Why AI could hold the key to improving third-party supplier risk assessment

In today's volatile business environment, effective risk management is crucial. However, 62% of businesses doubt their risk monitoring programs meet requirements. Supply Wisdom’s survey reveals key insights, showing 80% view technology as vital, yet 57% do not use AI in risk assessments. The survey also highlights that less than 15% use continuous monitoring tools for procurement and supplier management.

Supply Wisdom's "Risk Management in a Technology-Driven World" Survey Highlights

Key Findings:

• Risk Monitoring Gaps: 62% of businesses do not strongly believe their risk monitoring programs meet contractual and regulatory requirements.

• Importance of Technology: Almost 80% view technology as very or extremely important in risk management.

• AI Adoption: Despite recognizing its importance, 57% of businesses do not currently use AI in their risk assessment processes.

• Top Risks Monitored:

1. Financial Risk: 65%

2. Operations Risk: 64%

3. Compliance Risk: 51%

4. Cyber Risk: 51%

• Underutilization of Technology: Less than 15% of procurement and supplier management professionals use continuous monitoring tools for supplier assessment.

Regional Insights:

• Vendor Usage: North American companies use fewer third-party vendors compared to European companies, with 47% of European companies reporting vendors in up to 49 countries, versus 22% of North American companies.

Industry Insights:

• Challenges in Third-Party Risk Management: The survey highlights rising geopolitical, economic, and environmental uncertainties that increase the need for robust vendor, supplier, and contractor assessments.

Strategic Recommendations:

• Comprehensive View: Businesses need a full understanding of their supplier populations, including criticality and specific locations.

• Continuous Monitoring: Leveraging automation and AI for continuous monitoring can enhance risk detection and provide strategic insights.

• Data-Driven Decisions: Access to up-to-date data helps organizations understand vulnerabilities and implement effective mitigation strategies.

Expert Opinions:

• Tom Thimot, CEO of Supply Wisdom: Emphasized the lack of understanding of supplier populations and associated risks.

• Jenna Wells, Chief Customer & Product Officer at Supply Wisdom: Highlighted the risks of rapid vendor onboarding without adequate risk assessment.

• John Bree, Chief Evangelist & Advisory Board Co-Chair at Supply Wisdom: Noted the challenges faced by overworked risk teams and the importance of AI and ML in enhancing risk management capabilities.

Conclusion: To effectively manage third-party risks, companies must embrace technology, particularly AI and ML, to automate and enhance risk assessment processes. Continuous monitoring and access to real-time data are critical to safeguarding businesses against the evolving landscape of supply chain risks.

For more detailed insights, READ THE FULL ARTICLE HERE