Over the last three years, one in three UK companies have experienced major disruption or complete failure due to the actions of outsourced providers. That is according to a survey on third party management from Deloitte, the audit and business advisory firm.
Its latest survey, examining third party governance and risk management (TPGRM), found that just 11pc of UK companies feel equipped to deal with such failures during times of uncertainty. The global survey, which included the responses of 107 UK companies across all sectors, also found that the UK had one of the highest dependencies on outsourcers, at 80pc.
Kristian Park, global extended enterprise risk management partner, Deloitte, said: “This year’s survey results demonstrate that third parties are increasingly relied upon, with this trend likely to increase. Unfortunately, management processes and technology that support the oversight of these relationships are not keeping up, creating an ‘execution gap’. Whilst there is clear organisational commitment to address this, it is not being matched by the right skills, processes and technology to achieve intended results. Whilst both political and economic uncertainty has slowed investment and subsequent progress, there is greater appreciation of the related risks.”
The auditors estimate that most large organisations take between two to three years to develop an integrated TPGRM framework.
Kristian Park said: “We predict 2017 and 2018 as the years when people will make significant strides in addressing this issue. However it will be mostly dependent on the priorities set by individual companies”, continues Park. “In the current climate, some will be focussing on issues such as where they will continue to be located, or assessing talent models, particularly during the two-year time frame in which the UK intends to depart from the European Union.”
The audit firm recently calculated that third party failure could cause shareholder losses of an average 2.55 per cent or up to ten times the regulatory fine. Historically, this has ranged from £1.3m to £35m, reaching £650m for internationally-operating firms subject to global regulation.
About the survey
The survey is based on 536 responses, 107 UK based, reflecting the views of senior leaders responsible for governance and risk management of the extended enterprise of their organisations. Survey respondents came from a variety of organisations across all eight major industry segments and from 11 countries across the Americas, Europe, Middle East and Africa, and Asia Pacific regions. The survey responses were collected after the UK’s June 2016 referendum vote and during the US presidential election.
