Organization’s rely on suppliers for key business functions more than ever before. In the midst of disruption, it’s critical to have a third-party risk management (TPRM) program to identify at-risk suppliers and help your organization manage and mitigate risk. To achieve this, organizations need an integrated view across the extended enterprise. Initial due diligence and ongoing/continuous assessment is required to effectively monitor third parties and govern the lifecycle of the organization’s relationships with its vendors and suppliers throughout the extended enterprise.
The goal of a third-party risk management program is to reduce the chance of operational failures, protect data and information, meet regulatory and contractual requirements, and to ensure the organization achieves the objectives in each relationship. Given the vast depth and the severe consequences of potential third-party risks, TPRM has evolved over the years into a significant operational function, governed by systems, processes, procedures and policies.
Organizations are faced with a vast web of different regulatory requirements and issues throughout the lifecycle of an outsourcing arrangement. These issues include but are not limited to:
§ Operational Resiliency
§ Modern Slavery
§ Data Privacy
§ Anti-Bribery & Corruption
§ Information Security
§ Environmental, Social, & Governance (ESG)
In terms of data privacy, one of the most pervasive issues facing TPRM, the Ponemon Institute reports that the average cost of a data breach is $3.92 million, but this increases to$4.29 million when the data breach involves a third-party. Costs of a breach in a third-party go beyond legal and regulatory fines to include investigation and remediation costs, reputation damage, lost revenue, and more.
The challenge is that a TRPM program involves a coordinated effort across operational risk, control, and compliance functions, as well as the line of business that owns the relationships. This requires a facilitated collaboration between departments, such as procurement, IT security, privacy, legal, corporate compliance, and others.
Organizations are seeking to modernize and automate their TPRM processes to address the vast interconnected web of third-party risks that span across the organization and its processes.
Developing your organization’s TPRM program and leveraging a technology platform and architecture is essential to adequately govern third parties. Third-party risk directly impacts the organization’s brand and perception within the market and can bring about harsh penalties if managed inadequately, making it the entire organizations risk also. A breach of third-party governance puts into question issues of the organization’s integrity, quality, practices, and security. It is essential for your organization to ensure that third parties are governed adequately to protect itself from risk exposure and maintain brand integrity and continuity.