Risk Management Is Critical. Don’t Forget Your Third-Party Risk!

Community Risk Management Is Critical. Don’t Forget Your Third-Party Risk! Debra ShannonApril 20, 2023 Bigstock {"adCodes": [{"desktop": "\u003cdiv class=\u0027rblad-wit_content\u0027\u003e\u003c/div\u003e", "display": true, "mobile": "\u003cdiv class=\u0027rblad-wit_content\u0027\u003e\u003c/div\u003e", "new_amp": "\u003camp-ad width=336 height=280\n type=\"doubleclick\"\n data-slot=\"/22278042776,22664312254/wit/wit_content\"\n data-multi-size=\"300x250\"\u003e\n\u003c/amp-ad\u003e", "order": 0, "tablet": "\u003cdiv class=\u0027rblad-wit_content\u0027\u003e\u003c/div\u003e"}, {"desktop": "\u003cdiv class=\u0027rblad-wit_content\u0027\u003e\u003c/div\u003e", "display": true, "mobile": "\u003cdiv class=\u0027rblad-wit_content\u0027\u003e\u003c/div\u003e", "new_amp": "\u003camp-ad width=336 height=280\n type=\"doubleclick\"\n data-slot=\"/22278042776,22664312254/wit/wit_content\"\n data-multi-size=\"300x250\"\u003e\n\u003c/amp-ad\u003e", "order": 1, "tablet": "\u003cdiv class=\u0027rblad-wit_content\u0027\u003e\u003c/div\u003e"}, {"desktop": "\u003cdiv class=\u0027rblad-wit_content\u0027\u003e\u003c/div\u003e", "display": true, "mobile": "\u003cdiv class=\u0027rblad-wit_content\u0027\u003e\u003c/div\u003e", "new_amp": "\u003camp-ad width=336 height=280\n type=\"doubleclick\"\n data-slot=\"/22278042776,22664312254/wit/wit_content\"\n data-multi-size=\"300x250\"\u003e\n\u003c/amp-ad\u003e", "order": 2, "tablet": "\u003cdiv class=\u0027rblad-wit_content\u0027\u003e\u003c/div\u003e"}], "adsOrder": [2]}

Most organizations understand the importance of having a comprehensive risk management program for their operations, processes, and systems. They obviously need to manage their costs to prevent financial losses, but there is much more, such as protecting the assets (including in the event of a business disruption) while complying with legal and regulatory mandates. If they don’t, they could harm their brand image, customer trust, or stakeholder confidence. When organizations proactively identify, assess, and mitigate risks, they can enhance their resilience, sustainability, and long-term success.

Most organizations can’t do it all by themselves and hire external parties (such as vendors, suppliers, or service providers) to support them with specific products/services. Any external party that plays a significant role in the organization’s environment is considered to be a third-party vendor. Each of these third-party vendors will have risks. Since they should have their own risk management program, you’re not responsible for any of their associated risks, right? Wrong! According to the Federal Reserve, “The use of service providers does not relieve a company of the responsibility to ensure that outsourced activities are conducted in a safe and sound manner and in compliance with applicable law and regulations.”

Types Of Third-Party Risk

Bigstock

Each of these third-party vendors has risks that may adversely impact your organization’s operations, reputation, and security. So why aren’t more organizations focused on third-party risk as much as they should be? For some, it’s because they aren’t aware or don’t fully understand the potential risks while others “trust” their third-party vendors. Either reason isn’t going to be acceptable if something bad happens and it affects your organization.

Third-party risk specifically refers to the potential risks and vulnerabilities that arise from hiring a third-party vendor. Some of the top risks that you should be aware of are:

Cybersecurity risks - information security incidents and data breaches including ransomware

Compliance and regulatory risks - non-compliance with various legal or regulatory regulations

Operational risks - business disruptions in the event the third-party vendor is unable to deliver their products/services (e.g., if they have a material shortage) which could lead to operational inefficiencies

Reputational risks – unethical practices, labor abuses, etc. that a third-party vendor does which may damage its reputation

Financial risks - financial losses including penalties, litigation costs, or loss of customers

Mitigating Third-Party Risk

​Bigstock

If something bad happens to your third-party vendor, you want to be as prepared as possible. Since each third-party vendor is different, how can you best mitigate these risks? Proactively implement a robust third-party risk management (TPRM) framework. Comprehensive TPRM minimizes potential risks introduced to your organization by third-party vendors who want to work with you. Some considerations are:

1. Start by doing your due diligence and completing a comprehensive analysis before signing any contract. Review third-party experience, licenses, pending legal issues, etc. The depth and formality of the due diligence will depend on the products/services the third-party will supply. Some contract items are costs, performance metrics, right to audit, data ownership, and termination rights.

