The modern organization does not operate in isolation, but as part of an ecosystem of interactions with third parties. As Michael Rasmussen has noted, over half of the modern organization’s ‘insiders’ are no longer traditional employees. Insiders now include third parties such as suppliers, vendors, outsourcers, contractors, service providers, agents and more.
These third parties can offer a strategic advantage and business value, helping organizations to provide exceptional services and focus on their own area of specialization. However, with increasingly complex and interconnected third-party relationships comes increased risk. One of the main culprits of data breaches are third-parties that organizations engage with to perform key functions within the business. It’s the weaknesses within their infrastructure, and the services they provide, that can leave your organization vulnerable.
This is why third-party risk management (TPRM) is a fundamental pillar of corporate governance and resilience.
What is third-party risk management?
TPRM is a structured approach to identifying, assessing, monitoring and mitigating risks associated with third-party relationships.
And these risks presented to both the organization and the end customer only mount with each additional party involved. The chain’s involved industries can stretch beyond the first, second, and third (customer, the organization, immediate suppliers) into fourth and fifth (suppliers of the suppliers of suppliers).
With such mind-bending complexity, it’s no wonder risks can so easily permeate. The good news is that with a robust TPRM program in place, you can help safeguard your business against the potential disruptions, vulnerabilities and non-compliance.
Why is third-party risk management so important?
Imagine your business as a finely-tuned orchestra, with each vendor, supplier or service provider playing a distinct instrument. Now, if one instrument goes out of tune – whether that’s due to a security breach, compliance failure or financial instability within a third party – the entire harmony of your business operation is at stake.
These risks are not hypothetical scenarios but tangible threats that can manifest in various forms, such as operational disruptions, reputational damage, legal issues and financial setbacks. In an era where data breaches and supply chain disruptions make headlines, it’s essential to understand and mitigate these risks if you want your business to maintain its reputation and survive.
Perhaps you’re familiar with the third-party breach at Target as an example. Target had a heating, ventilation and air conditioning (HVAC) vendor that had access to the Target network for environmental monitoring. However, when a hacker broke onto this vendor they were able to get onto the Target network – this led to compromised point-of-sale (POS) systems across Target. This breach exposed a staggering 40 million payment cards and 70 million customer records. The total cost for Target?
An eye-watering $252 million. While insurance covered about $90 million, this still left a $162 million impact on Target – along with long-term reputational damage and loss of customer trust.
It’s not worth getting it wrong.
What does the TPRM process involve?
Think of TPRM as the compass that guides your business through the complex landscape of external relationships. A robust process involves a proactive approach to the following:
- Identification – You’ll need to recognize and categorize all third-party relationships – from suppliers and vendors to contractors and service providers.
- Assessment – Next, you’ll need to rigorously evaluate the potential risks associated with each third party. This will include financial security, cybersecurity practices and how well they adhere to regulatory requirements. There’s a lot to think about at this stage, so here’s a free third-party tiering assessment template we’ve put together to help.
- Monitoring – Here you’ll implement continuous surveillance to stay ahead of evolving risks. This helps ensure your third-party partners maintain their agreed-upon standards.
- Mitigation – Next, you’ll need to develop strategies to address identified risks. This could be through contractual negotiations, enhanced cybersecurity measures or by seeking alternative partners, for example.
- Compliance – Finally, you’ll need to make sure all your third-party relationships align with industry regulations and standards. This is key if you want to minimise any legal and regulatory risks associated with them.
How can TPRM software help?
The right software can transform the way you manage third-party relationships by automating and streamlining your processes. Some examples of how it can work for your organization are listed below.
Vendor risk assessment
- Automated surveys and questionnaires – TPRM software can automate the process of sending risk assessment surveys and questionnaires to third-party vendors, making it easier to collect and analyze their responses.
- Scoring mechanisms – You can implement scoring mechanisms to help you evaluate the risk level associated with each vendor based on their responses and other relevant factors.
Due diligence
- Data analysis – Ever feel overwhelmed by the sheer volume of your TPRM data? TPRM software can help you analyze large volumes of data related to third-party vendors including financial records, security practices and compliance history.
- Continuous monitoring – Continuous monitoring solutions allow you to easily keep track of changes in a vendor’s risk profile over time.
Compliance management
- Regulatory updates – To keep you informed about ever-changing regulations and compliance requirements, TPRM software can provide you with automated alerts and updates. This ensures both your organization and your vendors remain compliant.
- Policy enforcement – The right technology can help you enforce compliance with organizational policies and standards, with everything centralized in one space.
Contract management
- Automated contract reviews – You can use technology to analyze contracts for potential risks and determine whether they align with your organization’s risk tolerance.
- Alerts for renewals and reviews – Automated alerts for contract renewals and periodic reviews can help you stay up to date and compliant.
Incident response
- Event monitoring – Software can monitor and analyze events and incidents related to third-party vendors. Automated responses or alerts can then be triggered in the event of a security breach.
- Workflow automation – You can use automated workflows to help you efficiently respond to incidents. Automation is a great way to ensure a timely and coordinated reaction to any identified risks.
Risk reporting and analysis
- Dashboards and reporting – Dashboards and reporting tools can offer a comprehensive view of your organization’s third-party risk landscape.
- Trend analysis – Once you have your third-party risk data, TPRM software can help to identify trends and patterns so you can proactively address emerging risks.
Integration with other business-critical systems
- Security tools – The right TPRM software should integrate seamlessly with your security tools (for example, your vulnerability scanners and threat intelligence platforms) to enhance your organization’s security posture.
- Enterprise risk management systems – Integration with broader risk management systems will provide you with a more holistic view of organizational risk.
Level up your third-party risk management with Aurora
We understand the challenges and risks of working with third-parties, which is why we’ve spent 15 years really listening to the people we serve here at SureCloud. By combining our extensive knowledge of third-party risk management with real-world feedback, Aurora was born.
Below are some of the features you can expect with Aurora’s TPRM solution.
Reduce friction and ensure vendors complete third-party assessments
A faster, simpler way to complete assessments – Aurora eliminates the need for multiple login IDs for third-party vendors and allows vendors to share assessments easily with the people who need to answer it.
Review in real-time with an enhanced, collaborative experience
Aurora facilitates real-time collaboration between multiple stakeholders and simple task assignments so you can be sure things don’t get missed. It also integrates into key operational tools such as MS teams and JIRA.
Achieve at-a-glance visualizations of your third-party risk landscape
Proactively manage risks with Aurora’s real-time insights – your key to making data-informed decisions. Get at-a-glance visualizations of your third-party risk landscape and automatically identify areas of risk and non-conformities, triggering alerts and remediation activities.
An agile and flexible GRC platform that caters to your needs
Aurora’s agile TPRM offering comes pre-configured and aligned to industry best practices. What’s more, it can be quickly tailored to your needs and adapted along the way – for GRC that adapts with you.
Boost user adoption and give your business users frictionless access –
Aurora’s intuitive platform is designed to reduce the time you spend on training and admin overhead, and prioritizes user experience.
Ready to overcome your biggest TPRM challenges?
Our experts love to listen to people’s challenges and talk them through overcoming them, so get in touch if you’d like to find out more about how Aurora can help you too.
Design your best TPRM program yet – with Aurora, the future of third-party risk management is here.
