In today’s globalized business environment, no company operates alone. From manufacturers to financial services companies to cloud service providers, external vendors are integral to every business’s success — though each third-party relationship also introduces potential risks.
This ecosystem of interconnected risks is too complex and dynamic to be managed without technology. Different vendors interact with different segments of a company, which means that no single team is responsible for managing third-party risk. A third-party risk management (TPRM) platform can help meet this need, interfacing with a company’s existing systems to create a centralized hub to manage the risks introduced by external vendors.
A TPRM platform, such as that offered by Fusion Risk Management, can enable companies to organize and mobilize their defenses by breaking down silos, increasing visibility, and improving decision-making through the use of data analytics. With an uptick in regulatory scrutiny across the globe, companies can’t afford the cost of non-compliance, let alone the reputational damage and loss of revenue that result from a data breach.
Third-Party Risk Doesn’t End at Procurement
TPRM begins at the point of procurement, when companies perform due diligence before formalizing any business relationship with an external vendor. Vetting various risks — cybersecurity, financial, supply chain, business continuity and more — is a critical piece of this diligence. If the vetting process is too cumbersome or complex, users may circumvent controls and critical information can fall through the cracks. Using a TPRM platform, companies can streamline this process into a stepped workflow and use automation to accelerate intake and approval. If an external vendor has not provided the necessary data, there is a clear line of sight into all missing information. More importantly, they cannot proceed through the onboarding process without demonstrating an adequate risk assessment was performed.
But due diligence during procurement is just the first step in TPRM. To effectively manage vendor risks, companies must take a systems-based approach, considering every point at which external partners engage with their organization. A TPRM platform creates a central interface that can connect with different sources of information, driving visibility and facilitating cooperation between procurement, IT, legal, and risk management functions like compliance and resilience that have a hand in managing third-party risk.
TPRM assessments are typically performed on an annual basis, which is far from sufficient to successfully protect against third-party risk. Instead, companies must engage in risk management on an ongoing basis – activities like monitoring vendor KPIs, continuous monitoring and real-time alerts, benchmarking performance, and live data breach detection. A TPRM platform can turn what would otherwise be a series of interrelated, but siloed processes into a cohesive, end-to-end program, providing the overarching visibility and collaborative infrastructure necessary to keep a company safe.
Technology is also necessary to keep pace with new and existing regulations like the Department of Justice’s updated General Compliance Program Guidance and the EU’s Digital Operational Resilience Act (DORA). Even a company that only does business in the U.S. may be subjected to dozens of regulations because of its globalized supply chain. This regulatory web will only become more tangled as more governmental agencies focus their attention on third-party risk. A TPRM platform can automatically update its parameters based on new and evolving laws, such that businesses need not worry about maintaining alignment with their compliance needs.
The TPRM platform need not replace a company’s existing systems, although doing so over time can streamline processes and reduce costs without jeopardizing compliance. Because it is unlikely a company will ever migrate all third-party data into one system, the ideal TPRM platform is porous and can easily connect to other sources of information. Fusion’s offering, for instance, links to real-time data feeds from companies, while providing a user experience that enables vendor surveys, intuitive workflows, remediation, and reporting.
Level Up Your Defenses with Data Analytics
Technology also empowers companies to put their third-party data to use. For most businesses, it would be impossible to manually track every interaction with external vendors. Data analytics can provide a holistic, digestible view of this information, pinpointing potential vulnerabilities and other areas that require attention. Especially when assessing risk in real time, companies must rely on automated tools and alerts that can identify and respond to threats faster than a human user. Ongoing monitoring also enables companies to demonstrate that their external vendors maintain compliance with all relevant regulations. A TPRM platform fosters easier tracking to ensure risk mitigation efforts don’t lapse and third parties remain compliant.
Predictive analytics can help companies proactively hunt for vulnerabilities within their third-party ecosystem, using historical data to predict – and prevent – future threats. By analyzing historical data about a vendor’s normal operations, for instance, predictive analytics may enable a company to quickly detect aberrant behavior that indicates a potential of cybersecurity breach. Geographic visualization capabilities help companies monitor real-time risk events like hurricanes and wildfires that threaten their assets and those of their vendors.
Invest in Technology Now to Secure Your Third-Party Ecosystem
When every external vendor is a potential opening for a cybersecurity breach, businesses can no longer limit their risk management to their own systems and networks. They must protect against the risks presented by their entire third-party ecosystem, a scope so large and complex that companies must leverage the power of data analytics and technology to manage it. These tools are indispensable to helping businesses keep track of their vendors to stay compliant – and safe.
Written[CM1] by Corey Dunbar, Jeremy Stynes and Wesley Loeffler. Copyright © 2024 BDO USA, P.C. All rights reserved. www.bdo.com