Managing supply chain risk: know your supplier and protect your customer
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In today's ever-changing corporate landscape, companies are looking for pathways to make their operations as practical as possible. Outsourcing third-party vendors to carry out some duties is a growing trend across the globe. Apart from saving time, it saves costs too. But as businesses expand, the necessity for engaging third-party operations arises, and so do the risks.
The number of issues emerging from the supply chain is increasing, which can negatively affect business operations. Business leaders should always know who their suppliers are.
In this article, we'll examine why companies must follow Know Your Supplier (KYS) for successful supply chain management in the future.
Supply chain compliance risks
Fraudsters, like businesses, look for efficiencies. In the cases we saw in early 2021, hackers got into the systems of three widely-used suppliers, which gave them the key to numerous high-profile targets.
Some supply chain risks are complex to pinpoint and manage. However, non-compliance from your vendors threatens the entire supply chain, including your business and any customers you interact with during a risk event.
Nowadays, it is crucial to know who your suppliers, partners, and customers are, where they are coming from, and who is standing behind those companies.
- Managing tricky regulatory requirements: Laws and regulations cover cybersecurity, environmental protection, finances, product safety, trade, labor conditions, and competitive practices. As a manufacturer, you must ensure that your supply base pursues the same direction. And when your business grows, so does your compliance risk. Whether launching products or joining foreign markets, each additional step means you should comply with a further pile of regulations. Count today's arising exposures from doubtful business conditions.
- Providing transparency for stakeholders: Stakeholders increasingly require that businesses be more evident about their entire supply chain: how they source, manufacture, and supply products, as well as their influence on the environment and society. Tracking and reporting on compliance in your supply base manually are time-consuming. Incorporating compliance reporting into your technology-based risk management system makes procedures more efficient.
- Keeping up with the regulatory shift: Compliance officers say that keeping up with regulatory evolution is their ultimate challenge, according to a 2020 survey by Thomson Reuters. The survey also revealed that financial institutions received over 50,000 regulatory update directives in one year. Confronted with constant change, you need an effective way to verify ongoing compliance within your company and your supply base.
To trust all the related parties in your supply chain takes time, effort, and money. Moreover, once checked, the state of the supplier can change quickly over time.
Today, the supplier is legit, but tomorrow they start selling parts of weapons to a conflicting party (e.g. Russia) or become a part of a money laundering scheme.
Assess the risk: Know your supplier (KYS)
"Know your supplier" (KYS), aka, Know your Vendor, is a program that businesses pursue. The principal reason behind this program is to ensure that the quality and quantity of products bought from suppliers are in line with their requirements.
Companies implemented this procedure all over the world. The KYS approach helps to boost productivity and bring down costs for companies.
A good technique for any business would be to execute an initial assessment of all new clients before signing a contract.
That will allow them to apprehend what kind of business they are dealing with and whether they are likely to be implicated in any illegal activities or transactions that could damage their reputation and finances.
The KYS program has four main elements:
- Know your supply chain partners. Business leaders should know who their suppliers are and understand their business model, culture, and values.
- Know what you purchase. Companies should know the products they utilize in their supply chain and their impact on society, the environment, and human rights.
- Know what's occurring in your supply chain. Businesses should be able to track transactions between them and their suppliers and observe issues such as accidents or injuries at work sites or environmental harm.
- Know how we can help. Business leaders should seek aid from specialists who can help them conduct a successful KYS program within their company.
Supply chain management is usually the most extensive cost operation with purchasing, inventory, transport, warehousing, and technology to effectively handle the complicated supply chain entity.
Pinpointing risks that may hide in your supply chain is not easy, particularly if you have multiple suppliers in different parts of the world. The last thing you want is a lot of possible blows with no structure to follow up with due diligence. That is where Vespia comes in.
How Vespia streamlines automated supplier due diligence?
Following ever-changing policies and technology can be challenging. Several elements can delay supplier identification operations, such as budget restrictions, time, availability of data, etc.
Vespia's KYC and AML solutions provide businesses with acute vendor due diligence. It delivers a corporate solution to check the businesses' genuineness. It offers diverse parameters against which target businesses are verified irrespective of the location and specifies the appropriate owners, geographical location, and company registration number to validate the legitimacy of businesses.
At Vespia, we simplify that by performing business register checks and AML checks: PEP - politically exposed person -, sanction lists, adverse media, ID verification, UBOs - ultimate beneficial owners -, court cases, proof of address, monitoring, proof of operation, and supply chain transaction monitoring.
We verify supply chain players and issue blockchain-based digital passports. We can precisely track the origin of suppliers, parts, materials, processes, and many more.
After the initial verification, we keep monitoring those companies and their transactions. Today we support 300+ jurisdictions and 4000+ sanctions lists. In addition to the official sources, we use a global network of so-called data scouts, who are incentivized to perform fact-checking on suppliers.
Build trust in a matter of seconds
We are operating in a $100B market with suppliers, customers, partners, and other kinds of stakeholders. The market is valuable, as, with the expansion of money laundering, war conflicts, and the AML regulations becoming stricter, company owners need a reliable solution to save money and keep risks under control and not ruin their reputation.
Supplier due diligence ensures that the target companies are compliant and risk-free. Vespia is equipped with AI-based technology to facilitate businesses with vendor due diligence procedures across industries.
That helps potential buyers develop a better understanding of their vendors and make them mindful of potential risks. Suspicious activities can be easily identified using AML screening. It is essential to check target companies throughout the process to stop entailing risks.
Read our industry page for more information about How Logistics and supply chain industries benefit from AML and KYC.
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