I end this one month series by taking things a different direction. Today I do not focus on third party risk management but on third parties as a compliance innovation source for your organization. It is universally recognized that third parties are your highest Foreign Corrupt Practices Act (FCPA) risk. What if you could turn your third party from a liability under the FCPA to an innovation partner to your compliance program? This is an area that not many compliance professionals have mined but once again in compliance, you are only limited by your imagination.
In an article in Third Party Management Review by Jennifer Blackhurst, Pam Manhart and Emily Kohnke, entitled “The Five Key Components for Third party Innovation”, the authors asked “what does it take to create meaningful innovation across third party partners?” One reason compliance innovation with third parties can be so power is that it cannot only affect costs but can move to gain a competitive advantage. To do so companies need to see their third parties as partners and not simply as entities to be squeezed for costs savings.
Their findings identified five components common to the most successful innovation partnerships. They are: “(1) Don’t Settle for the Status Quo; (2) Hit the Road in Order to Hit Your Metrics; (3) Send Prospectors Not Auditors; (4) Show Me Yours and I’ll Show You Mine; and (5) Who’s Running the Show?”
Don’t Settle for the Status Quo
This means that you should not settle for simply the status quo in compliance. Innovation does not always come from a customer or even an in-house compliance practitioner. Here the key characteristics were noted to be “cooperative, proactive and incremental”. You need to be leading the compliance innovation discussion rather than falling from behind. If a third party can suggest a better method to make compliance more efficient or cost effective, particularly through a technological solution, it may well be something you should consider.
Hit the Road in Order to Hit Your Metrics
To truly understand your compliance risk from all third parties, you must get out of the ivory tower and hit the road. This is even truer when exploring compliance innovation. You do not have hit the road with the “primary goal to be the inception point for innovation” but through such interactions, innovation can come about organically, as a part of your ongoing third party relationship. There is little downside for a compliance practitioner to go and visit a third party and have a “face-to-face meeting simply to get to know the partner better and more precisely identify that partner’s needs.”
Send Prospectors Not Auditors
While an audit clause is critical in any third party contract, both from a commercial and FCPA perspective, this exercise should be considered as such. You can establish a point of contact as an innovation manager for your third parties” Every third party should have a relationship manager, whether that third party is on the sales side or the Supply Chain side of the business. Moreover, the innovation partners are “able to see synergies where [business] partners can work together for the benefit of everyone involved.”
Show Me Yours and I’ll Show You Mine
As with all relationships, trust plays an important role in third party compliance innovation, as “Firms in successful innovations discussed a willingness to share resources and rewards and to develop their partners’ capabilities.” The authors believe that “Through the process of developing trust, firms understand their partner’s strategic goals.” I cannot think of a more applicable statement about FCPA compliance. Another way to consider this issue is that if a third party partner has trust in you and your compliance program, they could be more willing to work with you on the prevent and detect prongs of compliance regimes. Top down command structures may well be counter-productive.
Who’s Running the Show?
This means “who is doing what, but also what each firm is bringing to the relationship in terms of resources and capabilities.” In the compliance regime, it could well lead to your third party taking a greater role in managing compliance in a specific arena or down a certain set of vendors. Your local third party might be stronger in the local culture, which could allow it to lead to collaborations by other vendors in localized anti-corruption networks or roundtables to help move the ball forward for doing business in compliance with the FCPA or other anti-corruption laws such as the UK Bribery Act.
The authors ended by remarking, “we noticed that leveraging lean and process improvement was mentioned by virtually every firm.” This is true in the area of compliance process improvement, which is the essential nature of FCPA compliance. Another interesting insight from the authors was that utilization can increase through such innovation in the third party. Now imagine if you could increase your compliance process performance by considering innovations from your third parties?
The authors conclude by stating that such innovation could lead to three “interesting outcomes (1) The trust and culture alignment is strengthened through the partnership innovation process leading to future innovations and improvement; (2) firms see what is needed in terms of characteristics in a partner firm so that they can propagate the success of prior innovations to additional partners; (3) by engaging third party partners as innovation partners, both sides reap rewards in a low cost, low risk, highly achievable manner.” With some innovation, you may well be able to tap into a resource immediately available at your fingertips, your third party.
Three Key Takeaways
- Use your third parties as innovators to assist your compliance program.
- Change your thinking about third parties and make them your partners.
- Do not settle for the status quo.
As with other areas in compliance, with 3rd parties you are only limited by your imagination.Click to tweet
This month’s podcast series is sponsored by Opus. Opus helps free your business from the complexity and uncertainty of managing the risks associated with your customers, vendors, and third parties. By combining the most innovative Third-Party Risk Management and Know Your Customer Compliance SaaS platforms with unparalleled data solutions, Opus turns information into action so your business can thrive. Opus solutions include Hiperos 3PM accelerator, the leading platform for