In my role, I have the privilege of speaking with some of the largest, most successful companies across all industries. One of the most interesting aspects of my day-to-day is exploring TPRM within automotive manufacturing. This industry faces some unique risks: being highly dependent on a large scale of third and fourth parties for obtaining parts, manufacturing, distributing, and customer satisfaction.
Poor sustainability, compliance failures, reputational challenges and other disruptions are among the third-party risks facing automotive manufacturing companies around the globe.
There are a wide variety of risks and compliance issues that can cause harm if TPRM systems and teams are not aligned. With all the third parties, fourth parties, and suppliers that feed into automotive manufacturing operations, large volumes of data need to be visible and consistent in order to properly identify, mitigate, and even avoid disruptions and breaches.
EY outlines the increasing adoption of centralised TPRM structures, highlighting that 90% of organisations are now moving towards centralised risk management—a noted increase from 85% in the previous year.
Building a cross-functional culture where programmes, processes, and teams are centralised and used consistently is critical to protecting operational security, brand reputation, and avoiding costly delays. It’s not just tactic-level improvements, but also a strategic overhaul for a company’s TPRM.
Regulators, customers, and other stakeholders expect automotive organisations to uphold ethical and sustainable practices. This includes the activities of their third and fourth parties; any negative disruption or activity can affect the reputation and compliance of the manufacturing organisation that engages with them. According to a 2022 KPMG report, “Most (70 percent) say TPRM program inefficiencies are exposing them to brand and reputation risk – up from 65 percent in 2020.”
Expectations for more sustainable operations are anticipated, from both regulatory stakeholders, as well as customers. BMW, for example, has the goal to cut CO2 emissions by at least 40% by the year 2030, which will cover their entire extended enterprise: “the entire lifecycle from supply chain to production and usage.”
Quick detection and management of these risks is necessary, and in order to achieve these goals, TPRM programmes must be built and integrated with consistent, visible, defensible strategies.
Automotive manufacturing organisations can face risks due to harmful activities of their third and fourth parties. Due to the complex nature of automotive operations, companies’ vulnerabilities extend beyond their direct relationships. Their third parties’ third parties (your sub-contractors) often provide critical support, systems, and parts. However, just because they are not direct relationships, their actions still affect your enterprise and you can be held accountable for illegal, unsafe, or unethical issues.
According to a SecurityScorecard report, 50% of organisations have had indirect relationships with at least 200 breached fourth-party vendors in the last two years.
Organisations need visibility into their entire third-party and supplier network to properly manage these potential operational, compliance, and reputational risks. This level of visibility not only protects you during an audit, but also helps evolve your TPRM program away from purely reactionary activities.
With better visibility, risk scoring, and automated workflows, organisations have the ability to identify a potential vulnerability before it has the opportunity to cause costly, disruptive impacts.
Ensuring quality and timely deliverables is critical to manufacturing and selling products, upholding ethical practices and brand value, and compliance. The right performance management programme is designed to collect, track, and manage the quantitative and qualitative performance metrics of your suppliers.
This captures the strategic advantages of efficiency, cost savings, competitiveness, quality, and innovation that these engagements bring, especially when they are your tier 1 suppliers. Performance management foundations help ensure third parties can deliver as expected by setting expectations for meeting SLAs, KPIs, and other important benchmarks.
As cyber incidents rise across all industries, automotive organisations must ensure the integrity of their IT security and data privacy. Areas of vulnerability including cloud security, information systems, supply chain attacks, and others all pose significant risks to operations, reputation, and resilience.
According to a Statista report, 42% of automotive manufacturing respondents stated that they experienced business disruption and delays related to cybercrime between 2010 and 2023.
TPRM capabilities like continuous monitoring help keep track of third-party related cyber events, threats, activities, and risk scores that can put your own cyber and information security at risk.
Low TPRM programme maturity, inefficient processes, outdated tools, and unclear roles can challenge operations and revenue opportunities. In research, Aravo is seeing that, in many cases, organisations overestimate their TPRM maturity levels.
In addition, use of outdated, manual tools to manage third parties, lack of centralised systems and data, lack of strategic direction, and other factors are creating roadblocks that keep TPRM from evolving.
Organisations can benefit from TPRM solutions that provide automation and evolve as programmes and priorities mature. Considering how your organisation will scale up is important, and your TPRM system must grow with you.
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