NOTE: For your existing third-party vendors (already signed contract), continue with the other considerations. Consider item number one when the current contract comes up for renewal.

2. Risks can be related to compliance, operation, and reputation, to name a few. Review contractual agreements, risk assessments, compliance/regulatory requirements, business continuity/disaster recovery, etc. Do an assessment of the risks analyzing the impact and likelihood that they could occur.

3. Consider having an exit strategy detailing exit criteria and procedures to ensure data and assets are securely transferred or disposed of (just in case).

4. Perform ongoing monitoring including evaluating their financial condition and reviewing their internal and information security controls (e.g., obtaining their SOC reports).

5. Continuously evaluate and update the TPRM based on business operational changes, regulatory changes, and emerging risks.

The organization’s (internal) risk management program is critical. Because the third-party vendors have a significant role in the organization’s environment, the (external) TPRM is important too. Organizations need to address both sets of risks to effectively manage their overall risk landscape.

For more information on third-party risk, follow me on LinkedIn!

From Your Site Articles

• 4 Critical Components To Risk Management Success ›
• 6 Reasons Why You Need To Have A Project Kickoff Meeting ›
• Identity Theft: 4 Types Of Cyber Attacks Students Should Watch Out For ›

Related Articles Around the Web

• What is Third-Party Risk? | UpGuard ›
• Gartner Survey Shows Third-Party Risk Management “Misses” Are ... ›
• Why Third-Party Risk Is Critical to Every Business — RiskOptics ›

third party risk {"customDimensions": {"1":"Executive Community, Debra Shannon","3":"third party risk, third party risk management, third-party risk, third-party risk management, risk management, third party vendors, third-party vendors, risk mitigation, executives, organizations, business, risk","2":"community","4":"04/20/2023"}, "post": {"split_testing": {}, "providerId": 0, "sections": [0, 544324100, 544398580, 544398581, 479660731, 473333499], "buckets": [], "authors": [21030904, 24925024]} } 8 Ways You're Being SHUT OUT Of The Hiring Process1-hour workshop to help job seekers figure out what's getting them tossed from the hiring processCover Letter 3 Tips For Overcoming Your Biggest Job Search FEARS Jenna ArcandSeptember 28, 2022 {"adCodes": [{"desktop": "\u003cdiv class=\u0027rblad-wit_content\u0027\u003e\u003c/div\u003e", "display": true, "mobile": "\u003cdiv class=\u0027rblad-wit_content\u0027\u003e\u003c/div\u003e", "new_amp": "\u003camp-ad width=336 height=280\n type=\"doubleclick\"\n data-slot=\"/22278042776,22664312254/wit/wit_content\"\n data-multi-size=\"300x250\"\u003e\n\u003c/amp-ad\u003e", "order": 0, "tablet": "\u003cdiv class=\u0027rblad-wit_content\u0027\u003e\u003c/div\u003e"}, {"desktop": "\u003cdiv class=\u0027rblad-wit_content\u0027\u003e\u003c/div\u003e", "display": true, "mobile": "\u003cdiv class=\u0027rblad-wit_content\u0027\u003e\u003c/div\u003e", "new_amp": "\u003camp-ad width=336 height=280\n type=\"doubleclick\"\n data-slot=\"/22278042776,22664312254/wit/wit_content\"\n data-multi-size=\"300x250\"\u003e\n\u003c/amp-ad\u003e", "order": 1, "tablet": "\u003cdiv class=\u0027rblad-wit_content\u0027\u003e\u003c/div\u003e"}, {"desktop": "\u003cdiv class=\u0027rblad-wit_content\u0027\u003e\u003c/div\u003e", "display": true, "mobile": "\u003cdiv class=\u0027rblad-wit_content\u0027\u003e\u003c/div\u003e", "new_amp": "\u003camp-ad width=336 height=280\n type=\"doubleclick\"\n data-slot=\"/22278042776,22664312254/wit/wit_content\"\n data-multi-size=\"300x250\"\u003e\n\u003c/amp-ad\u003e", "order": 2, "tablet": "\u003cdiv class=\u0027rblad-wit_content\u0027\u003e\u003c/div\u003e"}], "adsOrder": [2]} Are you terrified of screwing up a job interview? Does the thought of writing a cover letter horrify you? Are you scared to network with others? What do you even say, anyway? If you're struggling to overcome your job search fears, this live event is for you.

