If you are in business, third parties are often called in to assist with any number of matters. These can include financial matters, vending, contracting, providing service and more. While relationships with third parties can be beneficial, they also need to be overseen to make sure they do not result in damages that can affect your company’s reputation and bottom line. The overseeing of these relationships is known as third-party risk management.
To effectively enforce third-party risk management, several steps should be taken. These steps are outlined as follows:
Manage and Assess Third-Party Risks: Identify all possible third-party risks which can include process risks, political risks, undesirable events, contract risks, legal and noncompliance risks, and information system failures. Then figure out policies that can help to mitigate these risks. Having contracts in place is a good starting point.
Conduct Screening, Onboarding, and Due Diligence: Third parties that your company works with should be assessed according to their risk level. This will be affected by their location, the country they work in, the type of service they are providing, access to data and other factors. Once this is determined, the proper steps must be taken for due diligence. The onboarding process will help your third party become familiar with the needs and requirements, legal and otherwise, of your company.
The Fourth Party Factor: Although you may be dealing with a third party, a fourth party may be indirectly involved. It may be manufacturing products your third party is selling, or providing a service. In these cases, it is wise to research the fourth party and the way it operates to make sure it is not bringing in any additional risk.
The Vendor IT Risk Factor: Businesses are especially vulnerable when it comes to computers. Sensitive information can be easily accessed and compromised. Third parties that have access to this information are also vulnerable to attacks, so companies must make sure their information is being stored securely in that regard.
Oversee Third-Party Performance: Of course, you want the third parties that work for you to offer the best service possible. Not only will these workers provide your company efficient service, but the best workers are also the least likely to increase or contribute to third-party risk.
Apply Effective Third-Party Management: Managing third-party vendor risk can be a time-consuming and complex task. Vendor management software can streamline this process, reduce time spent by employees, and make management more effective.
While third parties can be beneficial to companies, they can also present several risks. Be sure your company has a third-party management department that is doing its best to minimize these risks to protect your company’s reputation and bottom line.