Dive Brief:
- While organizations are relying on outsourcing for more functions and services, a new Deloitte survey shows that nearly 53% have little oversight of fourth or fifth parties (third party outsourced relationships) or the risk that comes with that lack of oversight. The study, Focusing on the climb ahead, found that companies also are slow to manage their potential liability through extended enterprise risk management (EERM).
- According to other findings in the survey, 57% of respondents lack sufficient knowledge or visibility of their third parties' subcontractors and 21% aren't sure; just 2% regularly monitor their subcontractors, while another 10% do so for subcontractors considered critical; and 88% either depend on their third parties to monitor subcontractors, have an unstructured approach or don't even know their own practices on the matter.
- According to Deloitte, only 20% of companies have streamlined their EERM systems and processes, and 53% believe they'll reach maturity in two to three or more years — despite the fact that many companies rely on contractors heavily now.
Dive Insight:
As more organizations outsource functions and services, the need to understand and address risk escalates. Employers have increasingly opted to retain contractors for a variety of positions to better position themselves as agile employers, but experts have told HR Dive that, due in part to contract hiring, many employers don't have a good handle on who they have employed in their organizations. And that can lead to legal risk as well as business interruptions if problems arise, especially when it comes to those contractors' subcontractors.
For how quickly it has grown, employers opting for contract work with increasing frequency is a fairly recent phenomenon. Therefore, few departments may be fully prepared for the consequences of managing (or, more to the point, not managing) those workers.
Contract workers — and their subcontractors — tend to have better experiences when engaged directly on the front end. Companies may have to rework their managing structures to accommodate this. But with new tech, making such transformations is more possible.
