While managing internal risks is challenging enough, managing third party risk is an entirely different matter. Not only are you responsible for the actions of your vendors and suppliers, but you’re also responsible for the consequences of this type of problem. Here are some of the ways you can assess the risk posed by vendors.
To avoid a potential incident, use a vendor questionnaire. Once you’ve completed the questionnaire, you’ll have an idea of the types of problems associated with each third party and the potential impact on your organization. Organizations are responsible for managing this type of problems, which can be just as diverse as internal problems.
Failing to manage these problems can leave an organization exposed to regulatory, financial, litigation, and reputational harm, as well as hinder its ability to gain new customers. In this article, we’ll look at three types of third parties and how you can automate the process. Read on to learn more. And be sure to share this information with your staff.
The Three Main Types of Risk:
The reputational problem of third parties can have as much impact on an organization’s brand as regulatory enforcement. Third parties may compromise the reputation of an organization through poor service, data breaches, and lawsuits.
When this happens, customers will not be able to distinguish between the organization and the third party. Because of this, managing a third party risk is important to protect the organization’s reputation, otherwise the problems could become catastrophic. Social media makes it so that information flies across the internet in the matter of minutes and you don’t want to be on the receiving end of a doxing.
One of the biggest concerns with outsourcing your business to vendors is the financial risk that this kind of relationship poses. These problems can impact the success of the business financially and may also affect the organization’s strategic goals. These problems often overlap with operational, compliance, and reputational problems. To minimize the potential of dealing with a vendor that does not live up to your expectations, conduct periodic audits of their financial health.
3. Legal, Regulatory, and Compliance
For years, the banking industry has been at the forefront of addressing the issue of third-party risk. Despite new regulations, the banking industry has been far ahead of other industries in adopting effective risk management practices.
More recently, the adoption of the 2013 COSO Internal Control – Integrated framework has prompted other industries to take a closer look at the problems associated with third parties (https://info.knowledgeleader.com/bid/161685/what-are-the-five-components-of-the-coso-framework) COSO uses the term “outsourced service providers” for third parties. While the initial focus on third parties was financial reporting, this trend is now beginning to extend to operations and compliance.
Whether you manage problems or just want to minimize them, offboarding procedures are a key part of your company’s management program. Offboarding procedures for new vendors are crucial and should be implemented consistently throughout your organization. Consistency is key for long-term development of your management program. Here are some tips to help you ensure a successful offboarding process:
The process of remediating problems entails following a series of guidelines that establish best practices in the management of problems associated with third party relationships. The most basic guidelines for managing this problem include implementing the appropriate controls within the vendor relationship.
Ideally, this should be a part of a larger framework aligned to ISO, CSA, and NIST best practices. The best practice is to develop a remediation management plan that includes a thorough review and assessment of each issue. In some cases, such a system will automatically generate an action plan once an issue is reported and recurring reminders are issued.
The need for a robust management program is ever greater. Third party vendors represent a growing portion of an organization’s network, and 71% report more vendors today than three years ago. However, it is not only the size of the network that makes management so critical, it also requires new approaches to ensure your company’s safety and security. A comprehensive management plan can help your company understand your problems and make informed decisions about your vendors.
There’s obviously more than one type of management, with this type of management being one of the more popular in the digital age. If you want to know more, click here to be brought to Wikipedia. An automated assessment tool can make the process of categorizing third parties easier than ever. Organizations can consolidate information from spreadsheets and other sources into one central software solution.
Automated assessment solutions integrate with existing technologies and can centralize vendor inventory. When conducting assessments, organizations can identify which tools are being used to classify third parties based on their inherent problems. Then, these tools can be used to categorize third parties based on the risk factors that are important to them.