3rd Party risk management can be difficult and resource consuming if not approached correctly. The trend to outsource operations to third parties and for them in turn to outsource to their suppliers has been increasing year on year. This outsourcing inevitably introduces all manners of risks from supply disruption, reputation, cybersecurity, business continuity, data breach, and many more. A good 3rd party risk management, or vendor management, solution can help identify, measure, mitigate and prevent the risks posed by third and fourth parties.
A good vendor risk management framework encompasses operational, financial, and data security into a single solution and is increasingly a key part of regulatory compliance.
The following 6 best practices will benefit any vendor risk management program:
- Keeping an updated single vendor inventory
The lack of an up to date repository of all your vendors renders it impossible for any business to accurately measure the risks posed by vendors.
Third party vendors may not practice the same level of security and standards as your organization, and this risk needs to be identified and incorporated in your integrated risk management framework.
History has shown that the size of a company is irrelevant when considering risk. A security incident at a small vendor can lead to a serious risk event for you. Security issues can occur at any point within the lifecycle including after the relationship has ended.
- Define and deploy a vendor assessment process
Ad-hoc onboarding may be easier and appear to save time in the short term, however, in the long term it adds exponential risk and can be extremely costly.
Having a defined onboarding process underpinned by an extensive library of defined questionnaires or assessments and using these to affect your risk management process in a streamlined uniform manner across the vendor population can be invaluable, for many organizations it is a regulatory requirement.
A good solutions library will allow you to add assessments to meet your 3rd party risk management process while managing changes as your maturity grows. This significantly reduces operational overhead for assessing and onboarding new vendors while providing invaluable risk insights.
- Singular aggregated vendor risk exposure
Vendor risk is commonly performed by different departments based on their requirements. Typically, financial risk is evaluated by the finance department, data security by IT, money laundering and bribery by the legal department and so forth. Independently, none of the risks may be high but when looked through one single lens the cumulative risks may not be within the risk tolerances of the organization. Using spreadsheets and Word to manage these risks pose a risk in itself and should be mitigated with automation.
- Embedded review and audit
Most organizations and solutions can gather some, if not all, pertinent vendor information in a usable format. However, when it comes to review or audit of the said information, this is typically done in isolation. It then becomes a cumbersome fragmented process of jumping from one to the other in order to get a full picture and accurate risk exposure.
Review, audit and all conversations related to the vendor, should happen right within the vendor record, thus providing a true single risk view of the vendor. Justifications by reviewers and approvers are captured and timestamped directly in the record for Audit to view at any time.
- Auto findings not falling through gaps
Findings and gaps should be auto generated based on pre-defined risk scores and responses. To ensure a closed loop, findings should be linked to the vendor record in order to provide a full audit trail. If remediation and/or exceptions are required, ensure they are appropriately captured and documented.
- Reduce vendor assessment fatigue
Getting vendors to provide information is challenging and time consuming, expecting them to do so on an ongoing basis is almost impossible. Reducing vendor assessment fatigue by having assessments where responses to one question can be mapped to satisfy more than one regulatory or policy requirement can be immensely useful.
The requirements under many regulatory regimes overlap and having the capability to design and modify questionnaires in order to take advantage of this overlap can immensely reduce the burden on suppliers.
To learn more, request a demo, discuss a free trial proof of value or simply start a conversation drop an email to firstname.lastname@example.org.