Building Third-Party Risk Awareness & Transparency

Establishing an effective governance, risk, and compliance (GRC) program can be a difficult task. Developing an enterprise-wide approach that encompasses third-party relationships adds even more complexity.

Given the prevalence of vendor cybersecurity and supply chain issues, many organizations are recognizing the value of investing in a mature, comprehensive GRC program for properly managing third-party relationships and mitigating risks or compliance violations.

Integrating Third-Party GRC

A mature third-party governance program requires transparency and control over the ecosystem coupled with accurate information. When a governance program fails, it is often due to scattered or unreliable information that prevents data sharing and verification. To prevent the problems associated with siloed data, organizations should establish an information architecture that can integrate and manage the following:

• Data Records. GRC management platforms help vendor managers maintain a single source of truth for third-party data and documentation such contact information, contracts, financial information, and due diligence reviews.
• Communicating Compliance. It is pivotal that teams responsible for GRC management can communicate, follow, and monitor compliance and regulatory standards across all third-party providers.
• Policy Management. Any policies or procedures associated with third-party relationships need to be tracked and mapped to their associated vendors, business processes, laws/regulations, compliance changes, risks, controls, and other GRC data points.
• Transactions. Records should also be kept of all transactions including payments, goods and services received, etc.

Benefits of Technology-Enabled Vendor Management

Effective third-party risk management involves more than just record-keeping and communication. While adopting a GRC technology architecture can streamline these efforts, it also enables other benefits such as:

Automation

Spreadsheet-based documentation is prone to error and difficult to maintain. For organizations to spend countless hours on data management and reporting just to find mistakes throughout their work can greatly reduce effectiveness.

Research from the finance sector indicates that organizations achieve greater efficiency when they prioritize digital initiatives that enable “a big-picture look at risk management’s overall organization, governance, and performance management.” Implementing improvements such as enhanced monitoring and automated reporting can increase the productivity of specific risk management activities by 40% or more. 

Integration

It is crucial that a third-party management solution offers integration capabilities that aggregate data across governance, risk, and compliance functions. This is important not only for internal coordination and data-sharing between departments, but also to track changing risks and compliance requirements throughout the enterprise.

Risk Awareness

Relying on third parties can greatly increase exposure in many risk areas—from operational and financial to regulatory and reputational.

Gaining a holistic perspective of vendor performance, risk, and compliance helps organizations monitor changes in third-party relationships that may impact their risk posture.

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