Industry Leading Framework Reduces Third Party Risks in the Construction Supply Chain
THIRD PARTY RISKS
Modern Slavery is one example of a risk that construction businesses must address throughout their supply chain. Although many people might not know it, modern slavery, where people are exploited for personal or commercial gain, is a significant problem in the UK today. It can take many forms including human trafficking, forced labour and bonded labour. In the UK victims of modern slavery have been slowly rising with over 10,000 people referred to authorities in 2019. Forced labour, which often occurs in the construction industry, is the most common form of slavery in the UK.
THIRD PARTIES IN THE CONSTRUCTION INDUSTRY
When large construction organisations take on project management roles, they inevitably appoint several contractors, who may sub-contract jobs themselves. PWC estimates that over 70% of organisations have a moderate to high level of dependency on third party agencies. This creates a supply chain that is rarely transparent. It can be difficult for the project manager to be assured of the status of all the staff used by their sub-contractors. However, legally they are accountable for ensuring their sub-contractors are adhering to legal requirements around workers’ status. If businesses are found to be in breach of third-party legal requirements such as the Modern Slavery Act 2015, this can be seriously damaging to the business. Not only will a business have to pay fines that can cost millions, but it causes significant reputational damage, which can result in the loss of work and clients and eventually lead to the demise of the business. Almost of half of organisations surveyed in a recent Deloitte survey believed that the financial impact of a failure by a third party has doubled over the past five years.
A NEW FRAMEWORK FOR THE CONSTRUCTION INDUSTRY
The TierOne Project’s new risk capability maturity model enables businesses involved in construction to assess their risk across their third-party landscape against four areas:
- Leadership and Governance
- Third Party Risk Management
- Procurement
- Payments and Processing
The model provides a maturity ranking, giving businesses an indication of how they are performing and the extent to which they are at risk. The results also provide a set of prioritised recommendations for improvement, highlighting areas for focus to reduce business risk. This framework is an industry first, enabling businesses to be ahead of the curve in demonstrating the importance of protecting workers’ rights and conditions.
THE FRAMEWORK IN PRACTICE
In 2021, The TierOne project launched the new framework, piloting it with Construction Giant, Multiplex. An experienced team of construction, safety, and labour experts was formed, to trial the framework against one of Multiplex’s biggest sub-contractors. These experts applied the framework and advised Multiplex on their greatest areas of risk in the areas of quality, reputational damage, workers’ status and conditions and data protection related to their Third-Party Risk Management. This allowed Multiplex to be on the front foot in addressing their risk.
WHAT CAN THE FRAMEWORK DO FOR YOUR BUSINESS?
The pioneering risk capability maturity model enables your business to demonstrate your commitment to high standards not only in your own business but across your sub-contractor landscape. This gives clients the confidence they need that your business is socially responsible and shows the leadership role that you are actively pursuing in social responsibility in the construction industry.
DEVELOPING THE FRAMEWORK FURTHER
In the coming year the TierOne project will continue to develop the framework, making it accessible to a greater number of clients through greater breadth, use cases and a technology solution. Our ambition is for the framework to become a recognised and proven Third Party standard, which is known and trusted across the construction industry.