As companies become more reliant on outside vendors, they are exposed to a greater number of risks. A third party may not have the same ethical standards as the company, or may be less reliable.
Third party risk management is the process of identifying, assessing, and mitigating risks posed by third parties.
When it comes to TPRM, businesses have a lot of options to choose from. There are a variety of different strategies that can be implemented in order to reduce the risks associated with working with vendors.
In this blog post, we will discuss 4 of the best practices for third party risk management. By following these tips, you can rest assured that your business is taking the necessary precautions to protect itself from potential harm.
Identify Your Third Party Vendors
Knowing who your third parties are is the first step in managing risks associated with them. You should have a clear understanding of what services each vendor provides, as well as their role in your business.
You should create a list of all third party vendors, as well as their contact information. Once you have these details, you can begin to assess the risks posed by each one.
Qualify Potential Risks
After you have identified your third parties, it's time to evaluate the risks they can possibly bring to your business. Not all vendor relationships are created equal, and some will present more risk than others.
There are a variety of factors that you should consider when assessing. These include:
- The type of service being provided
- The nature of the relationship
- The size and financial stability of the vendor
- The geographic location of the vendor
- The regulatory environment
Possible risks should be evaluated on a case-by-case basis, and each vendor should be assessed according to their specific threats.
Determine Risk Tolerance & Implement Controls
When you have already identified and qualified the risks associated with your vendors, it's time to set some limits. You need to determine how much risk your company is willing to take on.
This will be different for every organization, and will depend on a variety of factors such as the size of the company, the industry and the amount of risk already present in the business.
It's important to remember that there is no such thing as zero risk. However, you can limit your exposure by implementing safeguards and controls based on your company's specific threat limit.
And now is the time to put your risk management plan into action. Based on the risks you have identified, you need to implement controls that will mitigate these threats.
There are a variety of different controls that can be put in place, and the best ones for your business will depend on the specific risks involved.
Some common controls are:
- Vendor risk management programs
- Service level agreements
- Information security controls
- Business continuity planning
Continuous Monitoring Of Your Third Parties
The best way to ensure that your TPRM plan is effective is by continuously monitoring your vendors. This means setting up regular reviews and assessments to make sure that the risks are still being managed properly.
It's also important to track any changes in the relationship or the threat landscape, so that you can make necessary adjustments to your plan.
Third party risk management is an important part of doing business in today's world. By following the 4 best practices we have discussed, you can be sure that your company is taking the necessary precautions to protect itself from potential harm.