Top Tips to Save Time When Assessing Third-Party Risks

How long do you spend identifying and managing risks with your third parties?

As organizations continue to work with more and more third parties, it becomes a time-consuming and laborious process – particularly if done manually. This is on top of trying to balance all your other GRC priorities.

To take the pain out of the process, here are our top tips to save time and get the best results when assessing third-party risks.

1. Define and document a clear methodology and approach

Spend time at the start of your program identifying and documenting a clear methodology and approach. The aim here is to establish a consistent, repeatable way to achieve the best results.

Your methodology should allow you to prioritize your highest-risk vendors. As supplier numbers increase or decrease over time, it’s also crucial that you can scale effectively too. Consider your different types of vendors and the criteria you need to assess and manage them accurately and consistently.

By defining and documenting your third-party risk management methodology and approach early, you can establish clear and consistent criteria. Not only will this improve understanding for all involved, but it will demonstrate the maturity of your approach and most importantly, improve the accuracy of any outputs.

2. Categorize your third-party suppliers

The beauty of having consistent, repeatable tiering criteria is that it can enable you to quickly remove any suppliers that don’t post a significant risk to your organization. This means you can dedicate your time to focusing on your highest-risk third parties. Aim to use quantitative scoring for this.

Here are some steps we recommend for categorizing your third-party suppliers effectively:

1. Define criteria for categorization – Identify key criteria that are relevant to your organization; for example, strategic importance, financial impact, regulatory compliance and performance history.
   
   
2. Gather supplier information – Collect detailed information about each supplier. This should include the products/services they provide, financial stability, geographic location and any previous performance data.
   
   
3. Assess strategic importance – Assess the strategic importance of each of your suppliers. Consider factors such as the role they play in your supply chain, the uniqueness of their offerings, and their impact on your business objectives.
   
   
4. Determine financial stability – Evaluate the financial stability of each supplier by analyzing their financial statements, credit reports and payment terms. Remember, a financially stable supplier is far less likely to cause disruptions.
   
   
5. Evaluate regulatory compliance – You’ll need to make sure your suppliers comply with relevant regulations and industry standards. This is particularly important if you’re working in an industry where regulatory requirements are very strict.
   
   
6. Review performance history – Make sure you review the historical performance of each supplier. Consider factors such as on-time delivery, the quality of their products or services, and their responsiveness to issues.
   
   
7. Conduct risk assessments – Identify and assess potential risks associated with each supplier. These should include geopolitical, economic, environmental and operational risks. Evaluate their contingency plans and risk mitigation strategies.
   
   
8. Develop a categorization framework – Develop a categorization framework based on the criteria you’ve defined. For example, you could create categories such as ‘Strategic Partners’, ‘Critical Suppliers’ and ‘Routine Suppliers’.
   
   
9. Regularly review and update – Regularly review and update the categorization of your third-party suppliers. After all, market conditions, supplier performance and business priorities are likely to change over time.
   
   
10. Continuously monitor – Implement a system for ongoing monitoring of suppliers – especially those in critical categories. This way, you can detect any changes or potential issues early.

3. Introduce automation to your TPRM process

Using manual processes to individually assess your suppliers can easily prove itself to be the most laborious task of third-party risk management. This is where automation can really give you back more of your time. Here are just some of the tasks automation can help you with:

• Sending assessments to suppliers
  
  
• Issuing communications
  
  
• Tracking assessments sent, along with due dates
  
  
• Tracking completed and outstanding assessments

This is where the right TPRM tool can help you – in fact, we’ve got a free, on-demand webinar right here to help you with the process if this is something you’re considering.

4. Outsource third-party risk management

Another option you might want to consider is outsourcing your third-party risk management activities altogether. If you do decide to explore this option, you’ll want to consider both the advantages and disadvantages of doing so.

One of the advantages of outsourcing TPRM is the wealth of expertise and specialization you’ll have access to; they will be focusing exclusively on mitigating third-party risks. There’s also the potential for cost savings – outsourcing can sometimes prove more cost-effective than building an in-house risk management team. It means you won’t need to hire and train staff or maintain ongoing operational costs.

For these reasons, outsourcing can be the most viable option for some businesses. However, there are certain things you need to bear in mind when outsourcing TPRM. Relying on third-party providers may create dependency, for example, which can make adapting to change a challenge. This may also make it more difficult to address emerging risks independently. Outsourcing also involves handing over a critical aspect of your business operations to an external entity. This can potentially result in your organization feeling a loss of control over the risk management process.

Spend time weighing up the pros and cons. After all, every organization has its own set of particular needs and there’s no one-size-fits-all solution.

5. Lean on existing assurance

Third-party service providers often obtain certifications against industry best practice information security standards and frameworks (you’re probably very familiar with ISO 27001 and SOC2, for example). These certifications are issued by independently accredited certifying bodies. As they are subject to such rigorous audits and testing, they demonstrate to clients that the service provider has a mature security posture and that controls are operating effectively.

We recommended earlier that you should define and document your organization’s minimum level of assurance for your various categories of suppliers. By doing so, providing the supplier shares an in-date, in-scope certification or accreditation (which includes the systems/services they’re providing you with), then you might not actually need to conduct a full audit. By doing so, you might duplicate an existing audit that’s already been conducted – this can get frustrating and inefficient if it happens often.

Once certificates have been validated as being in-date, the services in scope and issued by an accredited certifying body (e.g. UKAS), you’ll have saved plenty of time for both you and your supplier in achieving proportionate levels of assurance.

6. Work closely with your internal teams

Our final top tip to save time when assessing third-party risk is to work closely with your internal stakeholders and teams to embed third-party risk management practices from the start. All too often, organizations are assessing the risk posture of suppliers who might have already been onboarded or in contract, where there’s little chance to minimize any identified risks.

By following the recommendations above, you’ll find your processes are more streamlined, costs are lower and your third-party risk management programs are so much more effective in the long-term.

And if you want to find out more about how SureCloud’s no-code Aurora platform can help you streamline your TPRM processes and boost efficiency, take a look here to discover more.