Understanding your third-party landscape is crucial step and helps prioritize which relationships require the most attention
Jason Koestenblatt
Manager, Content Marketing
September 11, 2024
In today’s interconnected business landscape, managing third-party risk is more crucial than ever. Companies increasingly rely on third-party vendors, suppliers, and service providers to drive their operations. However, each external partner introduces potential risks that can affect various aspects of your business, from compliance to reputation to security and data privacy. Effective management and measurement of these risks are essential to safeguard your organization against disruptions, compliance violations, and financial losses.
Guidance from the Department of Justice (DOJ) underscores the need for continuous and precise monitoring of third-party relationships. Static evaluations are no longer sufficient. Instead, the DOJ emphasizes ongoing risk management throughout the lifecycle of the third-party relationship. This shift highlights the importance of integrating third-party management into your regular business operations rather than treating it as a one-time task.
Understanding your third-party landscape is the first crucial step. Conducting initial due diligence helps prioritize which third-party relationships require the most attention. Here's how to approach this:
Identify and prioritize third-parties: Not all third parties pose the same level of risk. Assess each relationship based on factors such as financial stability, compliance history, and operational impact.
Tailor due diligence: The DOJ’s updated guidance stresses “risk-based due diligence,” meaning your evaluation processes should be customized based on the risk level of each third party.
Review and refine: If a large number of high-priority third parties are identified, refine your criteria to manage these relationships more effectively.
Once initial due diligence checks have been performed, the next step is to run risk assessment workflows:
Implement key risk indicators (KRIs): Measure actual risk exposure with KRIs to ensure that high-risk third parties are continuously monitored.
Conduct appropriate assessments: Use the information gathered to triage third-party relationships and focus on those that present the highest risk.
Allocate resources efficiently: With limited resources, prioritize your highest-risk third parties to ensure thorough due diligence and monitoring.
Effective risk management doesn’t end with initial assessments. Ongoing monitoring and reporting are essential:
Systematic monitoring: Regularly review compliance programs, financial transactions, and other relevant metrics to ensure third parties adhere to agreed standards.
Detailed reporting: Maintain detailed records of all third-party interactions, including compliance checks and risk assessments, to provide a comprehensive view of each relationship.
KPIs for success: Track metrics such as time to detect risks, time to mitigation, and overall risk management costs to evaluate the effectiveness of your third-party risk management program.
Managing third-party risk effectively requires a unified, organization-wide approach. Many businesses still operate with siloed departments handling different aspects of third-party relationships. This fragmented approach can lead to inefficiencies and blind spots.
Benefits of a unified approach:
Consistent evaluation: A single, integrated process ensures that all third-party evaluations are based on the same criteria, reducing redundancy and improving accuracy.
Efficient onboarding: Streamline the onboarding process by avoiding multiple assessments and questionnaires.
Comprehensive risk view: Gain a complete picture of third-party risks, helping to identify and address potential issues more effectively.
To manage third-party risk across your entire business, consider the following best practices:
Appoint a centralized head of third-party management: This individual or team will oversee all aspects of third-party risk management, ensuring a cohesive strategy and effective coordination across departments.
Develop a comprehensive lifecycle approach: Implement a full lifecycle management process that includes initial due diligence, ongoing monitoring, and regular reassessments.
Utilize automated tools: Leverage technology to streamline assessments, monitor compliance, and generate reports, improving efficiency and accuracy.
Managing and measuring third-party risk is a complex but critical component of modern business operations. By adopting a systematic and integrated approach, you can effectively mitigate risks, ensure compliance, and protect your organization from potential disruptions. Emphasize continuous monitoring, risk-based due diligence, and holistic management to build a robust third-party risk management framework that supports your business goals and safeguards your reputation.
Action items:
Review current third-party risk management practices: Assess how your organization currently manages third-party risk and identify areas for improvement.
Implement key best practices: Adopt the strategies outlined to enhance your third-party risk management efforts.
Stay updated on regulatory changes: Ensure that your risk management practices remain compliant with the latest regulatory requirements and industry standards.
With the right third-party management solution in place, your business can optimize the value of its third-party relationships while also mitigating your risk exposure. OneTrust Third-Party Management can give you the insights and processes you need to streamline onboarding, automate assessments and monitoring, and ensure visibility across your complete third-party inventory.
To see how OneTrust Third-Party Management can help cut across business silos and create a unified, holistic TPM strategy, request a one-on-one demo today.
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