What are third party risks
In the modern day, many organizations rely on external parties to fulfil parts of their business obligations. Having external vendors own parts of an organization’s business process gives enterprises the opportunity to seek for new business ventures and to some extent, relieve pressure on some of their business units. This relationship is meant to be mutually beneficial yet businesses experience significant losses when dealing with contracted parties.
What causes third party risks
Third party risks are negative risks that an organization is exposed to upon handing over some of its internal processes to an external party. The drive for improved efficiency, reduced costs and faster time to market by businesses is what encourages third-party relationships. There are varying third-party risks enablers and the most prevalent are-
- Inadequate risk profiles
Inadequate due diligence when onboarding third-parties means that organizations aren’t fully informed about the true nature of risks associated with a selected vendor, including fourth-parties. This also implies there is little knowledge of how data is used once it leaves an organization’s premises and who interacts with it.
- Lack of ownership and accountability
Various studies show that there is limited ownership when it comes to managing third-party risks. This suggests that not only is this process mismanaged, when these risks present themselves there is little to no accountability.
- Manual audits
Managing these risks manually on spreadsheets results in daunting reviews and limited analytical processing which may reveal insights on how to effectively carry out this process.
Benefits of third party risks management (TPRM) programme
Third-party risk mismanagement may result in data breaches, damage to reputation and compliance and regulatory fines, just to name a few. It is, therefore, very important for organizations to invest in a TPRM solution that can:
- Provide a centralized, customizable and transparent workflow that tracks due diligence
- Provide high visibility through real-time reporting and configurable dashboards
- Monitor third-party performance and contractual obligations
- Provide compliance mechanism through tracking and logging parties interact with your data
Speak to one of our consultants to learn how we can help or improve your current third-party risk management workflow