The Benefits of a Multi-Dimensional Modern Slavery Risk Matrix

With many companies currently in the process of preparing their Modern Slavery Statements under the Modern Slavery Act 2018, there is an exciting opportunity to consider how Australian businesses can best assess country-based risk of modern slavery in supply chains. Modern slavery risk is characteristically complex and infamously difficult to measure with any degree of certainty making the quantification of modern slavery risk particularly challenging.

Indicators and indices such as the Global Slavery Index (GSI) and the Trafficking in Persons Report (TIP) have been hugely effective in raising awareness of the prevalence of modern slavery, and pressuring governments to take decisive action to remedy the issue within their borders. However, the complexity of modern slavery risk for businesses looking to map their supply chains necessitates a deeper understanding of how risks manifest across different contexts and industries around the globe.

While easily understood, a ranking or index alone gives little insight into the characteristics of risk within a particular country. For example, while the United States is listed under the GSI as a BBB (second from the highest) rated country on Government Response to modern slavery, the Transparency International Global Rights Index designed to measure violation of workers’ rights, ranks the United States as a tier 4 country due systemic violations. Much of this discrepancy stems from the fact that while there are labour laws in place in the US, the workforce has become increasingly casualised or contract-based and many workers are unable to access the benefits afforded to full-time employees. This kind of complexity is unable to be discerned from a single-value indicator.

Without the resources to conduct in-depth analysis of each country, our multi-tiered Modern Slavery Risk Matrix provides key insights into the types of slavery risks across the globe that can inform supplier prioritisation. Rather than conducting research into every country present in a high-risk supply chain, turning to the matrix equips businesses with an understanding of where the risks in a particular country may lie, with what particular vulnerable populations, and what corrective action or supplier engagement strategy may be most effective.

Our Country Risk Matrix provides businesses with an indication of modern slavery risk across three tiers of indicators. Understanding where a country performs well and where risks are apparent across these tiers begins to provide businesses with a story as to how any country experiences modern slavery risk.

1.     Vulnerability Risk Factors

Vulnerability risk ratings are calculated according to seven distinct indicators that are prevalent to our understanding of modern slavery risks. These indicators are recorded and given a risk rating based on the cumulative presence of indicators of vulnerability.

Some of the indicators relied upon to compile an understanding of the risk of modern slavery vulnerability are the Human Development Index and a country’s GSI Vulnerability rating.

As an initial indicator, the vulnerability of a population to exploitation and slavery-like work conditions can provide an understanding of risk of modern slavery. However, how a country both provides legal protections for workers and enforces those protections will have a significant impact on how prevalent these vulnerability risks are for a business looking to prioritise their suppliers.

2.     Formal Legal Protections for Workers

How well a country protects its workers can be an indicator of how far the government is prepared to go to protect its workers. A willingness to introduce legislation and sign up to formal human and labour rights treaties goes some way to understanding how the vulnerabilities in tier 1 (vulnerability) are experienced by workers across the globe. 

The level of formal legal protections is measured according to three indicators that are assigned an overall risk rating. Indicators relied upon include the Human Freedom Index developed by the Fraser Institute that looks at the levels of personal, civil, and economic freedoms.

3.     Level of Enforcement

While formal protections go some way to mitigating vulnerabilities and preventing slavery practices, formal protections provide little support to workers where they remain unenforced and inaccessible to vulnerable workers. For this reason, the third tier of the Modern Slavery Risk Matrix considers whether legal protections are upheld and enforced by governments and through systems of law.

The level of enforcement of workers rights is calculated based on assigned risk ratings according to three indicators including the Corruption Perception Index, which considers how much corruption influences legal and political decisions within a country. Modern slavery and exploitation thrive in corrupt environments because rights and protections can be easily eroded. Financial incentives often drive modern slavery practices, and these incentives are similar to those that drive corruption. However, corruption is not an accurate sole indicator of modern slavery risk and this rating has been collated with other indicators that could suggest a lack of enforcement.

Following these tiers of indicators can provide a more wholistic understanding of modern slavery risk to businesses who, by using the risk matrix, are able to understand whether actions such as the implementation of policies is likely to be effective with suppliers operating in a particular national context.

If you’re interested in understanding how country risk may impact your business, get in contact to find out more.

Mikaylie Page