While using third parties is a regular aspect of doing business, these third-party business relationships do not come without risks. Our Asia-Pacific Fraud Survey shows that fifty-five percent of organizations in Asia-Pacific believe risks are more likely to arise from third parties than from internal staff.
CFOs are becoming more influential and are increasingly looked to by boards for their views on compliance matters. In addition, regulators and other external stakeholders rely on the CFO as a key interface with the company.
Due diligence is a critical component of the compliance framework for companies to determine the trustworthiness of a third party. In making such an evaluation, CFOs need to heed red flags that may appear.
CFOs also need to strategically invest their time and resources in forensic data analytics and frequent compliance audits, as these form the basis of a strong monitoring system for third-party relationships.
Knowing your third party
Knowing your third party – find out more. [See a transcript of this video]
The importance of managing third-party risk
Recent prosecutions by regulators demonstrate that companies can be liable for the actions of third parties acting on their behalf.
Fines make headlines but they do not tell the whole story. Companies also have to bear hidden penalties such as the investigation cost, reputational damage, loss of business opportunities while undergoing investigations, risk of class action litigation, and the cost of remediation.
The UK Bribery Act and the US Foreign Corrupt Practices Act (FCPA) require companies to apply third-party due diligence procedures.
Weak systems and controls in Asia-Pacific
Types of third parties representing the biggest compliance risk
Q: Which type of third parties represents the biggest compliance risk to your company?
Base: All respondents (681)
Although it is expected by regulators, only 65% of respondents say that all of their third parties are required to comply with their company’s anti-bribery/anti-corruption code (ABAC) of conduct, according to our Asia-Pacific Fraud Survey.