The structure and reality of business today have changed. Traditional brick-and-mortar business is a thing of the past: physical buildings and conventional employees no longer define the organization. The modern organization is an interconnected web of relationships, interactions, and transactions that span traditional business boundaries. Layers of relationships go beyond traditional employees, including suppliers, vendors, outsourcers, service providers, contractors, subcontractors, consultants, temporary workers, agents, brokers, dealers, intermediaries, partners, and more. Complexity grows as these interconnected relationships, processes, transactions, and systems nest themselves in intricacy, such as deep supply chains and sub-contracting relationships. Business today relies and thrives on third-party relationships; this is the extended enterprise.

In this context, organizations struggle to govern their third-party relationships and often manage risk and compliance in relationships in silos that fail to see the big picture of risk exposure and impact on the relationship’s objectives. Risk and compliance challenges do not stop at organizational boundaries. An organization can face reputational and economic disaster by establishing or maintaining the wrong business relationships or allowing good business relationships to sour because of weak governance. Third-party problems are the organization’s problems and directly impact the brand and reputation, increasing exposure to risk and compliance matters. When questions of delivery, business practice, ethics, privacy, safety, quality, human rights, resiliency, corruption, security, and the environment arise, the organization is held accountable. It must ensure that third-party partners behave appropriately.

Fragmented governance of third-party relationships through disconnected department silos leads the organization to inevitable failure . . .

[The rest of this blog can be read on the EthixBase360 blog, where GRC 20/20’s Michael Rasmussen is a guest author]

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