Risk management continues to become more complex as businesses build on the growing opportunities generated by third-party ecosystems. A solid framework needs to be in place for these third-party relationships to add value.
Risk Assessments and Profiles
Compliance and procurement teams need to be creating risk profiles that rate risk for legal compliance, financials, security, performance, and data exposure. The latter is especially important due to the increased regulations around data privacy. This assessment is critical to mitigate the risks of non-compliance, poor and services, and litigation. Make sure your business is using the best suppliers, and third parties under contract do not underperform or cause unnecessary risk and disruption.
Many businesses are using external risk intelligence data in background checks to assess the risk and resilience of third parties. As part of any due diligence in third-party risk management (TPRM), businesses can integrate advanced security profiling software such as LexisNexis, Dow Jones and Thomson Reuters. It is important to note that these data sources are typically subscription-based and using the correct information source is important to reduce overhead costs in third-party risk assessments.
Continuous Monitoring Of Risk
Businesses must diligently monitor and manage third party relationships once the onboarding process is complete. Any and all risk must constantly be identified so steps can be taken quickly to avoid damage to the business. The third-party monitoring process provides the relevant data for continuous auditing to reduce the risk of litigation and fines which can have devastating financial consequences.  Managing third parties can be time consuming, but it is necessary to prevent gaps or delays in your third party ecosystem and avoid non-compliance with regulations that may have costly consequences.
Configuration
The third-party risk management framework has to adapt to changing circumstances. The Covid-19 pandemic caught many businesses by surprise and exposed gaps in management systems that proved inefficient to cope with the crisis. Many businesses had to implement new processes rather than configure the framework to the current risk because of the unprecedented circumstances. As businesses expand and relationships change, risk exposure also changes, so there must be a certain level of configuration with your third-party risk management (TPRM) system. This has contributed to the push toward digitization across the globe. Some risk management software providers offer custom configuration layers within the software that increases accuracy in risk models and processes.
Compliance
There is a growing pressure on enterprise level companies to keep up with compliance regulations and rules regarding the transmission of sensitive data. This is proving to be difficult due to the ever-changing regulatory environment. Third-party risk management (TPRM) is designed to make this easier. However, fraud is becoming a more commonplace and cyber security is a necessity technology and digitalization on the rise, . Regardless of the size of your company, you should never assume you would not be targeted and so data protection and evaluation of the risk the expansion of technology involved in your business is of paramount importance.
Environmental Responsibility
Deloitte's 2020 Extended Enterprise Risk Management (EERM) Global Survey has identified key reasons businesses implement TPRM. One of these is climate-aware contracting, an initiative to ensure clauses in contracts are compliant with climate regulations. However, there are other processes businesses can adopt to improve their eco-credentials and reduce their carbon footprint. With the advanced technology currently available, contracts are being moved online and most companies are becoming paperless. E-signature integration makes it easy to collect and store signatures and reduces the amount of paperwork, helping the environment as well as adding an extra level of security. By switching to a browser-based centralization of documents, businesses can keep contracts and information digitally stored, negating the need for a paper trail and reducing both usage and waste.
Digitalization
With the move towards digitalization, automated third-party risk management can streamline processes and provide the framework to simplify TPRM with fact-based decision making. The tools and features provided by third-party risk management software companies can include:
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Some third-party management software providers offer a customizable configuration layer within the software that helps increase accuracy in risk models.
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As businesses grow and relationships change, risks also change . This means there must be a certain level of configuration capabilities that allow you to have complete control over what changes can be made and who has access. The result makes you less vulnerable to outside attacks and improves security.
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Incident capture and reporting suites ensures all incidents are stored and automatically assigned for investigation, and analysis tools can assist with legal protection during the lifetime of a third-party relationship.
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Identity management is another feature that helps better understand customers, employees, third parties, and assists with monitoring and investigations. It can identify, authenticate, and investigate individuals and companies, reducing the risk they may pose to your business.
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When launching new business relationships, TPRM software can design, build, and publish intelligent questionnaires to identify risks.
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Centralized secure administration of third-party profiles enables easy and transparent access across the enterprise.
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If you have a large amount of third parties with access, it is imperative that you can easily track changes and views. Every action made in a risk management software system is fully tracked in the audit logs, along with a time stamp and the user’s information.
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Enterprise level businesses has a lot of third-party suppliers in which a self-reporting feature can be very useful. It drastically reduces the time spent conducting reports and makes risk management far more efficient.
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One of the most useful features of TPRM software is the trigger notifications. Set this up to send notifications for any specific event or milestone. This helps employees have complete control over contracts and projects and helps your business enormously when it comes to the end of a contract lifecycle and relationship with a third party, as unproductive contracts won’t be left to auto-renew and you can be on top of timelines regarding renegotiating contracts and terms.
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Third-party governance and risk management software is designed to centralize processes and standardize practices that increases efficiencies and protects businesses from certain risks. Learn more about Scanmarket's Supplier Risk & Performance Management to assess, monitor and mitigating risks that can have a detrimental effect on your business and relationships.
