting the trend of a growing dependence on critical third-party relationships, organizations are increasingly concerned about the rising cost of getting third-party risk management wrong. Flynn shared how a full half of the respondents to Deloitte’s recent EERM survey said the cost of failure has doubled in the past five years, with another 20% of survey respondents saying the cost of failures have increased by a factor of ten.
Park and Flynn have one final message we all should stay focused on with a long-term perspective: Managing risk powers performance—if you survive right now, and prepare appropriately, you’re going to thrive later.
For more expert information on how to thrive in 2021, watch the full webinar: Striking Balance: Managing Third Parties in a High-Risk Environment Webinar—Featuring Deloitte.