STAMFORD, Conn., Feb. 6, 2013 /PRNewswire/ -- Information Services Group (ISG) (NASDAQ: III), a leading technology insights, market intelligence and advisory services company, today released research concluding that many financial services organizations are ill-equipped to manage risk in their supply chains and poorly prepared to face increased scrutiny from regulatory bodies.
"Financial services institutions face significant supply chain risks due to their reliance on elaborate networks of first-, second- and third-tier suppliers to manage critical processes and operations," said Peter Lauer, Partner, ISG. "At the same time, regulators are subjecting firms to increasingly rigorous compliance audits, through initiatives such as Dodd-Frank, as well as through stricter enforcement of existing standards."
In many cases, Lauer adds, enterprises facing a regulatory audit lack the capability to demonstrate effective oversight and governance of their supplier networks.
"Banks and insurers often don't know what they don't know about their supply chain risks," said Lauer. "While they may have processes and reporting requirements defined, significant gaps exist between what's documented and what's actually used to make decisions and manage suppliers and service delivery."The growth of multi-sourcing, coupled with increasingly shorter deal terms, has contributed to this problem, as the data collected and processes put in place during pre-contract due diligence quickly become obsolete as contracts expire. Another issue is non-standard systems and reporting requirements that fragment the delivery chain and make it difficult to aggregate information or define accountability when a problem occurs. As a result, rather than ensuring coordination between the myriad entities and touch points involved, governance and supply chain risk management efforts are often limited to addressing discrete risks or solving isolated problems. As a first step in addressing these issues, ISG recommends an assessment of existing governance frameworks to prioritize critical needs and identify potential solutions. Over the longer term, bringing together client and supplier teams to facilitate collaborative discussion can allow all parties to build a holistic view of service delivery and the interrelationships along the service delivery chain.