The Increasing Importance of Collaborative Enterprise Due Diligence

Written by Jackson Wood, Director, Industry Solutions, Trade Compliance, Descartes

Organizations are grappling with increasingly complex requirements in global trade compliance.

I recently appeared as a guest on the podcast series Simply Trade hosted by Andy Shales and Lalo Solorzano from the Global Training Center. Andy and Lalo have a combined 60+ years of experience in the global trade industry, and the show covers everything from logistics to technology. As those of us who have spent any time working in the space, we know there is so much to learn with the ever-evolving world of global trade.

This was my second of three appearances to discuss the evolving nature of risk and opportunity for organizations that seek to grow their global trade aspirations and operations. In this most recent episode, we focused on the expanding and collaborative nature of enterprise third-party due diligence, and why organizations need to prioritize building these capabilities now. You can listen to the first episode of the risk management podcast here or read a three-minute article on the topic covered.

In the world of trade compliance, organizations are grappling with increasingly complex due diligence requirements. The push to mitigate “three-dimensional” risks — regulatory, reputational, and resiliency — is steering the industry toward a collaborative model that breaks down traditional departmental silos. This paradigm shift encourages organizations to build a cohesive risk mitigation strategy, not confined to the compliance department alone.

The Collaborative Framework

Internal Governance 

To facilitate internal collaboration, organizations must identify key individuals and stakeholder groups capable of contributing meaningfully to compliance and due diligence discussions. Executive sponsorship is crucial in breaking down silos, with leaders like the Chief Ethics Officer or Chief Compliance Officer playing a pivotal role in steering cross-functional collaboration efforts. This approach ensures a holistic due diligence approach that can effectively address the multifaceted challenges of regulatory, reputational, and resiliency risks. 

External Enablement 

In addition to internal governance, exploring partnerships with third-party entities (e.g., freight forwarders, customs brokers) and technology providers (e.g., compliance management platforms) can unlock collaborative opportunities. These partnerships offer fresh perspectives and insights to tackle compliance challenges more effectively. 

Compliance in the Spotlight 

Taking a collaborative approach to risk mitigation and compliance positions organizations ahead of the curve. As the demand for supply chain transparency intensifies and Environmental, Social, and Governance (ESG) factors become a competitive differentiator, this approach provides a strategic advantage. Notably, regulatory bodies like the U.S. Securities and Exchange Commission (SEC) and the European Commission are taking significant steps toward codifying sustainability directives. 

Proactive Measures 

Forward-thinking companies are taking proactive measures, addressing transparency and sustainability voluntarily before it becomes a legal requirement. This includes making public commitments, featuring compliance outcomes in annual reports, and setting specific goals to establish transparent and sustainable supply chains. 

Embracing a Cultural Shift 

With the convergence of regulatory and reputational risk, organizations are actively embracing a cultural shift toward transparency. Proactive companies are communicating their commitment to eradicating forced labor risks and establishing transparent and sustainable supply chains. This cultural change is reflected in executive statements and reported business metrics, fostering a commitment to transparency both internally and externally. 

Collaborative Due Diligence Framework 

A collaborative due diligence framework enables organizations to provide the supply chain information demanded by investors, the public, and regulatory bodies. It involves strategic changes in various operational areas, from sourcing and logistics to legal and regulatory affairs. This collaborative effort ensures that compliance policies and actions are aligned with the organization’s values. 

Creating Value Moving Forward 

By adopting a collaborative approach to due diligence, organizations can establish a strategic value creator. With a sustainable commitment to transparency and internal cooperation, organizations can foster productive collaboration between stakeholders, enhancing internal and external visibility while mitigating regulatory, reputational, and resiliency risks. 

In conclusion, the evolving landscape of compliance and international trade demands a proactive and collaborative response. Organizations that embrace this paradigm shift will not only navigate the complexities of regulatory requirements but also create value by enhancing their strategic position in the global market. As trade compliance undergoes a redefinition, organizations with a collaborative mindset can thrive, reaping the rewards of increased visibility and risk mitigation.  

Enhance Visibility and Collaborative Compliance with Descartes

Descartes is a provider of  industry-leading 3^rd-party risk management solutions, including trade content for leading business systems, denied party screening and global trade intelligence software. Our simple and straightforward solutions enable organizations to improve compliance processes, accelerate decision making, and drive business growth globally.

Descartes Visual Compliance™ and Descartes MK™ Denied Party Screening solutions are flexible and modular, allowing organizations to pick the specific and exact functionality and content they need for their particular compliance needs and scale up later as and when necessary.

Find out what our customers are saying about Descartes Denied Party Screening on G2 – an online third-party business software review platform. Additionally, you can read this essential buyer’s guide to denied party screening to help you select a solution that fits your needs.