Only 11% of UK firms “prepared to deal with third party failure” during uncertain times

Over the course of the last three years, one-in-three UK companies have experienced either major disruption or complete failure due to the actions of outsourced solution providers. That’s according to the results of an extensive survey* on third party management conducted by Deloitte, the business advisory firm.

This latest survey, which is designed to assess third party governance and risk management, finds that just 11% 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 discovers that the UK had one of the highest dependencies on outsourced partners, with a result of 80%.

Kristian Park, global extended enterprise risk management partner at Deloitte, commented: “This year’s survey results demonstrate that third parties are increasingly relied upon. It’s a trend that’s likely to increase. Unfortunately, management processes and technology supporting the oversight of these relationships are not keeping up, in turn creating an ‘execution gap’.”

Park continued: “While there’s clear organisational commitment to address this issue, it’s not being matched by the right skills, processes and technology to achieve the intended results. Both political and economic uncertainty has slowed investment and subsequent progress. There’s now greater appreciation of the related risks.”

Deloitte estimates that most large organisations take somewhere between two and three years to develop an integrated third party governance and risk management framework.

Kristian Park

Kristian Park

“We predict 2017 and 2018 as being the years when people will make significant strides in addressing this issue,” added Park. “However, it will be mostly dependent on the priorities set by individual companies. In the current climate, some will be focusing on issues such as where they’ll continue to be located, or assessing talent models, particularly so during the two-year timeframe in which the UK intends to depart from the European Union.”

Deloitte recently calculated that third party failure could cause shareholder losses of an average 2.55% or up to ten times the regulatory fine. Historically, this figure has ranged from £1.3 million to £35 million, attaining a level of £650 million for internationally-operating firms subject to global regulation.

*The Deloitte survey is based on 536 responses, of which 107 are 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, the Middle East and Africa and the Asia Pacific regions. The survey responses were collected after the results of the UK’s EU Referendum vote results were announced and during the recent US Presidential Election process

About the Author
Brian Sims BA (Hons) Hon FSyI, Editor, Risk UK (Pro-Activ Publications) Beginning his career in professional journalism at The Builder Group in March 1992, Brian was appointed Editor of Security Management Today in November 2000 having spent eight years in engineering journalism across two titles: Building Services Journal and Light & Lighting. In 2005, Brian received the BSIA Chairman’s Award for Promoting The Security Industry and, a year later, the Skills for Security Special Award for an Outstanding Contribution to the Security Business Sector. In 2008, Brian was The Security Institute’s nomination for the Association of Security Consultants’ highly prestigious Imbert Prize and, in 2013, was a nominated finalist for the Institute's George van Schalkwyk Award. An Honorary Fellow of The Security Institute, Brian serves as a Judge for the BSIA’s Security Personnel of the Year Awards and the Securitas Good Customer Award. Between 2008 and 2014, Brian pioneered the use of digital media across the security sector, including webinars and Audio Shows. Brian’s actively involved in 50-plus security groups on LinkedIn and hosts the popular Risk UK Twitter site. Brian is a frequent speaker on the conference circuit. He has organised and chaired conference programmes for both IFSEC International and ASIS International and has been published in the national media. Brian was appointed Editor of Risk UK at Pro-Activ Publications in July 2014.

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