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KY3P “Know your third party” in the Time of COVID-19
01 June 2020
From shutting down tech unicorns to grounding venerable
airlines, COVID-19 is disrupting businesses worldwide. In a recent
webinar, a panel of experts hosted by Richard Blore - CEO of KY3P
at IHS Markit - explored how businesses deal with this
transformational shock and what we can expect from a post-lockdown
world.
The worst pandemic since the Spanish flu of 1918, COVID-19 has
killed thousands and infected millions. While demand collapses,
businesses are reassessing how they operate as consumers who were
once fighting over smartphones and fast fashion now scramble to buy
facemasks, flour and other goods the market seems unable to
produce, ship or distribute.
For decades, businesses have developed complex supply chains
built on outsourcing and globalized, just-in-time production.
Relying heavily on 3rd Party Vendors ("suppliers"), this business
model is being challenged to its core.
Informing how to respond to a
crisis
As COVID-19 spread globally, many suppliers were initially
overwhelmed by due diligence requests from clients seeking to
assess the resilience of their supply chains. Focused on surviving
the economic shock triggered by the pandemic, many suppliers issued
general statements that fell short of the transparency standards
required to keep their clients happy.
Introduced to address the due diligence hurdles faced by firms
using numerous suppliers globally, KY3P by IHS Markit - a thriving
ecosystem of design partners, consultants, clients and thousands of
suppliers - leveraged its Significant Event Notification Tracking
("SENT") system to address the pandemic's challenges. Created to
help clients navigate crises, SENT enabled KY3P clients to quickly
design a joint, streamlined questionnaire aimed at understanding
how the pandemic was impacting their suppliers while helping all
stakeholders respond to issues shared across the KY3P community.
SENT revealed that suppliers faced major contractual problems as
both clients and other supply chain partners sought to renegotiate
terms or cancel orders. Suppliers devoted significant efforts to
securing access to critical services and goods while stay-at-home
requirements and safety concerns forced an increasing number of
people to Work-From-Home ("WFH").
Economic stress remains high as suppliers sit on large
inventory, but SENT confirmed that technological tools, WFH and
multi-locations work solutions have been effective in helping firms
remain operational.
What's next for global supply
chains?
As lockdowns are gradually lifted, businesses need to adapt.
Stella Nunn - a director and operational resilience and business
continuity expert with PwC London - noted that in addition to
collecting information and managing logistic and staffing
challenges, firms must engage in scenario planning to tackle
fundamental questions, both now and over longer periods: "How
do you maintain your services and supply chains when the world is
changing? What is your new normal?" she said, before stating
firms must align their recovery with that of their suppliers.
Pointing to the prevalence of WFH, Nunn recommends firms to
examine their suppliers' human resources management to assess risk,
identify points of failure and reengineer communications to account
for the health pressures faced by workers and their families as WFH
becomes a new standard. Firms must also think hard about how to
support their supply chain partners, their ability to find
alternative suppliers if needed, whether some functions should be
brought back in-house and even whether buying key suppliers may
become necessary. Companies should also evaluate how essential
worker regulations may impact them.
Peter Malan - Partner, PwC Australia - highlighted the
pandemic's impact on how firms manage information, data and
cybersecurity. With many employees working from home or from other
alternative locations, firms might have overlooked data security
and privacy considerations as information now gets transmitted and
stored across less secure devices and networks. "In the rush to
keep the lights on, many firms implemented ad hoc solutions that
may breach legal requirements in some jurisdictions," said
Will Kendal, EMEA Product Manager, KY3P. Cybersecurity is also
becoming a critical issue as hackers exploit WFH vulnerabilities to
compromise corporate networks.
A brave new world
In addition to its high human cost, COVID-19 is transforming how
businesses operate. Impacting just-in-time global supply chains,
post-lockdown sanitary requirements may feature trade barriers,
travel constraints, supply chain redundancies and new working
models based on WFH. More than ever, firms will need to enhance
third party resiliency to future-proof their operations in the next
global threat.
IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.
S&P Global KY3P® is proud to co-sponsor Vendor & Third Party Risk USA with our own Peter Pernebo speaking on 1 June… https://t.co/x9Sj4WxoBJ
May 12
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