Every organisation needs to have an appropriate 3rd party risk management policy, but this can be easier said than done. The nature of digital technology means that companies may deal with organisations worldwide, with every region having its data protection laws.
Most businesses now cite vendor and supply chain risk assessments as a prime concern yet lack the necessary knowledge and skills to address these concerns appropriately. But with ever-tightening data protection laws and a steady rise in online fraud, businesses that fail to keep on top of their 3rd party risk are leaving themselves open to huge financial problems, either through fraud or by way of fines. The result is always financial and reputational loss.
So knowing how best to implement a robust 3rd party risk management process is an absolute necessity. It’s best to take a step-by-step approach, ensuring that you don’t miss any crucial elements.
Create a complete standardised process
Every employee responsible for onboarding new suppliers and vendors needs to be fully acquainted with the necessary steps to be taken. Look out for 3rd party service management software that standardises workflows according to your exact needs. Anyone logging into the system should see at a glance what stage of the onboarding process each vendor has reached. Your software should seamlessly guide users through the process, from initial pre-screening to collecting any necessary documentation.
Set up vendor risk profiles
Unique supplier risk profiles will let you quickly identify how you do business with each vendor, as well as the services or products they provide. This information is invaluable when deciding which specific risk assessment questions need to be asked. Each vendor can then access data from your company based upon their need and your approval.
Set up risk assessments and controls
Every company is different regarding risk assessments and controls, so there’s no one-size-fits-all solution. But businesses must carry out risk assessments according to the letter of the law, so it’s worth checking your own industry’s guidelines to ensure you conform to best practices.
Have a plan in place for remediation
Some issues will inevitably arise at some point, so it’s essential to have a plan already in place for when that happens. Planning should involve recording the nature of the issue and the steps that need to be taken to resolve it. In addition, there needs to be a system for identifying any necessary follow-up procedures, together with a clearly defined process leading to an ultimate resolution. Some 3rd party service management tools include these features, helping to automate and streamline remediation.
Keep referring back to vendor contracts.
Just because you can automate a system, it doesn’t mean that you don’t need to keep checking in to make sure it’s doing its job correctly. And one thing you should refer back to as often as you can is your supplier contract. Depending on the type of contract you offer to each supplier, this enables you to keep track of how well they’re performing against their targets. Even more importantly, you need to know precisely when each supplier contract is due to expire. Expired contracts could open a whole new set of exposures for your organisation, so renewing them ahead of time makes sense for both parties.
Monitor your suppliers
Regardless of how thorough your onboarding screening process may be, it can only show you a snapshot of that business at that specific moment in time. But a lot can happen during a year, and who knows what might have been happening within the walls of your vendor’s organisation? So it’s an essential part of a robust 3rd party risk management process to include regular vendor monitoring.
Your approach will depend upon your business and the nature of your suppliers. For example, it could be that a simple yearly check would be sufficient, but higher-risk companies might require checking quarterly. In some cases, companies can use integrated third-party software to trigger alerts in the event of media reports or government warnings, for example.
Ending a relationship with a supplier
There are all sorts of reasons as to why you and one of your vendors might part company, but thanks to data protection issues, it’s not enough to stop placing orders. Your offboarding strategy is as essential as your onboarding one as it allows you to close the door on your digital interactions with them securely. With data security being such an important issue, proof that you have conformed to your obligations is essential to avoid the risk of punitive fines in the future. If you are looking to build a risk management policy, talk to us to know more about how we can help you.
