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Treasury & Capital Markets / Covid-19
Supply chain due diligence lacking in Asia-Pacific
Covid-19 set to have substantial impact on risk landscape in region moving forward
The Asset 22 May 2020

NEW research reveals that despite more than half of Asia-Pacific (APAC) companies facing enforcement actions against them in relation to a third-party risk, 44% of third-party relationships are still not subject to due diligence checks.

The findings, revealed in a report released by Refinitiv on May 21, come as companies struggle to monitor third-party risks and protect themselves and their supply chains in the post-Covid-19 environment – with only 18% of APAC respondents saying they understand the risks related to pandemics and epidemics.

When it comes to reporting a third-party breach, while 64% of APAC respondents would report internally, only 14% say they would report it externally. Additionally, 61% believe that prosecution would be unlikely if the organization breached third-party-related regulations.

According to the report, in terms of third-party screening, Hong Kong leads the region in third-party due diligence, while Singapore records the poorest performance. As a driver for conducting due diligence, corporate social responsibility and supply chain sustainability are cited as important factors by over a third of APAC respondents.

When asked to identify the most important reasons to carry out due diligence screening on third-parties, half of APAC respondents said it was to ensure regulatory compliance, and just under half said it was to protect their company from reputational risk. Respondents also cited the lack of available data and resource constraints, including budget and time, as key factors limiting their ability to identify risks.

The report notes that Covid-19 is set to have a substantial impact on the risk landscape, both in APAC and globally, particularly in terms of supply chain and third-party risk. Global supply chains can create competitive advantages for businesses and cut costs for consumers, but they also carry significant risk. If businesses do not have clear insight into all levels of their supply chains and the ability to conduct due diligence quickly and easily, they cannot hope to mitigate or manage their risk. 

“As regulators increasingly focus on sanctions, corruption, sustainability, and human rights, companies must upgrade their risk management capabilities in order to continue to reap the benefits from working with third-parties,” says Charles Minutella, head of enhanced due diligence at Refinitiv.

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