LRQA: Navigating the New Era of Risk with Assurance 4.0

LRQA is a leading global assurance partner, bringing together decades of expertise in assessment, advisory, inspection and cybersecurity services.

With a team of several thousands in around 150 countries, the organisation's award-winning compliance, supply chain, cybersecurity and ESG specialists help more than 60,000 clients across almost every sector to anticipate, mitigate and manage risk wherever its clients operate.

As CEO at LRQA, Ian Spaulding's role focuses on the execution of the company strategy: working with clients to overcome challenges and create more resilient businesses, as well as a safer, fairer and more sustainable society. 

Having worked in corporate social responsibility (CSR) since the 1990s, Ian – like his employer – is particular passionate about the benefits of ESG practices, both in owned operations and across global supply chains. 

Here, he speaks to Supply Chain Digital about the new era of risk and the digitally-informed approach to assurance that he and his team are taking. 

How are assurers helping global supply chains adapt to the era of continuous risk?

A number of trends have combined in recent years to usher an entirely new era of risk management.

An evolution in ESG considerations, emerging legal requirements governing ESG, supply chain complexity and increasingly sophisticated threats to cybersecurity are making it harder for companies to protect their operations and reputations. 

There is a clear expectation that business performance must navigate political and economic trends, as well as being aligned with the needs of the planet and our communities, all of which are made harder by the current risk climate. 

Our clients are now having to balance responsible sourcing, the energy transition and strengthening cybersecurity maturity alongside the need to assure product integrity, assets and management systems.  

Tell us about the 'Assurance 4.0' approach

Assurance 4.0 is a new term we’ve coined to mark this new era of risk management, enabling organisations to navigate the risks associated with these three global trends of heightened ESG expectations, supply chain integrity and cybersecurity. 

Thankfully, new digital technologies provide an opportunity for companies and assurers to monitor and manage these new challenges in a rapidly-evolving landscape.

Tools now available include our own EiQ supply chain intelligence platform, which collates more than 75 million data points from 25,000+ supply chain audits. This provides clients with near-time monitoring of their supply chain performance and ESG risks through data collection, analytics and risk alerts. 

In doing so, our clients are able to take a more proactive and continuous approach to risk, a lesson learned from the world of cybersecurity. 

Why are companies finding it so hard to protect their operations and reputations? 

The very nature of today’s supply chains makes it harder for businesses to protect their operations and reputations as they become increasingly globalised with multiple layers and, often, limited communication between stakeholders. 

While many companies have good visibility of their own operations, ensuring due diligence and compliance throughout these complex global supply chains is particularly tough. 

Yet new legislation, such as the EU Corporate Sustainability Due Diligence Directive (CSDDD), US Securities and Exchange Commission (SEC) rules on climate disclosures and the Uyghur Forced Labor Prevention Act, highlight the need for businesses to have the correct processes and data in place to monitor for ESG risks and ensure compliance throughout their supplier networks.

Fragmentation can impede the flow of this information. A lack of integration among technology systems and reduced data sharing means limited transparency, which leads to inefficiencies, a duplication of efforts, difficulties in sharing information, reduced responsiveness and a potential misalignment of activities. 

At worst, it can also leave hidden risks: we’ve all seen news stories where poor labour or environmental practices have been uncovered to the complete surprise of the organisation further up the supply chain. 

This is why increased visibility – which can be achieved through improved data collection and analysis – is crucial. Over the last year we've been working with the US Department of Labor to establish the Global Trace Protocol Project, designed to address the barriers in supply chain traceability and ensure that supply chains are free of exploitative practices.

What specific operational challenges are businesses facing as a result of external factors?

Our teams work hard to eliminate child labour and modern-day slavery through responsible sourcing programmes. In 2023 alone, we helped 30 clients across the retail and manufacturing industries identify, assess and remediate forced labour risks.

Thanks to the active enforcement of legislation such as the Uyghur Forced Labor Prevention Act, there has also been a trend towards decoupling from certain regions such as China. But this can also open businesses up to new risks with suppliers in untested markets such as Mexico or Vietnam. Understanding new markets through comparative data analysis and predictive risk management can help mitigate issues before the arise.

The Rana Plaza industrial collapse in 2013 was a real wake-up call for many industries, especially fashion and apparel. Our company took a lead role in developing an actionable response to ensuring tragedies like this are mitigated before they can happen, which included developing hotlines and grievance mechanisms. One example is the Amader Kotha Helpline, which receives an average of 3,000 calls per month from workers across 1,500 factories, helping businesses stay well informed of any high-risk issues that are reported by workers. 

Fragmentation of supply is another key factor which makes it extremely difficult for companies to protect their operations. Conflicts around the world and numerous issues with shipping through the Suez Canal and the Red Sea have created a chaotic period for Europe’s manufacturers and retailers, often forcing them to seek new suppliers at short notice. 

We also know that transitioning to cleaner energy sources is top of the agenda for businesses, so we’ve been working with our clients to reduce their impact on the environment and helping them with that transition. For example, we’ve delivered more than 600 renewable energy projects across 25 countries in the past 24 months. We also conduct around 60,000 inspections of critical assets every year, to ensure safely and minimise risk to life.

How crucial have data-informed decision-making and real-time insights become to navigating risk and protecting performance?

In an era that has become defined by disruption, using data-informed decision-making and real-time insights is no doubt vital to navigating risk and protecting performance. 

For areas where a rapid response to risk is vital, it’s clear that scheduled traditional risk assessments and audits alone no longer offer sufficient insight or protection that businesses need. 

Continuous assurance and monitoring are essential for businesses that are looking to track their data in real time, including data from suppliers, facilitating a proactive and even a predictive approach to risk management.

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