Over the last few years, the industry has seen many dynamic changes. Third-party risk management started many years back but is now evolving rapidly. It mainly focuses on risk management that can occur due to the involvement of third-party, including control, access, processes, and data storage. Security control plays a vital role when pressure from shareholders and consumers regarding risks associated with ESG.
Organizations are getting more and more sophisticated while considering non-IT tasks. Third-party risk management interacts with the third parties at different phases and looks for the risks they need to address. Then, they try to understand the risks, minimize the challenges, and mitigate concerns throughout the vendor lifecycle.
Challenges Faced by the Organization Regarding These Parties
The organization’s primary challenge is integrating the security and procurement of third parties, and it must balance what the security team wants to do and advance the procurement lifecycle. Many organizations are concerned about security and control because third-party data breaches have accelerated over the last few years. As a result, third-party risk management tends to focus on understanding the importance of security risk.
Organizations are now starting to interconnect with other organizations in the market. Security teams are being asked to have a more comprehensive understanding of the risk associated with third parties. The organizations that used to deal with quality, delivery, and financial risk are now being asked to understand factors dealing with diversity, modern slavery, and ESG. Therefore, every team interacts with third parties throughout the third-party relationship – from sourcing and selection to continuous monitoring and validation to offboarding and terminating the contract.
What Does Third-Party Risk Management Do?
Third-party risk management consolidates the information, automates the process, and fosters collaboration across teams. It becomes pretty easy to mitigate risks associated with the third party by interacting and building a third-party relationship. It can reduce the overall risk associated with the third party throughout the contract. They scale each customer’s program with a high level of quality and then provide a customer success program.
Many people spend a lot of time gathering data and getting third parties to respond and collect the data. You can spend more time on remediation if all that can be automated. So, organizations are trying to automate, outsource, and do whatever they need to simplify that front-end experience so that companies can focus more on performing the remediations. They handle a lot of data collection and collate risk information upfront so the team can spend more time on the remediation side.
Evolution of Third-Party Risk Assessments
There are a lot of people who still use spreadsheets for third-party risk management. They try to address a set of suppliers beyond their IT vendors and a broader set of risks than what is covered in an annual security check. Organizations need to continuously understand third-party risk profiles beyond the assessments and get a 3rd party security assessment that may indicate the risks and help mitigate them.
Companies that don’t have the time to interact with their third parties about remediation can always augment their teams with managed services.
Comparison of Third-Party Evolution: 2021 & 2022
In 2021, TPRM remained at the forefront of business strategies and events like ransomware attacks, new orders, and changing regulations. Recently, ESG has become the forefront of TPRM programs, leading to significant shifts in how professionals across industry and risk domains. The ransomware trend continues to increase in growth through 2022. They have highlighted a need for security teams to rapidly tailor the incident management response strategies to consider ransomware threats.
The awareness and regulations of TPRM have increased over the years and are most consistently seen as a security trend that has been the global impact of cyber threats from attacks. Fiscal implications have become one of the devastating effects of cybersecurity incidents. Attacks often risk individual data, impacting unsuspecting civilians’ day-to-day lives. TPRM expands across risk domains in the organization.
The TPRM industry has shifted significantly, including an increased emphasis on the criticality of ethics and ESG in TPRM. The push for professionals to consider TPRM across subject matter, like third-party due diligence and supplier sustainability, has been one of the most notable changes in 2021. As a result, the community will continue to embrace the shift in 2022, and TPRM programs must adjust to consider third-party risks related to critical environmental issues.
Today, IT controls are a primary concern of organizations. Industrialists try to understand risk throughout the third-party relationship, implement processes, and plan to mitigate risks. Third-party risk management gathers information and gives you a comprehensive understanding of risks across different risk dimensions.
They continuously monitor risk data that enters into the TPRM software. They also provide an assessment capability for the inside-out view. The goal here is to understand the third party’s policies and procedures and ask for artifacts or evidence by building up vendor profiles with additional information, which includes vendor demographics, fourth-party relationships, ESG information, etc. All these are stored and packed into a comprehensive profile that a business can understand.