2023 Risk Prediction: The Fusion of IT Risk Management and Third-Party Governance
March 6th, 2023 •
Hannah Tichansky • Reading Time: 4minutes
2023 Risk Predictions
As we move forward into 2023 it’s important for risk professionals to take stock of the previous year, and prioritize initiatives and resources for navigating what’s ahead. We have dived into research and spoken with experts to determine what risk leaders can expect in 2023, what trends will continue to gain traction, regulations on the horizon, and more. For our first prediction in this series, we explore how 2023 will see the fusion and integration of IT Risk Management and Third-Party Governance.
Why Fuse IT Risk Management and Third-Party Governance?
IT risk management and third-party governance are two essential aspects of safeguarding an organization’s & its customers’ data and systems. While they share some common goals, there are also key differences between the two disciplines.
IT Risk Management
This focuses on identifying, assessing, and managing threats to an organization’s digital & physical assets. This includes detecting vulnerabilities in software and hardware systems, monitoring security events, and responding quickly to incidents. The aim of this discipline is to protect the organization from data breaches or other malicious activities.
This involves ensuring that external vendors and partners comply with the organization’s policies and standards when handling information or providing services. This includes assessing vendor security measures, reviewing contracts, and monitoring performance. The goal of third-party governance is to minimize risk while ensuring that vendors are meeting their obligations.
Integration Leads to Higher TPRM Maturity
Not all TPRM programs are created equal, and each will be at a different level of maturity depending on many factors including organization, use of automation, visibility, and more. This is a fluid process as organizations work to make incremental improvements to their risk programs in order to boost resilience, meet regulatory demands, and mitigate risk.
An agile and mature TPRM program involves a cross-functional and coordinated strategy and team to define and govern third-party relationships that are enabled by consistent processes, information, and technology.
According to Deloitte’s 2022 Global TPRM Survey, “In organizations that have travelled further on the TPRM maturity journey, the need to move towards an integrated system for managing third parties is mirrored by the widening of TPRM into related functional areas…Around two-thirds (67%) of TPRM teams recognize that the scope of their work is broadening into the related functional areas.”
By integrating these two disciplines organizations can benefit from a more holistic and coordinated approach to information security related to third parties.
The benefits of such an approach include:
Improved data security by taking a comprehensive approach
Reduced compliance costs
Increased efficiency in responding to incidents
Growing Pains and the Shift Away from Manual Processes
However, there are also challenges to this approach that must be understood and overcome when organizations decide to fuse these disciplines together. It is important to ensure that the appropriate policies and procedures are in place, as well as to invest in technology solutions that automate IT risk management and third-party governance activities.
Some of the push for the fusion of these disciplines is related to increasingly complex third-party ecosystems, enhanced scrutiny from regulators, and a rise in high-profile risk incidents. All of these factors have brought us to the point where manual TPRM processes no longer cut it. Spreadsheets and emails can’t keep up, and organizations are doing themselves a disservice if they rely on them for managing their third parties.
On a positive note, Aravo’s 2021 TPRM survey found that only 11% of respondents rely on manual processes and spreadsheets to manage their programs (down from 34% in 2020). This is great news, and this number should continue to go down as more organizations invest in technology that helps them stay organized and stay on top of their suppliers. By doing so, organizations can benefit from an effective and secure approach to safeguarding their digital & physical assets.
The Nuts and Bolts of IT Risk Management and Third-Party Governance Integration
Integrating IT risk management and third-party governance involves combining the two disciplines into a cohesive framework. Several factors need to be worked out and put into play in order to make this happen. These include stakeholders, processes, and technology.
The organization must define a set of policies and procedures that cover both areas, as well as ensure that all stakeholders understand and follow them. These stakeholders, such as CISOs, Chief Risk Officers, compliance, legal, and procurement personnel (as well as others) need to understand that breaking down silos between departments is critical to creating cohesion.
In addition, the organization should establish formal processes for assessing vendors, monitoring their compliance with security standards, and responding to incidents. Establishing these processes with the relevant stakeholders is critical to getting this integration off the ground and for beginning to see results.
A key part of the formal processes that must be established is technology that supports them. As mentioned above, manual processes no longer cut it as third-party ecosystems continue to evolve and gain in complexity. Organizations should invest in technology solutions to automate these activities.
Benefits to embracing technology include:
Achieving a single version of truth across IT Risk Management and Third-Party Governance: You’ll have a standardized and centralized process for managing third parties that cut across departments and help in your integration of these disciplines.
Improved decision-making and compliance: Data management is much more robust once technology and automation are adopted. This allows for better process workflows, better visibility, and better adherence to policies.
Increased efficiency and reduced costs: With more automation comes better efficiency, saving time and resources. What’s not to love about that?
The Importance of Organizational Commitment
The integration of IT risk management and third-party governance requires organizational commitment, investment in technology, and comprehensive processes. Organizations should carefully plan the implementation of such an approach to ensure that it is effective and secure. To this end, organizations should focus on creating a culture of security, implementing policies, and procedures that cover both disciplines, investing in appropriate technology solutions, and monitoring compliance with security standards.
By taking these steps, organizations can leverage the benefits of integrating IT risk management and third-party governance while minimizing potential risks. With the right approach, organizations can ensure that their data assets are secure and well-managed. With the right controls in place, they can also maximize efficiency and reduce the costs associated with compliance. Ultimately, integrating IT risk management and third-party governance can provide organizations with a comprehensive approach to information security that delivers long-term benefits.
Curious about our risk predictions for 2023 or how to fuse your IT Risk Management and Third-Party Governance programs? Talk to one of our experts!
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