Focusing on the climb ahead

Third-party governance and risk management

Welcome to our 2018 global survey on Extended Enterprise Risk Management (EERM). This year we had just underone thousand responses, a significant increase and more than double we received last year. Survey responses reflectthe views of senior leaders from a variety of organizations in 15 countries1 across the Americas, Europe Middle Eastand Africa (EMEA), and Asia Pacific. A record number of participants this year is reflective of the ever increasing profile and investment third-party risk management is getting within organizations.

This third annual survey follows last year’s survey entitled “Overcoming the threats and uncertainty” which revealedhow EERM in many organizations had continued to benefit from greater executive awareness. However significant changes in the external environment (such as the Brexit result in the UK and the US presidential election) had sloweddown progress in implementing holistic, integrated frameworks and risk management mechanisms. After this stagnation during 2016 in addressing EERM maturity, 2017 seems to have allowed organizations to tackle the topic with a renewed focus and investment.

Our prior surveys focused on understanding the nature and magnitude of the EERM challenge in large global organizations. Using this as a backdrop, the current survey aims to capture improvements in maturity of EERMframeworks with a specific focus on the business case and investments in EERM. The survey results also reflect anemerging shift to include more centralized oversight and management for EERM across the more decentralized or federated structures to enable increased risk-awareness and consistency. A more centralized approach to EERM also enables the aggregation of information at an ‘organization-wide’ level to not only have a cross-risk view of third- party relationships, but also to address issues around concentration risk. In addition to reporting other leadership initiatives and concerns, this report sets out our predictions for 2018/2019 and related points of view.

As in our previous surveys, survey respondents are typically responsible for governance and risk management of theextended enterprise in their organizations, including Chief Finance Officers (CFOs), Heads of Procurement/Vendor Management, Chief Risk Officers (CROs), Heads of Internal Audit, and those leading the Compliance and InformationTechnology (IT) Risk functions. The respondents represented all the major industry segments2. The majority of theseorganizations had annual revenues in excess of US$1 billion. Additional insight was also obtained from subsidiaries ofgroup organizations operating with higher degrees of decentralization and others with lower annual revenues.

I hope this report will continue to enhance your understanding of what has changed and what lies ahead as you exploit the many opportunities that EERM can yield for your organization.

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