Be it backward integration with a vendor/supplier or forward integration with a dealer/distributor, a thorough understanding of business partners and the risks they carry is essential. It is also crucial to have a technology infrastructure that can support the seamless integration of third-party stakeholders into the system and monitor the health of a relationship throughout its lifetime. Some of the common pitfalls here are:

Absence of a Solid Risk Framework at Onboarding – To ensure that the business partner is of sound health, it is crucial to mitigate risks from business partners by gathering enough information and conducting effective due diligence. Some of the parameters to evaluate include litigation history, reputational history, and financial parameters. The lack of a solid risk framework often subjects a business to compliance failures and huge financial, and reputational losses.

Lack of Diversity – A business often ends up working with the same set of dealers and distributors for years. Such heavy reliance subjects them to compliance oversight, supply failures, and internal fraud.

Absence of Continuous Risk Monitoring – Once a business partner is onboarded into the system, it is common for businesses to ignore continuous risk assessment. This is essential to raise awareness of changing vulnerabilities and processes and provide for more effective decision-making regarding third-party risk.

Lack of Data – Effective decision-making needs accurate, reliable data and often real-time data. No risk mitigation framework can work if it is not built on reliable data. Moreover, the sources of data are often disintegrated, making it challenging to get a complete picture of the health of the business partner network.

Lack of Transparency – Often, different departments in an organization collaborate with a common business partner without any visibility of the engagement on the other side. Such lack of transparency leads to operational inefficiencies, increased overheads, and an adverse effect on the bottom line.