Written by Jackson Wood, Director, Industry Solutions, Trade Compliance, Descartes
I recently had the privilege of participating in a podcast series with the good people at Simply Trade. For those unfamiliar with this platform, the Simply Trade podcast is hosted by Andy Shales and Lalo Solorzano from the Global Training Center. Andy and Lalo have a combined 60+ years 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.
For our three-part series on the podcast, we are doing a deep dive into the evolving nature of risk and opportunity for organizations that seek to grow their global trade aspirations and operations. You can listen to the first episode of the risk management podcast here.
Key Takeaways
- A three-dimensional risk approach that considers regulatory, reputational, and resiliency aspects of global trade is crucial for a robust compliance program.
- Siloed approaches focusing solely on procurement, compliance, or supply chain effectiveness are no longer sufficient.
- Increasing regulations like the U.S. Forced Labor Prevention Act (FLPA) and Uyghur Forced Labor Prevention Act (UFLPA) require companies to enhance due diligence and disclosure about forced labor in their supply chains, demanding an evolution in risk management perspectives.
- Strong leadership is essential for guiding internal discussions, effective governance, and cross-departmental collaboration in risk management.
- Partner with industry experts like Descartes to effectively enhance internal visibility, external transparency, and mitigate diverse risks —regulatory, reputational, and business resilience—within the organization and the evolving global trade landscape.
Defining a New Risk Paradigm
In the first episode, I spoke with Andy and Lalo about how progressive global businesses are building new models to identify capacity and convene the constituents within the organization who have the necessary perspective and capabilities to manage global trade risk.
Adopting a three-dimensional risk approach is critical for executing a holistic compliance program that delivers cost benefits and strategic value within the evolving regulatory landscape.
- Regulatory – protecting the organization from global trade compliance risks to avoid fines, penalties, and withheld shipments.
- Reputational – protecting the organization’s reputation and image. Is the supplier or country associated with forced labor, environmental degradation, or political corruption? Are the supplier’s actions aligned with the values of the organization and the commitments made to staff and stakeholders?
- Resiliency – ensuring a resilient relationship with a supplier. Will this relationship stand the test of time? While the supplier may meet standard due diligence, are they vulnerable to, for example, climate change disruptions or geopolitical instability that could impact the ability to meet obligations long term?
Once an organization has this new framework in place, executive sponsorship—someone (e.g., Chief Legal Officer, Chief Compliance Officer) to chair the internal governance discussions and take ownership of cross-functional collaboration efforts—is a prerequisite for establishing a common language, lens, and framework to help break down discipline silos and facilitate productive collaboration.
With this backdrop, we spoke in depth about the U.S. Forced Labor Prevention Act (FLPA), a law that was enacted in 2015 to help prevent the use of forced labor in global supply chains, as well as the more recent Uyghur Forced Labor Prevention Act (UFLPA), which pertains to the use of forced labor in the Xinjang region of China. Both the FLPA and the UFLPA apply a new standard of due diligence to goods imported into the United States and requires companies to disclose information about their efforts to identify and address forced labor in their supply chains.
As regulations like the FLPA and UFLPA continue to proliferate, global organizations must evolve their perspectives and their methods for managing the risks and opportunities associated with global trade. It is no longer sufficient to operate with siloed focus on procurement execution, trade compliance and supply chain effectiveness. Evolving regulatory requirements, increasing brand and reputational expectations, and emerging threats to supply chain resiliency demand a unified approach to contemplating and managing risk across the enterprise.
However, global supply chains are immensely complex and constantly in flux, which makes appropriate due diligence and ongoing visibility very difficult to establish. Moreover, government agencies do not publish a list of all entities suspected of engaging in forced labor, making the background vetting of potential suppliers even more vexing. That’s why internal collaboration and effective governance is essential to enabling an organization to conduct more cross-functional due diligence efforts.
To wrap up our first of three Simply Trade podcast episodes, we emphasized that early discussions and collaboration efforts will inevitably be bumpy. But a sustainable commitment at the governance level, with the appropriate level of executive sponsorship, will yield opportunities of better internal visibility and external transparency, while mitigating regulatory, reputational, and business resiliency risks for the organization. For the second episode in this three-part series, listen to it on the Simply Trade podcast.
Descartes Risk Management Solutions Enable Business Growth
Descartes is a provider of an industry-leading suite of 3rd-party risk management solutions, including sanctioned party ownership, forced labor compliance, trade content for leading business systems, and denied party screening software that integrate with all major business systems.
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. Our simple and straightforward solutions enable organizations to improve compliance processes, accelerate decision-making, and drive business growth globally.
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.
