November 15, 2011 by Canadian Underwriter
Sixty-five per cent of 76 international companies surveyed by international legal practice Norton Rose Group said they do not conduct detailed due diligence on incoming key personnel provided by their supplier.
“The majority of customers assume that their suppliers will have done the necessary due diligence on their own staff and do not see the need to repeat the exercise,” said Mike Rebeiro, group head of technology and innovation at Norton Rose Group. “This is surprising given the impact a single rogue employee can have on the reputation of a business and all associated organizations.”
The Norton Rose Group released the results of its study of global outsourcing patterns in its Toronto office on Nov. 14. The full report, Outsourcing in a Brave New World, can be found at: http://www.nortonrose.com/files/outsourcing-in-a-brave-new-world-57727.pdf
The survey found a disconnect between suppliers and customers on a number of issues, including who should be managing political or jurisdictional risk. Just 8% of suppliers thought that they themselves should manage political or jurisdictional risk, compared to 49% of customers who felt that suppliers should manage this risk.
“As the margins for suppliers become thinner, suppliers need to have an open conversation with customers about the risks of doing business in certain jurisdictions,” Rebeiro said. “While almost half of customers believe that the supplier should have satisfied themselves that they can operate successfully in the jurisdiction they have chosen, they should also familiarize themselves with that jurisdiction and consider a contingency plan.”
For risk managers, outsourcing may be an opportunity in the making. The study found 58% of suppliers had no dedicated risk manager and only 51% of suppliers keep a written risk record for projects.