Organizations across most market segments are becoming increasingly reliant on third-party vendors to support critical business operations across the board to support a wide array of process and functions.
It is estimated that over 50% of businesses using third-party vendors have experienced a data breach involving confidential information. Given the current state supply chain’s impact on multiple industries, most management is keenly aware of the constraints they operate under, especially depending on their third-party vendors to provide crucial supplies, products, and services.
As corporate networks continue to grow more complex and the concern regarding third-party risks intensifies, organizations will continue to implement Vendor Risk Management technologies and processes to safeguard against the varied third-party risks.
Cybersecurity Risk. Ransomware can impact any organization, taking their systems offline and making them unable to perform. Certainly, widely reported ransomware attacks such as the Colonial Pipeline hack highlight that cybersecurity attacks do not solely impact firms processing confidential data sometimes these attacks’ purpose is for creating market chaos and disruption. The supply chain impact from just one piece of its critical infrastructure supporting fuel distribution was monumental for firms that needed fuel to deliver goods or operate machinery. Senior management need to know that their key suppliers are secure enough to protect against ransomware attacks and resilient enough to quickly stand back up into operation should an attack find success.
Compliance Risk. Firms, including those using third-party vendors, operate with risk from violations of laws, regulations, nd internal processes that your organization must follow to conduct business. The laws that apply to each organization vary by industry and market sector. Non-compliance with these regulations usually results in substantial fines, so it is crucial to ensure your organizations vendor’s cybersecurity compliance efforts align with your firm’s regulatory requirements. Are your third-party vendors operating in a manner that maintains compliance with your industry’s rules and regulations?
Financial Risk. When vendors are unable to meet the fiscal performance requirement established by organizations their performance is likely to be impacted. Companies need to implement risk management processes that can ascertain the overall financial health and stability of key suppliers and vendors throughout the year.
Operational Risk. Operational risk occurs when there is a shutdown of a supplier or vendor processes. Third-party vendor operations are interconnected with organizational operations, so when vendors are unable to provide their goods or services as promised, organizations are usually unable to perform their own daily activities. To limit operational risk, organization should create a business continuity plan so that in the event of a vendor shutdown, there is a plan from which to operate.
Reputational Risk. Reputational risk concerns the public perception of any organization. Third-party vendors can impact a firm’s reputation by acting inconsistently with their standards, losing, or disclosing customer information or by violating laws or regulations. All organizations need to continually assess and monitor their supply chain vendors to identify any adverse information about a vendor that might put your firm’s reputation at risk.
Geographic Risk. With the volatility in the world today, where a key third party operates geographically presents risk to the company. Geographical risk awareness of the location from which critical vendors are delivering goods or services the company operations will need to be critically evaluated and continually monitored throughout the year.
Strategic Risk. Strategic risks arise when vendors make business decisions that do not align with the overall organization’s strategic objectives. Strategic risk can influence other forms of risk. Knowing your vendors and monitoring for strategic risks can be challenging since these risks are not always transparent.
Ways To Mitigate and Monitor Third-Party Risk
Modevity recommends mitigating risk by first developing a vendor risk profile ranked beginning with the most risky or critical relationships. The types of risk posed by the third parties should be identified, and processes should be in place so vendors presenting the greatest risk to the business can be monitored and mitigated.
Below are four processes you can implement to monitor and mitigate third-party risk at your organization:
Business Continuity Plans. Typically, the business continuity plan is the organizational operational plan for what to do when critical service providers or key vendors fail to deliver, due to an active risk.
Risk Assessments and Security Questionnaires. Third-party Risk Assessments use vendor questionnaires and threat intelligence to help organizations determine the level of risk individual vendors pose to a business. But the organization needs to recognize the vendor responses are ‘self-attestations’ and will need to be critically reviewed for potential issues.
Third-Party Due Diligence Reporting Technology. For critical vendors handling crucial processes to the company operations or confidential information, implementing vendor due diligence risk system reporting to the organizational risk management efforts is vital.
Continuous Monitoring. Organizations can improve their ability to identify and mitigate vendor risk before it becomes problematic by implementing continuous risk monitoring technology and procedures.
By implementing an automated Vendor Ris Management (VRM) solution, your company can drastically reduce the manual and repetitive work to track Risk and Compliance and gain access to real-time data that will help you determine when risk levels are elevated for any vendor. Moving to an automated solution will help you move beyond mere compliance into continuous Vendor Risk Rating, Vetting and Monitoring, providing your organization the vendor data intelligence, it needs to detect varied risks early and to mitigate them quickly. With an intelligent, automated VRM solution, your organization will be able to streamline and enhance its overall Third-Party Vendor Risk Program.
Today, it is vital for companies to take a more proactive stance with Thid-party Risk and assess a vendor before any contract is executed, but they also need to apply continual monitoring process of vendor risks.
Conducting vendor due diligence vetting during the onboarding process can help identify risks that a new vendor/supplier may pose. Ongoing due diligence vendor risk rating and monitoring provides the detailed information companies need to determine whether to continue a business relationship. Doing business with a high-risk vendor can be extremely detrimental to any companies bottom line, reputation and enforcement actions by international regulators are often costly.
The Modevity Vendor Risk Management Services will provide clients with a powerful automated branded process for vendor assessment questionnaires and a powerful due diligence vendor risk scoring and reporting service with continuous vendor monitoring.
Modevity has implemented the full range of powerful database technologies, vendor assessment, AI and open-source tools that enable our team of investigative analysts to quickly obtain a complete vendor risk profile.
Our client companies will no longer need to implement Vendor Risk Management & Assessment software and staff resources – providing substantial organizational cost savings to their organization.
Modevity Contact info:
Tom J. Canova, Co-Founder, CMO
Office: (610) 251-0700