Over half of organisations have faced a risk incident due to third-party failure during COVID-19 pandemic
More than half of (51%) of organisations have faced one or more third-party risk incidents whilst responding to the COVID-19 pandemic. 13% of incidents were considered ‘high impact’, severely compromising financial performance and profitability, customer service and, in some instances, put organisations in breach of regulations.
This is according to the results of Deloitte’s extended enterprise risk management (EERM) global survey, with respondents coming from consumer, energy resources and industrials, financial services, life sciences and healthcare, government and public sector, and TMT.
Just under a third (27%) of organisations that hadn’t adequately invested in third party risk management prior to the pandemic faced a high impact incident over this time, compared to just 2% of those that had.
Almost half (45%) of organisations remain in ‘respond’ mode in dealing with the impact of COVID-19, leaving many vulnerable to third party failure without due assessment.
Kristian Park, extended enterprise risk management (EERM) partner at Deloitte, said: “As businesses have shifted to more digital ways of working, new technologies and the continued need to both reduce costs and access specialist skills has bred a new set of risks when it comes to third party oversight.
“Whilst many organisations have long-established third party risk management programmes in place, the COVID-19 pandemic has highlighted unforeseen gaps, making many vulnerable to failures caused by third parties - for which the organisations are, ultimately, responsible.
”As a high proportion of respondents remain in ‘respond’ mode to the pandemic, it suggests many underestimated their preparedness to deal with such an event.
Other findings included:
- 71% of organisations now identify digital risk as their top priority area. Despite this, 42% shared concerns over inadequate cyber security investment, topping the list of all emerging risk ‘domains’.
- Almost half (49%) of respondents are now updating their due diligence and monitoring processes using their tech investments to make them ‘intelligence led’ and in real-time, compared to a third (35%) last year.
“One area in particular that most organisations identified as a priority was digital risk,” said Park. “With many workforces moving to remote locations, some for the first time, this has opened up greater opportunities to fall victim to cyber crime.
”Many organisations won’t have considered the security policies and guidelines that a remote workforce – and, by extension, third parties – required until now.
“That said, we know that crises tend to reinforce the need to invest in good risk management. Much like we saw during the aftermath of the 2007-8 financial crisis, COVID-19 is likely to have a similar effect on future risk procedures,” he continued.
”As organisations seek to recover from the impact of the pandemic, we are also seeing many looking to gain competitive advantage which is already driving significant investment in risk management technology.”