As organizations increasingly rely on external networks, the imperative to monitor and evaluate these third-party relationships intensifies. Third-party risk management automation grants insight into vendor and supplier operations, clarifying the potential risks they carry for your organization.
Comprehending Third-Party Risk in Siloed Environments
Less mature organizations tend to manage third-party risk in silos on an ad hoc basis. Suppliers and vendors are often managed solely by the departments that directly use their products and services with no central overview of how the service provided by the third-party could impact other business areas or the overall performance of the organization.
This lack of central oversight leaves businesses in a vulnerable situation with no holistic view of their entire vendor network, undermining their ability to assess and prioritize risks effectively. There is often no standard onboarding process, limited continuous monitoring, and no standard key risk indicators to understand how the vendor is performing. Usually, no formal SLAs are defined and their overall sustainability and viability as a long-term business partner is often overlooked, neglecting the importance of lifecycle assessment in supply chain relationships.
Overcoming Obstacles in Third-Party Risk Management
The risk professional trying to get a centralized view of an organization’s vendor base when they are dealing with hundreds and sometimes thousands of suppliers, vendors, contractors and technology and service providers has a difficult job on their hands!
To get visibility of the situation they must:
Build a register of the critical vendors.
Understand the contract and SLAs for each vendor and define KPI’s, ensuring they align with security best practices and contribute to a robust third-party risk management strategy.
Define the key risk indicators for each supplier to enable the identification of substandard performance, risks, and evaluate the security posture.
Conducts regular vendor risk assessments, questionnaires, and surveys to understand performance.
Determine the viability and sustainability of each vendor as a long-term business partner via research and scorecards.
Understand the impact across the entire organization if the third-party vendor fails.
Gather regular input relating to the performance of each third-party and supplier.
Build a log of incidents relating to each supplier as part of the due diligence and risk mitigation process.
Ensure they are meeting any compliance requirements, regarding regulations, policies, and legislation, as part of the third-party risk management system.
Rate the criticality of each vendor to enable management teams to put money and resources behind the most critical vendors.
Doing this manually would be a huge undertaking for what is usually a very small risk team and would require extensive collaboration with stakeholders across the business. But bringing the process online using a purpose-built third-party risk management solution can help.
Let’s explore three critical vendor risk management practices in more detail and look at how automating the processes helps risk teams to work with individuals across the organization to build a comprehensive third-party risk management (TPRM) solution, , incorporating lifecycle assessment and security controls.
Key benefits of bringing Third-Party Risk Management Online
Bringing your third-party risk management process online using GRC software brings a wealth of benefits for organizations, including automation, due diligence, and risk mitigation. Here we explore three of the fundamental processes of a third-party risk management program and explore the benefits of conducting those processes online using a GRC tool.
- Standardizing the Onboarding Process
The best-practice frameworks and templates within a GRC solution let you create a standard onboarding process for all suppliers capturing all the information in a consistent format up front. These online forms can be sent out to the internal team champions managing the supplier ensuring the information is captured consistently and centrally within the GRC platform.
Stakeholders can save contracts, and log SLAs and KPIs for each vendor within the solution, and risk teams can further customize forms to capture all the information they need. The data captured feeds directly from the online forms into the software platform and can easily be reported on and ‘visualized’ using automated reports and dashboards, improving the assessment process of vendor relationships.
- Defining KPIs and KRIs
Once each supplier has been onboarded and logged in the system and you have a live register of all your third parties you can start to gather further information on each vendor. Stakeholders can log the criticality of each vendor on your preferred scale, they can define Key risk indicators for each supplier, and key performance indicators and SLAs.
These metrics can then be digitally linked to real life information like online vendor risk assessments, questionnaires, and surveys. Incident logs and other transactional and operational data can be pulled into the third-party risk management solution via API integrations with other systems and linked to the relevant KPI’s and KRIs giving clear indications of when a vendor is not performing or posing a risk to the organization.
You will even have clear visibility of which systems, business processes, individuals, and teams will be impacted if the vendor fails. Automating this process enables organizations to get early visibility of risks that would otherwise go unnoticed if left to manual processes and gut feel.
- Digital Risk Assessments, Questionnaires, and Surveys
Rolling out your vendor risk assessments, questionnaires, and surveys online will significantly simplify the TPRM process. These can be pushed out at an internal level to ask your own teams how the vendor is performing, or they can be sent to the suppliers themselves via a discreet online portal, serving as a reputational and performance assessment process.
Risk assessments, questionnaires, and surveys can be sent out on a regular basis using automated workflows and alerts, and late completions will automatically be chased up via automated reminders. Information is captured in a consistent format in a central database meaning you can easily run reports on the data at the touch of a button.
Taking Third-Party Risk Management to the Next Level
Above we explored just 3 of the simple ways that bringing your third-party risk management process online can improve your oversight of overall vendor performance and the associated risks.
But more mature organizations can take this to another level! Organizations who already have a robust, consolidated view of third-party risk and are using the online processes described above can start to link vendor risk to other business functions and processes.
Integrating Compliance with Vendor Risk Management
Many organizations choose to link third-party risk management to compliance. Most organizations expect certain standards, values, and regulatory obligations to be upheld by their vendor network, whether that be ethical morals, data privacy laws, ISO standards and other certifications. An online TPRM solution will enable you to map vendors to compliance requirements to understand if they are compliant and flag any non-conformances.
This can also be done in a similar way with audits. Audits can also be managed online within a GRC tool; auto notifications can be sent to vendors regarding their next audit and the results and any necessary actions will also be flagged online and worked through to resolution using automated workflows and alerts.
Linking Operational Resilience with Vendor Performance
Many organizations choose to integrate vendor risk management with operational resilience and business continuity plans, meaning if a critical supplier fails, they have short-term and long-term contingency plans in place based on the criticality of the product or service the vendor supplies.
More mature organizations also look to link incident management to their vendor risk programs. This enables any incidents or near misses relating to a particular vendor to be directly linked to their vendor profile within the TPRM solution. This provides risk teams with an early indication of poor performance so they can address problems early. The information could also be used as justification to terminate relationships with unreliable suppliers.
Empowering Risk Teams with TPRM Automation
Using an automated online solution turns a tiny risk team into a whole team of risk champions from across the organization. By asking stakeholders to input the relevant data about their suppliers using simple online forms, the risk team can build a much more accurate picture of the criticality of each supplier and the likelihood of any risk or performance issues relating to that supplier.
Start your third-party risk management maturity journey today. Talk to Riskonnect about bringing your vendor risk program online using the latest GRC technology.
