Whether through an assurance, advisory or internal control lens, the quality of your third-party ecosystem directly influences risk exposure, operational continuity, and regulatory compliance.
We offer here a practical guide on how to strengthen assurance and governance across supply chains:
1. Establish a clear view of third-party dependencies
Many organisations underestimate the breadth of their supplier landscape. Visibility is the foundation of assurance.
Map all suppliers, subcontractors, and outsourced service providers.
- Identify critical dependencies that affect corporate reporting, customer data, sustainability obligations or regulated processes.
- Highlight suppliers whose failure would create a material operational or financial impact.
Visibility enables effective internal audit planning, risk assessment and control evaluation.
2. Segment suppliers by risk, not spend
Suppliers of low monetary value can still carry high operational, compliance or reputational risk. Internal auditors are uniquely positioned to challenge this misconception.
- Categorise suppliers by criticality (strategic, operational, reputational and transactional).
- Apply enhanced scrutiny to those supporting financial systems, data processing, cyber risk, AI or customer-facing operations.
- Align oversight with risk appetite and regulatory expectations.
Risk-based segmentation supports more robust internal controls and underpins assurance.
3. Stress test supply chain resilience
Internal auditors increasingly need to understand how supply chains behave under stress, not just in a steady state.
- Run scenario-based stress tests (e.g., supplier insolvency, cyber breach, logistics disruption).
- Assess the financial, operational, compliance and customer impact of supplier failure.
- Evaluate the adequacy of contingency plans, business recovery and alternative sourcing routes.
Stress testing strengthens the ability to create effective resilience and response programmes.
4. Strengthen due diligence and ongoing monitoring
Due diligence is not a procurement exercise. It is a governance requirement.
- Refresh financial, operational, compliance and sustainability checks regularly for critical suppliers, not just once a year.
- Monitor early warning indicators such as declining service levels, late payments, or financial distress, as well as changes in delivery requirements.
- Use dashboards to track KPIs, SLAs, and risk trends.
Continuous monitoring reduces surprises, avoids cost inefficiency and enhances control effectiveness.
5. Embed clear governance and accountability
Governance, oversight and clear accountability ensure that each supplier is regularly monitored and their performance assessed in respect of all critical risks.
- Define ownership for supplier risk, performance, and escalation.
- Ensure finance, procurement, risk, legal and operations collaborate rather than operate in silos.
- Use structured review meetings with documented actions and follow-up.
Clear governance strengthens internal controls and supports compliance with UK Corporate Governance Code and equivalent expectations.
6. Strengthen your relationships with suppliers – on a human first level
Confidence is built on transparency, and suppliers respond positively to structured, collaborative engagement.
- Share forecasts, priorities, and expectations.
- Encourage suppliers to participate in improvement and risk mitigation discussions.
- Recognise strong performance to reinforce positive behaviours.
Healthy relationships reduce operational risk and improve accountability.
7. Integrate sustainability and ethical considerations
Ensure supply chains reflect ethical, sustainable, and socially responsible practices.
- Integrate sustainability criteria, including both the environment and society, in supplier selection and performance reviews.
- Assess issues such as carbon impact, labour standards, community value and supplier diversity – with a focus on those of most relevance to your sector.
- Support suppliers in developing their own sustainability capabilities.
ESG-aligned supply chains strengthen trust, reputation, and deliver tangible financial value.
8. Leverage technology to enhance oversight
Digital tools can significantly enhance the quality of supplier oversight.
- Use supplier management platforms for real-time visibility.
- Apply analytics to identify anomalies, trends, and emerging risks.
- Automate compliance checks to free up capacity for higher-value analysis.
Technology improves accountability as well as transparency and strengthens evidence-based decision-making.
Confidence comes from preparedness
Confidence in supply chains is not about eliminating risk; it’s about understanding it, challenging it, and ensuring organisations are prepared. With the right visibility, governance, and assurance frameworks, supply chains can shift from being a source of uncertainty to a source of resilience and competitive advantage.