As the economic recovery picks up speed, third-party risk management (TPRM) is more important than ever before. Faced with supply chain disruption, cyber threats and growing inflationary pressure, global businesses are assessing their operational resilience and reviewing their dependence on third and fourth parties. 

KPMG International's new research - which surveyed 1,263 senior TPRM professionals across six sectors and 16 countries worldwide, including the Netherlands - reveals that TPRM is a strategic priority for 85 percent of businesses, up from 77 percent before the outbreak of the pandemic. Nonetheless, the outlook for TPRM presents no shortage of challenges.

Our findings demonstrate the need for TPRM leaders to make a step change in their operating models and their approach to third-party risk. This need will only grow as supply chains and broader ecosystems continue to expand, and the risk presented by fourth parties creates further complexity.

  1. Third-party incidents are disrupting the business and damaging reputation
    Weaknesses in the TPRM operating model, leading to missed opportunities to mitigate risk, are proving to be a major problem for businesses worldwide. Three in four (73percent) respondents to our survey have experienced at least one significant disruption, caused by a third party, within the last three years.
  2. Businesses underestimate the need for a sound TPRM program, resulting in insufficient budgets
    Practitioners are held back by limited budgets that see them prioritizing tactical initiatives over strategic improvements. Six in 10 (61percent) believe TPRM is undervalued considering its enterprise-critical role. If businesses understood the full complexity of a sound TPRM program, rather than narrowing in on its individual components, they could support larger budgets while benefiting from new efficiencies around operational resilience, cyber security and fraud. 
  3. Technology is not yet to fulfilling its promises
    Respondents expect to use technology to automate or support 58 percent of TPRM tasks within three years, which will free them to focus on activities that require human review and interaction. Today, however, 59 percent are frustrated by the lack of visibility that their technology gives them around third-party risk.
  4. The challenge of limited resources is here to stay
    TPRM programs are continuing to evolve while teams contend with a growing body of work. Digital tools will shoulder the burden, but TPRM’s remit is expanding across all risks, domains and types of third parties. The number of businesses assessing all third parties for environmental risks is, for example, expected to reach 30 percent within three years. A risk-based approach, allocating resources to highest-risk arrangements, would be preferable.
  5. Most businesses struggle to maintain a fit-for-purpose TPRM operating model
    Respondents largely accept that it was luck, not their TPRM programs, which helped them avoid a major third-party incident during the COVID-19 pandemic. In turn, 77 percent believe that overhauling the operating model is overdue.

Previous editions

Key contacts

Leen Groen

Partner
Forensic
KPMG The Netherlands

Patrick Ozer

Partner
Forensic
KPMG The Netherlands

Patrick Van Hardevelt

Director
Governance, Risk & Compliance Services
KPMG The Netherlands