What Is a Supplier Risk Management Programme?
A supplier risk management programme is a critical weapon in your armoury against modern slavery risks. It’s part of how you identify, manage, and mitigate any potential risks in your operations and supply chain, as well as in the supply chain of any entities you own or control. It also provides a framework for success and compliance with your mandatory reporting requirements under the Modern Slavery obligations across the world.
With a robust third-party risk management plan in place, doing the right thing and staying compliant is infinitely easier.
But what should it contain and how do you get started?
Understand Your Obligations and Risk
A successful risk management programme requires careful planning. Establishing a special project team can help keep you on track. Your first task should be to hold a briefing session to discuss your obligations and potential areas of risk.
Understanding your legal and regulatory obligations is important, as these will inform the direction your programme takes. What laws apply to your business and what do they require you to do? Also consider the non-legal/regulatory risks relevant to your programme, reputational risk can be as important as regulatory risk.
Make a Commitment
Making a commitment to manage the risk of modern slavery in your operations and supply chain is the foundation of an effective risk programme. It sends a clear signal that you’re serious about doing business responsibly and minimizing risks related to modern slavery and human rights violations.
Having made this commitment, your next task is to embed it into how you do business – you need to develop a risk management framework. This should include reviewing your relevant policies and procedures to make sure they’re aligned with your commitment, with a particular focus on your process for vetting suppliers unless you operations are in difficult locations.
A successful risk programme will help you identify and describe the “risks of modern slavery practices in the operations and supply chains” of your own business and any entities that you own or control, which is one of the mandatory reporting criteria of the Modern Slavery Act 2018 (Cth).
That means having clear visibility of your suppliers: who they are, what they supply you with, and where the people involved in that particular supply chain are located.
You may be familiar with your larger direct or first-tier suppliers, but how well do you really know your smaller suppliers or those further downstream? It’s important that you do as these suppliers typically carry the greatest risk of modern slavery due to factors such as informal arrangements and subcontracting or the nature of the work they do.
A mapping exercise can bring much-needed clarity. This includes identifying your various tiers of suppliers and tracing their supply chain. For a complete picture, you should also include your own operations, as well as the supply chains of any entities you own or control.
Assess Your Risk
With your supply chain and operations mapped out, you now have the information you need to carry out a risk assessment, using a pragmatic, reasonable methodology. Few organisations will have the time or resources to examine each and every supplier in-depth, so focus on identifying those that present the greatest potential risks and merit further investigation.
Also bear in mind that practice makes perfect. If this is your first year of reporting, your risk assessment may not be as thorough as you’d like – but with a greater understanding of your supply chain in subsequent years, you can expect to achieve greater sophistication.
Take our Modern Slavery Questionnaire to help your business identify, mitigate, and manage modern slavery risk and human rights abuses across your supply and manufacturing chains.
Here is a diagram that reflects the cycle of a Modern Slavery or Human Rights risk programme. This work falls within the Design segment of a modern slavery programme. It is an essential beginning, but needs to be followed up will implementation and assessment of its effectiveness.