Strong relationships are built on trust, but trust has to be earned. Gaining assurance that third parties have complied with their contractual obligations is more than merely prudent, it’s essential.
Collaboration with third parties can include outsourcing, joint ventures, licensing deals, distribution rights, contract research, technology services, distribution channels and logistics. The benefits can be irresistible – increasing scalability and speed to market, reducing cost, leveraging brands and intellectual property rights across geographies, providing focus on core competencies, access to specialist skills and experience – the list goes on.
Often, third parties are integral to business critical areas and core processes: IT, HR, distribution, licensed manufacture and sales, procurement, R&D, security. Where contractual arrangements are based on third party self-reporting of usage, performance, compliance, costs or revenues, new risks are introduced. In light of the numerous benefits, the risks are overshadowed or overlooked, often creating a considerable level of trust embedded in the third party. Whilst the service may be outsourced the management of the risk is not.
Deloitte’s contract risk & compliance team has witnessed the frequent manifestation of risk, often resulting in value leaking away, some of which may be recoverable. In response, we have developed a tried and trusted approach to dealing with third party contract risk based on four key principles:
Reliance on third party relationships, coupled with ever increasing requirements to demonstrate good governance, produce robust financial information, maximise revenues and reduce costs, has led to many organisations looking beyond the traditional methods for gaining assurance and maximising value.
We assist our clients in their management of third party relationships, providing:
Whether concerns or assurance requirements sit with one specific partner or over a range of providers, whether they lie upstream or downstream from the organisation, we provide a bespoke, fit for purpose method by which you can:
Our team is skilled and highly experienced in a wide variety of areas across a large breadth of industries. We have experience working with upstream third parties such as outsourced service partners and joint ventures as well as downstream third parties such as licensees, distributors and customers. We use data analysis tools and techniques to produce highly efficient work methods. Our team has extensive international experience and a history of working effectively with the Deloitte network to deliver internationally consistent results.
We often identify non-compliance with terms and conditions or other contractual arrangements or inaccuracies in self reporting. This non-compliance is quantified and can provide you with significant leverage. This can result in our service being materially revenue generative. Contract risk and compliance activity results in revenue benefits, improvements to processes, service levels and business relationships and greater visibility of your extended operations.