An extended enterprise is only as strong as its weakest link. While collaboration with third parties helps drive innovation and growth, it inevitably can introduce risks. In this blog we explore the importance of third-party risk management (TPRM) and the role it plays in keeping every link in the governance, risk and compliance (GRC) value chain robust and resilient.
Why third-party risk management matters
Operating independently, third parties are contracted to fulfil specific roles within the wider supply chain often as suppliers, partners or associates. They often add significant value to your business proposition, enhancing your capabilities, bringing specialist knowhow, skills or technologies to your offer or enabling you to flex up or scale down based on demand. Since third parties are not under your organisation’s direct control, they can introduce additional risks, such as quality control issues or compliance failures. Managing these risks is crucial to ensure that third parties meet required standards and do not negatively impact your business's operations or reputation.
“In complex business environments where uncertainty is a given and risks are interconnected, organisations that invest in TPRM and the maturity of their enterprise risk management infrastructure will be more agile, resilient and ultimately, sustainable,” says Jeff Robinson, Decision Focus Partner. “Your ability to maintain customer and stakeholder confidence pivots on the trust you can place in your third-party network. For such assurance, traditional risk management isn’t enough — you need the vantage of 360° visibility across everything from third party onboarding, to monitoring and compliance and control assessment.”
Tips for staying on top of third party risk management
Continuous monitoring of third-party suppliers is essential to ensure that they maintain their performance and compliance over time. Proactive risk management will enable you to respond swiftly to any issues that arise and maintain the integrity of your supply chain.
Our best practice suggestions include:
- Regular performance reviews – conduct periodic assessments of the supplier’s performance against agreed-upon metrics.
- Compliance audits – perform regular audits to ensure ongoing adherence to regulations and contractual obligations.
- Risk scoring – categorise suppliers based on their risk level, allowing you to prioritise your team’s monitoring efforts.
- Automated alerts – use technology to set up alerts for any significant changes in the supplier’s risk profile, such as financial distress or legal challenges.
- Risk mitigation planning – identify and maintain relationships with back-up third parties to ensure a safety net in case of disruption.
- Crisis management preparation – establish a cross-functional team responsible for managing supplier-related crises.
- Be clear on communication strategy – essential for informing stakeholders, including customers, partners, and regulators, in the event of a supply chain disruption.
- Plan recovery strategies – outline specific actions for quickly restoring operations with minimal disruption or inconvenience.
- Foster and maintain strong relationships – a collaborative approach can lead to better communication, more transparent operations and a shared commitment to mitigating risks. Work together on risk management strategies, such as joint audits or shared contingency plans and consider long-term contracts that encourage investment in the relationship and mutual commitment to success.
Get a real-time view of your extended enterprise
For assurance that your third-party network meets your own high standards of integrity and to minimise the minimising the risk of financial and reputational damage, consider how technology can work to your advantage.
The Decision Focus Third Party Risk Management (TPRM) module is a central repository of third parties – including suppliers, distributors and intermediaries - encompassing all associated third-party risk.
The module manages the entire lifecycle of third parties including due diligence, contract management and service level agreement (SLA) oversight. It streamlines the gathering of critical data from third parties via a secure portal, allows you to reduce third party onboarding time and complete the due diligence process faster and more efficiently.
Key benefits – a snapshot
1. Centralised risk management
The module provides a centralised platform for managing all third-party risks, providing a single, consolidated view of the entire ecosystem. No reliance upon manual processes using spreadsheets or silos of information, all relevant data and risk assessments are easily accessible, and risk management efforts across the organisation are co-ordinated and unified.
2. Automated risk assessments
Decision Focus’ TPRM module automates the process of risk assessment, reducing the time and effort required to evaluate and monitor third party risks. Automation ensures that assessments are consistently applied, minimising human error and enabling quicker identification of potential risks.
3. Customisable risk frameworks
The module allows you to customise your risk management frameworks to align with specific needs and industry standards. This flexibility ensures that the risk management process is tailored to the unique risk profile of your organisation, resulting in more accurate and relevant assessments.
4. Real-time monitoring and alerts
With real-time monitoring capabilities, the TPRM module keeps your team informed about any changes in the third-party risk landscape. Automated alerts notify users of significant developments, such as changes in a supplier’s financial health, regulatory compliance issues, or operational disruptions, enabling proactive risk management.
5. Enhanced collaboration and communication
The module facilitates better communication and collaboration between internal teams and external suppliers. It provides tools for sharing information, setting expectations and tracking performance, ensuring that all stakeholders are on the same page and working towards common goals.
6. Comprehensive reporting and analytics
The Decision Focus TPRM module includes powerful reporting and analytics tools that provide deep insights into the risk profile of third party suppliers. You can generate detailed reports, track trends and identify potential vulnerabilities, helping to inform strategic decision-making and risk mitigation efforts.
7. Regulatory compliance support
The module helps your organisation stay compliant with regulatory requirements by providing frameworks and tools to ensure that third-party suppliers meet all necessary legal and industry standards. It also allows for easy documentation and audit trails, which are essential for demonstrating compliance during audits.
8. Scalability
As your business grows, so do your third party networks. Being scalable, the TPRM module can handle increasing volumes of data and suppliers without compromising performance and continue to support your risk management needs as your organisation expands.
9. Risk scoring and prioritisation
The module offers sophisticated risk scoring capabilities, allowing risk management efforts to be prioritised based on the level of risk each third party presents. This helps focus resources on the most critical suppliers, ensuring that the most significant risks are managed effectively.
10. Ease of integration
The TPRM module integrates seamlessly with other systems and tools such as ERP, procurement and compliance software. This integration capability ensures that data flows smoothly across platforms, providing a more comprehensive view of third party risks.
11. User-friendly interface
Easy and a pleasure to use, the intuitive design reduces the learning curve and encourages widespread adoption, ensuring your organisation gets the most out of the tool.
Read more about Decision Focus Third Party Risk Management software, download our brochure or get in touch to book a demo.