Strategies for Effective Third-Party Risk Management
Effective Third-Party Risk Management (TPRM) is all about understanding that working with any third-party vendor or supplier carries an inherent risk.
Across all industries, organizations are faced with a two-fold challenge when it comes to vendors and suppliers. Increasingly stringent regulatory standards on one hand, and a simultaneous increase in the complexity of supply chains and delivery models on the other. In this article, we aim to give a comprehensive look into effective third-party risk management, from strategy to common challenges and success factors.
Ensuring that vendors remain compliant is becoming more important than ever before in order to ensure businesses minimize risks and achieve greater value by obtaining transparency and standardization in their processes.
Apart from being essential to maintaining operational and cyber resilience within the organization, third-party risk management is also required by many industry standards, such as: ISO 27001, NIST C2M2 and COBIT 5. At the same time, vendors might also process or have access to some of your organization’s most sensitive data and it is absolutely crucial to know how to approach assessing such vendors’ information security maturity effectively and regularly.
With the outsourcing of business processes becoming more common within organizations, and in order to deal with the growing burden of vendor assessments and audits, it is essential to have a structured and efficient third-party risk management process in place. Successful third-party or vendor governance is not something that can be achieved by simply writing up rules or setting up KPIs from an ivory tower.
Each third-party is different—both in terms of who they are as a business, and in terms of who they are in relation to your business.
Common Challenges in Third-Party Risk Management Practices
Focus on the ‘Perfect’ Assessment
A great deal of time is spent, amongst key stakeholders, in reviewing and agreeing on the perfect assessment. The output can be a lengthy process with questions that have a ‘design by committee’ quality. Instead, opt for rapid iterations and generate quick assurance value.
Some vendor assurance or third-party risk management processes are executed as a tick-in-the-box exercise, with unclear consequences for identified risks. If thresholds for mitigation and ending the third-party relationship are not defined, the outcome of the process is incomplete.
Most third-party or vendor governance processes still involve a significant aspect of manual analytics to understand the output of a potentially large number of assessment results. Automating both, analysis and insights, is key to operational success.
Success Factors for Effective Third-Party Risk Management
Generate Deep Insights Quickly
Ask questions that allow insights beyond the immediate question. A great way of doing this is by providing multiple unique answer options. This method can replace multiple questions with one comprehensive one.
Enable collaboration throughout the assessment with your third-parties. They need to be on your team and close communication can be of enormous benefit.
Focus on Risk Portfolio View
Viewing each vendor or supplier individually can be relevant for making decisions specific to that third-party, however risk exposure is often only revealed in a portfolio view. Analyze the risk exposure across multiple third-parties from various perspectives to gain a better understanding.
Mitratech’s GRC platform offers a scalable solution to identify and evaluate risks resulting from working with third-parties.
Furthermore, Mitratech’s Alyne provides predefined assessments that allow the identification of high risk third-parties and documentation of outcomes with legally required diligence. These assessments are highly scalable and allow you to digitize your vendor and supplier risk management process within minutes.
Additionally, Mitratech’s GRC platform multidimensional third-party risk management capabilities can now be boosted by Black Kite’s supercharged cyber risk assessments showing weaknesses in your supply chain from a technical, financial, and compliance perspective. Take a look into our Mitratech x Black Kite powerful collaboration and the enormous benefits it can provide to your organization.