Greater scrutiny is being placed on corporate supply chains than ever before.
As a result, companies are seeking to mitigate corruption, modern slavery and other such risks in their ever-growing third-party ecosystems. At the same time, they are striving for insights that will help them to optimise their efforts and prevent disruption to business operations.
In this blog post, we will outline why data, especially legal entity data, is critical to giving companies the intelligence they need to mitigate risk and create actionable insights in their supply chains.
Why supply chain risk management is rising up the agenda
Several drivers have come together to make supply chains a major focus:
- Increasing regulatory pressure
Laws have been introduced around the world that require companies to put in place programmes to mitigate risk in their supply chain – including risk posed by their suppliers’ subcontractors – and disclose this information to regulators. This includes the US Federal Acquisition Supply Chain Security Act, the UK’s Modern Slavery Act, and California’s Transparency in Supply Chains Act. More recently, a US Executive Order on America’s Supply Chains was issued in February 2021, and Germany’s Supply Chain Due Diligence Act will come into force in 2023.
- Pandemic-related disruption
Covid-19 further exposed vulnerabilities in corporate supply chains. Disruption has been a common feature of the last two years, from empty supermarket shelves to superconductor shortages. This has damaged companies’ revenues and put many out of business. In fact, a survey by EY found that 57% of companies have reported “serious disruptions” during the pandemic.
- Expectations from consumers & other stakeholders
Consumers are increasingly using their spending power to reward companies who can demonstrate ethics and integrity in their supply chains, and punish those who cannot. As ethiXbase’s Managing Director and Co-founder Michael Short recently told us: “Alongside the development of legislative and regulatory frameworks for reporting on sustainability within global supply chains, what has really changed is the groundswell of public support whereby the average consumer will pay more for products that are ethically sourced or produced”.
Transparent legal entity data: driving supply chain intelligence
An essential first step in mitigating supply chain risk is knowing the third parties in your supply chain. But this can’t be in a vague manner, it needs to be denominated down to the actual legal entities your organisation works with – as after all, it’s legal entities that we enter into contracts with.
This information needs to be available as data: in a structured, transparent and helpful way – if you’re to be able to leverage it at scale.
Transparent legal entity data acts as a foundational layer indicating ‘who’s who?’, with internal or external datasets then being layered on top to generate insights that can help to identify risk or optimise processes.
Specific applications of legal entity data for supply chain risk management and intelligence include:
- Onboarding & risk profiling
It is vital for risk management and procurement professionals to know their third parties at the legal entity level. This knowledge allows them to conduct an initial verification of a third party, and then profile thousands of third parties according to the risk level they pose.
- Ongoing monitoring
Supply chain due diligence and risk management cannot only happen at the start of a relationship with a third party, but must be done on an ongoing basis. Legal entity data that is refreshed and updated regularly helps with effective ongoing monitoring.
- Supply chain integrity
Legal entity data is used by companies’ compliance teams to identify potential fraud and prevent losses to the business. This not only saves companies money, but it appeals to consumers who want to buy from companies that can demonstrate they sourced their products and services in an ethical way.
- Insights and optimisation
Legal entity data enables data management and analytics efforts. When combining it with payment, transaction or other sources of data, insights can be gleaned that wouldn’t otherwise be possible.
The trends which have brought the world’s attention to corporate supply chains are likely to continue – and accelerate – in 2022 and beyond. The Wall Street Journal reported in December 2021 that investment is “piling into supply chain technology” – but these technologies can only be effective if they leverage the right data.
Do you have the data you need to manage risk in your supply chain, and find insights and opportunities to optimise your business’ operations?
You may also be interested in…
- Case study: How OpenCorporates’ data supports supply chain management
ethiXbase automates supply chain management with OpenCorporates’ data.
- Highlights: Why transparent company data should be on your product roadmap
In our recent webinar, product leaders joined us to discuss why they and the industry are increasingly turning to transparent company data to overcome these challenges — and to accelerate product development.
Read webinar highlights >