Not in My Name
Assessing and Managing Third-Party Risk in Global Business
Global value chains are the new normal for many businesses. The actions of suppliers, agents or partners in a foreign jurisdiction can have a direct impact on corporate reputation and expose companies to a range of financial and legal risks. Knowing who you’re doing business with and what actions they may be conducting in your name is the only effective means to assess and manage the risks.
In 2013 major grocery chains throughout Europe were swept up in what has been termed ‘The Horsemeat Scandal’ – the finding of horse meat rather than beef in the products of several major supermarket players resulted in financial and reputational damage to companies throughout the supply chain.
In the aftermath, what became apparent was the lack of knowledge about who actually made up the supply chains of such major businesses. In one study, it was shown that only 38% of companies had information on the identity of the suppliers to their suppliers (Tier 2) and none had information beyond those.1
Food contamination is just one of a number of risks within global value chains. Tech giants, have been impacted by reports of unsafe and unethical labour practices and more locally, several fast-food chains have had to manage the fallout of the illegal labour practice of their franchisees.
Not knowing who you’re really transacting with and what they may be doing is often most acute at the time of an acquisition as one major US Private Equity firm found out when they acquired a seemingly successful company in China. While the CEO seemed competent and clearly charismatic, six months following the acquisition it was revealed he had convictions for embezzlement and strong ties to organised crime.