Despite Rising Corruption Enforcement, Companies Skimp on Researching Third-Party Business Parties

Michelle Remo, “Big 4″ observer
March 23, 2012 /

For the first time in history, every Foreign Corrupt Practices Act (FCPA) enforcement action brought in 2011 by the Department of Justice and the Securities and Exchange Commission found that companies’ third-party business partners paid illegal bribes. Yet, according to a recent Deloitte poll, corporate due diligence and risk assessments on business partners remain low.

“FCPA regulators are paying more attention to the research that companies conduct on third-party business partners,” said Joe Zier, a leader in Deloitte’s FCPA practice.

“Managing the due diligence and risk assessments on the hundreds—if not thousands—of third-parties can be daunting. But, the more business partners an organization has, the higher the risk exposure.”

Among poll respondents, 23.1 percent say their companies work with approximately 100 to 999 different third parties. Additionally, 30.3 percent of respondents reported working with 1,000 or more different business partners.

Typically, only up to one-quarter of third-party business partners are subject to corporate due diligence and risk assessments, according to 23.4 percent of respondents. Moreover, five percent of respondents’ companies conduct no third-party due diligence at all.

Cost of implementation (30.8 percent), lack of pressure to conduct extended due diligence (13.6 percent) and fear of alienating the sales channel (5.9 percent) are among the top challenges to implementing companywide third-party risk assessment and due diligence programs.

“To help keep tabs on the actions of their business partners on an ongoing basis, companies are increasingly turning to software solutions,” said Zier.

“As with any compliance program, however, it is important to tailor these technologies to help identify and mitigate your organization’s risks.”

More than 1,220 professionals from the financial services; consumer and industrial products; technology, media and telecom; banking and securities and other industries responded to the polling questions during the webcast, which was titled “Third-Party Business Relationships: Emerging Issues and Regulatory Risks.”


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