Vital ethical and compliance risks in enterprise businesses

Diana Walker
November 12, 2018

Technological advances and its promotion of globalisation over time have made it easier for enterprise companies to reach and expand into global markets. Of course, the ability to assess, and communicate with potential new prospects globally does not mean you can ignore the importance of understanding local language nuances, agree to local contracts, obtain localised licences to commence trading and move products and services into relevant locations.

There are high risks associated with building local subsidiaries or market partners, and this inherently doesn't assure the company will be able to generate the connections locally to achieve success. Yes, the preferred approach we find most companies we communicate with engage in building relationships with third parties to represent the enterprises' goals. Whether outside consulting, accounting, marketing to human resources.

Most of the time, enterprise companies rely on different forms of extensions for their businesses. Over time, this rapidly expands to include more than just third-party suppliers but provides distie's, contract customer service representatives, regulatory and government liaison agencies and other private alliances to help deliver business objectives and generate value ultimately.

Every risk can come from an opportunity

Macro and micro cost efficiencies, subject matter experts, access to different geographies, customers and revenue growth are opportunities that emerge from extending your enterprise. For each participant within the extended enterprise, there are more significant benefits from new business opportunities for suppliers and vendors, and increase market share for partnerships. These benefits are, of course, mutual, the risks that come as a result with third-party operations are much more prominent to the primary 'in-house' company on the entire funnel. The 'in-house' enterprise holds accountability for the actions and conduct of not only their internal departments but also thirds parties.

Before the digital risk era, operational risks were typically associated with external parties. The advancement of wide-ranging and industry agnostic regulations and laws such as the anti-trust, data production have given rise to the legal, regulatory, and ethical risks across the entire enterprise. These risks are core driving factors outside the enterprise's control as they can be directly related to macro-environmental factors such as third parties, including business partners. Here's a concerning fact: The OECD presented statistics that nearly half of overall cases which involved bribery occurred in mature markets.

Managing extended enterprise risk in its current form

The approach to managing strategic risk for third parties have no truly evolved to address the changing nature of reputational risk in the macro enterprise. Enterprise organisations continuously continue to view third parties from a commercial framework. This is vital of course to build a successful relationship, and it does not address the overarching ethical and legal risks generated through such relationships proactively.

This ultimately results in a siloed approach with multiple different departments across the entire enterprise as they focus on risks that relate to their divisions. E.g. KPI differences between marketing departments and organisations to SLAs. What is the solution to this? Organisations need to introduce a single source of truth to management their third-party framework removing as many insolated silo's as possible throughout the enterprise.

To conclude this, with the increased enterprise reliance of extended macro enterprise, the compliance risks generated by these suppliers are a definitive danger if managed incorrectly. Business leaders, regulators and shareholders recognise that a holistic, integrated approach to maintaining and ingraining legal compliance, as well as ethical behaviour internally and externally in the enterprise is a necessity to monitor and sustain enterprise risk.

If you're interested in removing silo in your enterprise, one of our managers would gladly assist you. Simply request a demo at www.readinow.com

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