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Best Practices for Managing Subcontractor Risk (Part Three)
Proactively managing subcontractor risks through consistent standards, direct oversight, and clear communication is essential for maintaining safety, compliance and operational success in supply chains.
- By Avetta Staff
- Sep 17, 2024
Key Takeaways:
- Subcontractors introduce significant risks to extended supply chains. Hiring companies need direct visibility and oversight to protect their operations.
- A strong subcontractor risk management program requires a unified strategy, starting at the C-suite level.
- Clear expectations of a new subcontractor compliance program should be communicated through all levels of the hiring organization and with all prime contractors.
- Hiring companies must also monitor and enforce compliance standards to ensure proper risk mitigation and management in the field.
Introduction
Subcontracting is vital to modern supply chains, allowing companies to leverage specialized skills and increase flexibility. However, as outlined in our last blog, it also introduces significant risks, including safety incidents, workforce concerns, cyber vulnerabilities, reputational damage, and business disruption.
Those risks are often exacerbated by a troubling lack of visibility from the hiring company down to the many tiers of subcontractors working in their network. Many companies rely on prime contractors to vet, qualify, and manage subs, creating a compliance disconnect between hiring companies and subcontractors.
To properly manage subcontractor risk and compliance, hiring companies must instead take a proactive, deliberate approach. In this article, we’ll explore best practices for managing subcontractor risk, including:
- The need for consistent standards and communication
- How hiring companies can ensure direct oversight over subcontractors
- Tips to ensure subcontractor qualifications and compliance in the field
Consistent Strategy From the Top Down
Developing a company-wide compliance and safety strategy is crucial. This strategy should involve high-level decision-makers across the organization to ensure consistent application across all projects.
As with any major initiative, a company’s stance on subcontractor risk and compliance must start with the C-Suite. Achieving consistent standards is nearly impossible without cohesive and well-communicated buy-in from the top. Clear policies and practices should be communicated across all levels of the company, from corporate leaders to field supervisors.