In the previous two blog posts in this series, I’ve referenced how and why businesses are faced with hidden risks, and what kinds of solutions are currently available to limit the impact of hidden or misunderstood risks.
But let’s face it – while the how and why are important to understand, the outcomes are what count. In this post, I’m going to explore what happens when businesses apply best practices informed by an Intelligence First approach to manage and reduce hidden risks.
Before we dive in, it’s important to note that while you can apply best practices to identifying the shape, size, and speed of a risk, and you can employ multiple controls to reshape and deescalate a risk, it’s unlikely that you can fully eliminate risks. To some degree, it comes down to how and why a risk professional defines both an inherent risk and residual risk, as well as the organization’s ability manage controls and risk outcomes. In this nomenclature, an inherent risk is a risk that is unaltered by your analysis of it and your application of controls to the risk. Residual risk is the risk that remains after you’ve characterized the risk and applied your controls.
In many situations, residual risk may remain too high for your organization’s risk tolerance, requiring additional definition and application of controls. Eventually, you should get to a residual risk evaluation that meets your organizational risk tolerance levels where a risk professional can best manage it.
Understanding that process of risk identification, evaluation, mitigation, and acceptance, avoidance, or absorption is central to risk management as a whole. And understanding your organization’s risk appetite, management capabilities, and risk tolerance helps programs run more effectively and efficiently. It also helps you better identify, define, and understand a risk event and discover any additional and related risks that may have otherwise been missed or hidden. This may require some effort and expertise. TPRM solutions like Aravo can accelerate core processes, help to better identify risks and potential associated risks, and provide a solution for mitigation and remediation.
One of the challenges in TPRM today is a dependency on slow and manual processes for risk identification and evaluation. While some companies only qualify a third party through an initial inherent risk assessment, many others follow up with questionnaires sent directly to third parties. Too often, these are either ignored or take months to respond to, the replies are often incomplete, inaccurate, or biased to win a job, and the engaging organization both has to wait for and then work with incomplete information. This is where a lot of TPRM program effectiveness breaks down.
At Aravo, we’ve designed a different strategy. Based on multiple factors, our Intelligence First approach puts process and timeline ownership into the customer’s hands.
After a third party is nominated and preliminarily qualified, Aravo’s users can source authoritative risk intelligence from a broad selection of trusted partners. The intelligence they provide, based on your own risk profile and assessment requirements, is accessible in minutes, integrated into your risk evaluation, and — as applied with Aravo’s AI decision-accelerator — helps you clearly identify risk scores, prioritize additional needs, and define next steps in the engagement workflow. Intelligence First allows customers to assess a third party’s risk prior to or instead of sending burdensome questionnaires and pursuing manual evaluation processes. This saves time and costs while improving data and assessment accuracy and enabling rapid yet defensible third-party onboarding. Combined with the highly adaptable, scalable, and configurable Aravo Evaluate Engine, customers are able to comparatively evaluate relative risks, identify knowledge gaps, and score risks at a scale and precision unseen elsewhere in this industry. With an ability to leave basic risk scoring behind, aggregate or disaggregate scoring criteria, and highly adaptable data visualizations, the Aravo Evaluate Engine reduces the likelihood of hidden risks, improves understanding, and invigorates good TPRM practices.
As risks are increasingly complex, interconnected, and fast-moving, they may affect multiple areas of the business. Too often, we see stories of unseen or misevaluated risk events surprising businesses and wreaking havoc. A concealed, unknown, or poorly assessed risk related to corruption, child labor, sustainability, data privacy, or cybersecurity — when revealed — can do more than just create bad press. It can wreck an organization’s reputation and negatively affect operations, finances, and the ability to continue to do business. Technologies and processes that can help a risk professional or team discover, reveal, assess, and manage hidden risks are of incredibly high value.
Applying risk intelligence early in the assessment process, including critical data on a third party’s information security practices, history with corruption or sanctions violations, credit and financial stance, can help a business define whether to work with them is consequential. Risk intelligence on specific risk factors important to your organization and the nature of the third-party engagement accelerates and builds confidence in decision making. Risk scoring that allows for a broad range of evaluation points helps reveal important risks and identify gaps in understanding related to a third-party. And Aravo’s integration of AI improves gap identification in data and information needed for accurate assessments, ensures best practices for defining, routing, and pursuing next steps. It also delivers confident recommendations for approvals, disapprovals, mitigation, and reporting, and provides the extra insight needed to best reveal and manage hidden risks.
In the end, the organization is heavily dependent upon the TPRM program to uncover insights, inform, and advise on risks across multiple categories. When businesses are engaging with ever more third parties, spanning multiple use cases and integrations, and both regulators (and the market as a whole) expect increasing degrees of understanding and accountability, missing or misevaluating risks is increasingly indefensible.
Aravo’s Intelligence First and Evaluate Engine are specially designed to reduce the likelihood of such risks making a negative impact on the business. As expectations continue to mount, claims of ignorance or resource shortages are less likely to be acceptable responses. It’s time your business tackles hidden risks competently, confidently, and defensibly.
Contact Aravo to learn more about the newly enhanced Aravo Evaluate engine. Let us help you best manage your third-party risks and eliminate hidden and misunderstood risks from your supply chain.
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