“Compliance” metrics refer to the manner in which the legal compliance function is monitored, measured, modified and considered for consequences on the business relationship and pricing. Every outsourcing agreement carries an implicit metric of compliance.
Generally, outsourcing contracts require the service provider to comply with applicable law. But this is only the beginning. Identifying and managing legal compliance duties therefore may include metrics that result in allocation of costs and risk.
As a legal and business matter, compliance metrics are evolving.
Corporate Governance
For business and legal reasons, corporate governance needs to be reflected in the management of supplier relationships. Under corporation laws and securities laws, boards of directors and senior executives are held legally accountable for failures to manage for accountability, transparency and duty to investors. Supplier management falls within the general responsibility for enterprise management.
In the pursuit of these duties, enterprise managers contemplating methodologies and procedures for governance in the sourcing relationship must consider how corporate governance principles such as accountability, transparency, collaborative decisionmaking and alignment for pursuit of common goals should be extended to up the tiers of suppliers. Legal and criminal liability may apply for failure to do so.
Accordingly, relevant corporate governance principles should suffuse the relationship governance in outsourcing.