70% of businesses ramp up supplier risk detection investment


New Moody’s Analytics research into third party risk management shows that the threat to reputations is a key driver of investment in supplier risk detection.

Key findings include:

  • 69% of businesses say they do not have the necessary visibility over their supply chains to uncover risk in their organisational networks to avoid reputational harm
  • 70% of businesses are growing their investment in third party risk management
  • 74% rated their third party risk management sophistication as either poor or mediocre

Businesses pointed to a range of factors driving these assessments: a lack of data, difficulty evaluating every organisation in a supplier network, and the responsibility for supply chain visibility being spread across departments. 

Keith Berry, General Manager, Know Your Customer Solutions at Moody’s Analytics said “The past couple of years have brought supply chain risk to the fore. Organisations that can account for the environmental impact of their suppliers and demonstrate that they work with fair and ethical organisations can better protect their reputations and are more appealing to consumers. It’s clear that visibility of supply chain risks can provide huge competitive advantages.”

Identifying risks associated with suppliers buried in the supply chain is crucial to corporate responsibility and to protecting reputations, especially for consumer-facing businesses and regulated organisations which are particularly sensitive to reputational risk. Yet gaining visibility into operations and suppliers in lower tiers of the supply chain is a challenge, with their data unavailable or firms not required to release information.

The qualitative research found four key advantages of improved third party risk management:

  • Avoidance of reputational damage
  • Improved operational resilience
  • Avoidance of fines
  • Faster time to supply chain recovery following disruption

Supply chain issues, such as those seen in the retail sector and in a recent case of an Iranian drone found to contain US parts, have brought supplier risk into sharper focus and demonstrate the reputational impact supply chain risk can have. New regulation such as the German Supply Chain Due Diligence Act and the EU’s upcoming Corporate Sustainability Reporting Directive has further amplified the strategic importance of supply chain visibility.

About the research

Moody’s Analytics partnered with an independent research consultancy, Context Consulting, to design and conduct the study. The research is based on in-depth interviews with third party risk management experts within 41 multinational organisations spanning North America, Europe and APAC, from a variety of sectors: Industrial, pharma and health, finance and insurance, tech and telco, energy and utilities.

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