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Just 11% of UK firms are prepared to deal with third party failure during uncertain times

Despite 80% having ‘high’ or ‘critical’ levels of dependence on outsourced providers

6 April 2017

Over the last three years, one in three UK companies have experienced major disruption or complete failure due to the actions of outsourced providers, according to a survey on third party management from Deloitte, the business advisory firm.

Its latest survey, examining third party governance and risk management (TPGRM), found that just 11% of UK companies feel equipped to deal with such failures during times of uncertainty. The global survey, which included the responses of 107 UK companies across all sectors, also found that the UK had one of the highest dependencies on outsourcers, at 80%.

Kristian Park, global extended enterprise risk management partner, Deloitte, said:
“This year’s survey results demonstrate that third parties are increasingly relied upon, with this trend likely to increase. Unfortunately, management processes and technology that support the oversight of these relationships are not keeping up, creating an ‘execution gap’. Whilst there is clear organisational commitment to address this, it is not being matched by the right skills, processes and technology to achieve intended results. Whilst both political and economic uncertainty has slowed investment and subsequent progress, there is greater appreciation of the related risks.”

Deloitte estimates that most large organisations take between two to three years to develop an integrated TPGRM framework.

“We predict 2017 and 2018 as the years when people will make significant strides in addressing this issue. However it will be mostly dependent on the priorities set by individual companies”, continues Park. “In the current climate, some will be focussing on issues such as where they will continue to be located, or assessing talent models, particularly during the two-year time frame in which the UK intends to depart from the European Union.”

Deloitte recently calculated that third party failure could cause shareholder losses of an average 2.55% or up to 10 times the regulatory fine. Historically, this has ranged from £1.3m to £35m, reaching £650m for internationally-operating firms subject to global regulation.

Ends

Notes to editors

About the survey
The survey is based on 536 responses, of which 107 are UK based, reflecting the views of senior leaders responsible for governance and risk management of the extended enterprise of their organisations. Survey respondents came from a variety of organisations across all eight major industry segments and from 11 countries across the Americas, Europe, Middle East and Africa, and Asia Pacific regions. The survey responses were collected after the results of the UK’s referendum vote results and during the US presidential election.

About Deloitte
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.

The information contained in this press release is correct at the time of going to press.

Member of Deloitte Touche Tohmatsu Limited.

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