One of the biggest challenges for today’s businesses is hidden and misunderstood risks in the supply chain. When these risks are missed, they increase a business’s risk exposure and limit its ability to define, optimize, and create advantage from risk. Third-party risks expand and diversify, and regulatory agencies and market forces increasingly expect active, accountable, and adaptable risk management programs. Hidden and misunderstood risks are an Achilles Heel for successful TPRM programs.
Understanding where financial, operational, compliance, and reputational risks lie within your third-party ecosystem is essential to ensuring organizational integrity and long-term business continuity. In the modern enterprise, risk management is often distributed across multiple functional teams, locations, and divisions. Assessments and evaluations are usually influenced by team focus, risk types, and immediate needs.
As an organizational risk leader, it can be daunting to make sense of and organize these variable evaluation criteria, fragmented data sets, risk bias, and diverse methodologies into a single approach. Yet, it is well known—and increasingly defined within regulations—that the secret to an optimized third-party risk management program is a centralized, coherent, and insightful data system that can adapt as risks evolve, scale, and diversify.
Third-party risk management has become increasingly integrated with business strategies and success. Deloitte reported in 2023 that the business use of third parties has increased exponentially in the last five years and looks to continue to do so. At the same time, we see businesses investing in and integrating more deeply with third parties than ever.
Key relationships are increasingly intertwined and interdependent, often including entrenched collaboration on business strategies, innovation, and growth models. As businesses also increasingly share technologies, customer, and market data and offer critical, irreplaceable services, the character, scope, and scale of risks have evolved.
There are so many data points to consider now. Not only are there more third parties to evaluate but the scope and scale of risks have increased, expanding relevant assessment and evaluation criteria. Deep integration into businesses further expands risk factors. Multiple applicable regulations necessitate including fourth-party and Nth-party suppliers in risk evaluations, expanding the ecosystem.
Risk professionals may be forgiven for feeling like they are rapidly sinking into quicksand across a vast and expanding landscape of third parties, business-critical engagements, and diversifying risk domains.
Businesses cannot afford to misunderstand or miss hidden third-party risks that can impact their ability to operate, comply with regulations, deliver services to their customers, and maintain their financial and reputational standing. It is understandable that with the volume and diversity of third-party risks today, TPRM teams can struggle. But it is also clear that enforcement agencies are increasingly less receptive to claims of ignorance or an inability to invest in available software solutions designed to help manage third-party risks.
While many software options enable businesses to input third-party entity records and apply some degree of risk assessment and prioritization in a registry, recent regulatory developments have upped the ante for businesses across industries and regions. As Gartner noted in 2020, 60% of businesses work with 1000 or more third parties.
At that scale, reconfigured productivity solutions (MS Excel, Outlook, Word) are insufficient to evaluate, escalate, and manage third-party risks. And regulatory agencies are increasingly prescriptive in requiring centralized, automated, and intelligent TPRM solutions.
Ultimately, the answer to many of the biggest challenges vexing risk professionals regarding accuracy, productivity, and regulatory alignment lies with purpose-built TPRM platforms. As companies seek to increase program efficiency and assessment accuracy, digital transformation and centralized management of risk assessments and mitigation are necessary.
Manual processes anywhere in TPRM processes and workflows – including exchanging files with and evaluating third-party responses – across multiple teams and locations create ample opportunity for human error, inconsistencies, and missed risks. Going digital across the key information gathering, assessment, and risk mitigation processes improves program consistency, accuracy, and effectiveness.
Accordingly, seasoned risk professionals increasingly opt for alternatives to third parties volunteering timely and accurate data in questionnaire responses. As third parties experience survey fatigue, delay responses, and commit less information, the primacy of depending on questionnaire submissions and responses to evaluate risks in TPRM is failing.
A noticeable recent shift in the execution of third-party risk programs is a growing demand for trusted data – data that can supersede questionnaire information, validate it, or even replace it, depending on the situation. TPRM solutions that integrate risk intelligence data feeds at multiple stages in a risk evaluation workflow are able to provide authoritative data that improves program consistency, accuracy, and effectiveness.
Ultimately, a purpose-built platform that enables risk professionals to manage the entire life cycle of a third-party engagement, integrates risk intelligence into the earliest stages of assessment, and delivers comprehensive insights drives the value and strategic impact of successful TPRM programs. Demand for centralized, intelligent, and data-rich TPRM solutions is increasing.
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Aravo has the right solution for risk experts facing a rapidly changing TPRM landscape, increasing reliance on data and insights, and demands for complete, holistic, and defensible programs. Experience a Demo today.
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