Given the dynamic nature of the business ecosystem, a robust third-party risk management solution should provide near real-time visibility into your third-party ecosystem, enable collaboration and relationship building. It’s time to apply an Integrated Third-Party Governance, Relationship and Risk Management approach to efficiently and effectively manage third-parties.
Risk management is not just about completing assessment questionnaires and doing site visits. It is also about how much you understand your organizations business needs, the critical services being outsourced, the impact to your customers in case of disruption to those outsourced services and how well you manage relationships with your third-parties. An organization cannot fully succeed in managing and mitigating its third-party risk without having a robust governance and relationship framework.
In today’s digital age, no organization can thrive on its own. To drive value from your vendor partner and help meet business objectives, your organization will need to build lasting relationship with vendor partners. With organizations strengthening their perimeter, hackers have found it easier to breach third-parties. While there is no fool-proof method to eliminate all risks, technology can help make the third-party risk management process more effective and efficient.
This increased monitoring and assurance activity is only possible through a technology platform that should at minimum focus on the following key components:
Setting-up regular cadence, business review meetings and centrally tracking issues and triggering timely alerts for reviews, missing key documents, contract non-compliance, SLA misses are all use cases.
Ability to auto-trigger risk assessments based on certain triggers (internal or external events concerning the third-party), centrally manage all assessments along with ability to smartly sense issues based on the third-party response.
Ability to determine the Criticality and Inherent Risk based on preliminary assessment based on customizable risk dimensions and the ability to auto-trigger re-assessment due to internal or external changes. Some key risk dimensions that must be covered:
Organizations can integrate the following to monitor third-parties on a near real-time basis.
4. Performance Measurement & Innovation – Ability to define, track and measure Service Levels, KPIs and KRIs including measuring the strategic value that your third-party is bringing to the table.
More and more organizations are now taking a closer look at current technology platforms. Automation has been there for a while but AI-Driven digital and cognitive enablement are evolving and is likely to further redefine engagement experience involving third-parties. The challenge though has been with integrations with in-house upstream and downstream systems.
Third-Party risk is starting to feature consistently on board agendas with CEO/board-level responsibility in the more progressive organizations or those operating in highly regulated environments. This also means more and more organizations have begun investing in the right technology solutions to enable continuous risk monitoring. The industry as a whole however is still playing catch-up in enhancing the maturity of their third-party governance and risk management processes.
At the end, Third-Party Governance and Risk Management is all about the art and science of engaging your organizations third-parties. While emerging technologies such as AI and Machine Learning can sure assist in the ‘science’ of engagement, the ‘art’ of engagement will largely depend on human intuition.
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