How Strong Supplier Onboarding Reduces Compliance Risk

According to an article by Navex, supplier onboarding is no longer viewed as a routine administrative task but is now a frontline compliance function under increasing regulatory scrutiny. 

With laws such as the EU Corporate Sustainability Due Diligence Directive and the UK Economic Crime Act coming into force, regulators are shifting from asking whether due diligence was performed to probing how thoroughly and consistently it was executed and whether it can withstand enforcement scrutiny.

The article cites Michael Volkov, former federal prosecutor and CEO of The Volkov Law Group, who emphasizes that the onboarding process is the first and perhaps most critical opportunity to establish expectations and controls for supplier relationships. Weak intake practices, such as inconsistent vetting or missing documentation, are not only operational inefficiencies but are emerging as compliance vulnerabilities and legal risks.

The rise in global enforcement isn’t limited to large multinationals. The article states that organizations of all sizes, especially those in high-risk sectors or regions, must be prepared to justify their supplier onboarding decisions, particularly in the face of potential red flags. Failure to maintain adequate documentation or explain the intake process could undermine a company’s position during an investigation.

According to Jan Stappers of Navex, regulatory expectations now focus on operational maturity, consistent execution, traceable decisions, and long-term visibility. While achieving intake excellence may seem daunting, even modest improvements in consistency and documentation can significantly reduce compliance risk and enhance organizational resilience.