These days, it’s common for companies to work with third-party vendors around the globe. Whether you’re outsourcing work to a company in Asia or relying on materials to move through the supply chain via a specific, more local third-party supplier, you’re assuming some level of risk when working with those third parties. And that risk can leave your company vulnerable.
Third-party risk is a common factor behind data breaches, regulatory sanctions, and even reputational damage. Consider how upset some consumers become when they find out that a previously favored company uses a vendor that uses a vendor that acquires materials that are unethically sourced. Consider that 44 percent of firms report suffering cyber security consequences as a result of a data breach affecting a vendor, but only about 15 percent of those vendors are transparent enough to report those data breaches to the organizations they work with. You need to know the risks, and take steps to protect your organization.
Every Third-Party Vendor Relationship Is Inherently Risky
The problem with third-party vendor relationships is that you can’t monitor your third-party vendors’ operations for regulatory compliance and other potential issues as thoroughly as you can your own operations. Vendors are their own organizations, and they have their own best interests at heart, and even when they’re diligent about managing risk, you can’t always trust them to report security breaches or other potential risk events to you. And you can’t always know who else they’re working with, or what the risk levels of those fourth- and fifth-party vendors might be.
So, every time you enter into a vendor relationship, you’re taking on some risk. You can never eliminate that risk — every third-party vendor relationship opens doors through which hackers, regulatory mistakes, or even bad PR can slip through and damage your company. You have to stay vigilant and keep a close eye on vendors to mitigate the third-party risks.
Your Company Could Be Held Responsible for Breaches
In many industries, companies in the U.S. have to adhere to strict regulatory guidelines, and so do their vendors. For example, in the financial services industry, you’re responsible for making sure that your third-parties comply with all applicable regulations. Your organization could be held liable if they don’t, even if the vendor isn’t located in the U.S.
You Need the Right Software Tool to Manage Risk
Modern supply chains stretch around the world and modern third-party vendor relationships are more intricate and elaborate than ever before, with organizations increasingly outsourcing labor and relying on ever-more-specialized third-party suppliers to provide them with the tools, information, supplies, and materials they need to complete their own processes. Old-fashioned, manual means of managing third-party risks are no longer up to the task, and companies who haven’t yet automated third-party risk management are leaving themselves open to an unnecessary level of cyber security and other risks.
It’s time to implement a third-party risk management software solution. The right software tool will be scalable to accept and monitor an unlimited number of third-party vendor relationships. You’ll be able to automate many of the time-consuming manual processes involved in emailing vendors and logging those emails for compliance, generating vendor self-report questionnaires and collecting the answers, and even assessing vendors’ risk levels and assigning security ratings.
For example, a tool that allows for automated vendor self-reporting will automatically send out vendor questionnaires when it’s time, and collect the answers by allowing vendors to upload their reports to the system. Your employees can collect information from there as they need it, and there’s no need to waste anyone’s time manually sending questionnaires or spending time on the phone with vendors and recording their answers. Software tools can streamline every process, saving you tons of time and money, and improving your risk levels with constant monitoring and greater transparency into vendor risk profiles.
Third-party risk can damage your company’s reputation, get you in regulatory trouble, and even cause an expensive data breach. Don’t risk subjecting your company to damage it can’t recover from. Take steps to protect your organization from risk with the right software tools, so you can focus more of your employees’ time and energy on doing what they do best to grow your business.
Ryan Kh is an experienced blogger, digital content & social marketer. Founder of Catalyst For Business and contributor to search giants like Yahoo Finance and MSN. He is passionate about covering topics like big data, business intelligence, startups & entrepreneurship. Follow him on twitter: @ryankhgb.