We get it. Looking for work can be scary, especially if you’ve been at it for a long time and haven’t gotten any results.

Understanding which fears are getting in the way and how to overcome them will make all the difference. Sometimes you might not be aware of which obstacle is getting in the way of your goals. If you want to overcome these fears once and for all, we invite you to join us!

In this training, you’ll learn how to:

• Utilize strategies for coping with your job search fears
• Be confident in your job search—from writing your resume to networking
• Face your fears and move forward

Join our CEO, J.T. O'Donnell, and Director of Training Development & Coaching, Christina Burgio, for this live event on Wednesday, October 5th at 12 pm ET.

CAN'T ATTEND LIVE? That's okay. You'll have access to the recording and the workbook after the session!

Read moreShow lessjob search fears {"customDimensions": {"1":"Executive Community, Jenna Arcand","3":"live events, career events, j.t. o'donnell, jt o'donnell, christina burgio, career advice, career, career growth, professionals, job search, job seekers, job interview, job search tips, job search advice, interview, job interview tips, interview tips, job search fears, overcome job search fears, networking, cover letter, resume, writing a cover letter, job search strategy, job search help, looking for a job, unemployed","2":"cover-letter","4":"09/28/2022"}, "post": {"split_testing": {}, "providerId": 0, "sections": [0, 376490081, 562457120, 370480899, 376490053, 376489574, 376491143, 376489962, 404327439, 376489624, 479660731, 543270555, 473310813, 473333499], "buckets": [], "authors": [21030904, 19836096]} } Get Some LeverageSign up for The Work It Daily NewsletterEnter emailSubscribeFollowFeatured Risk Management Is Critical. Don’t Forget Your Third-Party Risk! {"customDimensions": {"1":"Executive Community, Debra Shannon","3":"third party risk, third party risk management, third-party risk, third-party risk management, risk management, third party vendors, third-party vendors, risk mitigation, executives, organizations, business, risk","2":"community","4":"04/20/2023"}, "post": {"split_testing": {}, "providerId": 0, "sections": [0, 544324100, 544398580, 544398581, 479660731, 473333499], "buckets": [], "authors": [21030904, 24925024]} } Now Hiring: Remote SysOps Engineer {"customDimensions": {"1":"Work It Daily, Kinsta \u00ae","3":"kinsta, hiring, remote jobs, remote work, remote workforce, remote companies hiring, remote companies 2021, sysops engineer, sysops engineer jobs","2":"popular","4":"05/18/2021"}, "post": {"split_testing": {}, "providerId": 0, "sections": [370480899, 545998439, 545998440, 473310812, 376489962, 526353713, 545658354, 548352055, 548352058, 543270555, 473333499, 473310813], "buckets": [], "authors": [19548593, 21891195]} } 3 Important Career Lessons Learned On And Off The Field {"customDimensions": {"1":"Executive Community, J.T. O'Donnell","3":"career change, entrepreneur, entrepreneurship, career, career challenges, overcoming career challenges, personal branding, personal development, professional development, professional growth, success, career success, pro athletes, tom brady, chris gronkowski, nfl, tiktok, social media strategy, social media, career growth","2":"popular","4":"02/10/2021"}, "post": {"split_testing": {}, "providerId": 0, "sections": [0, 370480899, 473333499, 376489962, 526353713, 376489624, 479660731], "buckets": [], "authors": [21030904, 19549412]} } How Ex-NFL Player, Chris Gronkowski, Is Using Social Media To Change Careers {"customDimensions": {"1":"Executive Community, J.T. O'Donnell","3":"2010, Barstool, camera phone, career growth and development, career growth opportunities, chrisgronkowski, cowboys, dallascowboys, dinner, football, free, gronkspike, iceshaker, investor, nfl, nflfootball, nflplayer, nflplayers, nflworkout, payday, rookie, salary, sharing, sharktank, tic toc, tic tok, tick tock, ticktock, tictok, tik tok, tiktok, tiktok.com, trade, trainingcamp, upload, video, video phone, weighin, youtube.com, \u0442\u0438\u043a \u0442\u043e\u043a, \u30c6\u30a3\u30c3\u30af\u30c8\u30c3\u30af, chris gronkowski","2":"popular","4":"01/29/2021"}, "post": {"split_testing": {}, "providerId": 0, "sections": [0, 370480899, 473333499, 526353713, 376489624, 479660731], "buckets": [], "authors": [21030904, 19549412]} }