Oct 02, 2013
From the Advisory Institute
KPMG has launched potentially groundbreaking analysis into the risks companies take when they enter into new business relationships. KPMG's Astrus Insights, which analyzed 8,000 integrity due diligence reports on third-party relationships, covering 172 countries, has found that bribery and corruption is a key risk in many sectors.
While this was not unexpected, several interesting insights were revealed:
- More than 20 percent of subjects reviewed were given an overall risk rating of red, meaning they were associated with significant risks (such as allegations or incidences of corruption, fraud, money laundering or other unethical or illegal practices)
- Companies seeking to cut costs are often tempted to rely on basic internet or sanctions list checks alone, but Astrus Insights shows these searches typically fail to identify nearly 84 percent of potential risks
- Third-party companies are only as trustworthy as the people who run them, and the single greatest risk identified was the integrity of directors or shareholders of a company
- Our analysis highlights the criticality of piercing the corporate veil beyond the immediate third-party entity and any nominee owners or directors to identify ultimate beneficial owners
The Astrus Insights analysis provides a clear indication that companies need to take extra care in performing appropriate risk-based due diligence of third parties and better manage the risks associated with them, otherwise they could open themselves up to significant risks.
Read Astrus Insights: KPMG's Analysis of Third-Party Risks (PDF: 8.66 MB)