As you may already know, most company’s litigation costs have more than doubled over the last fifteen years. This nation-wide surge in litigation has wiped out one third of Fortune 500 profits. A recent study identified one of the main causes for this dramatic litigation increase; outsourcing to third-party suppliers and contractors.
If your company is like most, you are increasing your reliance on outsourcing to third party contractors and vendors. This phenomenon has created a fast growing trend that puts your company at great risk, perhaps more than any other threat to your company’s financial security.
1. Outsourcing to suppliers (vendors, contractors, sub-contractors, service providers, etc.) has tripled over the previous 3 years.
2. OSHA reports more than 4,000,000 workplace injuries/illnesses every year. A recent sub-contractor incident caused workplace injuries and loss of life. The sub-contractor was not appropriately credentialed by the hiring company. A subsequent investigation quickly revealed the sub-contractor had a known track record of safety violations. OSHA citations were issued, criminal investigations were initiated, and multiple wrongful death lawsuits and personal injury lawsuits were filed. Millions of dollars were spent in litigation because the sub-contractor was not properly screened and credentialed by the hiring company.
3. A recent KPMG study revealed an alarming number, 70% of supplier statements are incorrect. This means that 70% of the insurance, licensing and safety information you rely on to avoid loss from your supplier relationships is most likely unreliable. By not having a clear picture of how much liability their suppliers and contractors expose them to, companies that deal with these suppliers are totally unprepared to deal with the costs of on-site accidents and negligence. Companies can no longer rely on the assumption of tort indemnification by working with independent contractors. The general rule of non-liability for companies that hire independent contractors who subsequently commit torts has been eroded by so many well-recognized exceptions that legal experts now consider the non-liability rule as merely a preamble to its long list of exceptions. As many companies have found over the last decade, a multi-million dollar tort lawsuit is the last place you want to be when you discover that your contractors and suppliers have submitted incorrect or expired certificates of insurance.
4. In an unstable economic climate, more and more judges and juries are willing to find loopholes in traditional independent contract indemnification agreements, in an attempt to compensate tort plaintiffs injured as a result of on-site accidents involving independent contractors and suppliers. For an example of how far-reaching this changing legal paradigm has become, a court of appeals panel recently held that for the first time in that particular state, a hospital could be vicariously liable for the injuries caused by an independent contractor physician, despite the hospital’s agreement with the doctor disclaiming all liability. In another court of appeals decision, the panel of judges decided that a company could be held liable for the damages caused when an independent contractor helicopter pilot crashed, and it was later determined that the company knew or should have known about various safety and performance deficiencies of the independent contractor. These types of litigation disasters for companies who hire independent contractors will only increase in the coming years, and the decision to rely on 70% incorrect information supplied by those contractors will prove more and more costly.
5. PricewaterhouseCoopers has reported that poor data management costs businesses more than $1.4 billion per year. When companies face litigation years after the incident that sparked it, they are often without the necessary documentation to defend themselves - proper insurance certificates/endorsements, etc.
6. Fortune 500 litigation represents one-third of after tax profit and is increasing rapidly year-over-year.
7. Research conducted by PricewaterhouseCoopers and the Meta Group states that integrating governance, risk and compliance is the best way for a company to achieve bottom-line savings. Doing this will lead to:
· Improved revenue by 8%,
· Increased reputation value by 23%
· Employee retention increased by 10%.
8. The General Counsel Roundtable has found that each additional dollar spent on compliance-enhancing procedures saves an average of $5.21 in improved avoidance of legal liability, harm to an organization’s reputation, and lost productivity.
Business Credentialing Services provides state of the art third party compliance verification, tracking and monitoring services for its clients.
BCS’ founders and staff of industry experts have pioneered the system of insurance certificate tracking and monitoring as a risk reducing and cost saving method, perfecting this efficient process over the past 10 years. Our knowledge and expertise in this area is fine-tuned from working closely with some of the smartest and most risk-aware management teams at top Fortune 500 companies.
BCS has a proven track record and guarantees dramatic decrease in existing operational expenses while also reducing your potential for loss from third-party relationships – service providers, contractors, sub-contractors, vendors, tenants, suppliers, and the individuals they employ. BCS uses state-of-the-art systems and services to improve your suppliers’ compliance practices, ensuring total adherence to both your contractual terms of service, as well as all applicable governmental regulations unique to your industry. In a world of ever-increasing risk, your company can simply not afford to rely on outdated and inefficient methods for identifying and eliminating the risks you incur by relying on contractors and suppliers to fulfill critical job functions. In the world of risk analysis, luck favors only the prepared.