What are critical third parties?

Critical third parties are those that perform or support essential activities for an organization. While many third parties are utilized to grow a business or expand its reach, a critical third party is one that specifically:

• Can significantly risk an organization if the third party does not meet expectations
• Has impacts on customers
• Has a significant impact on the organization’s operations
• Requires that significant resources are invested to utilize the third party and manage its risk

Learn more about Critical Third-Party resilience: (link to subpage with full info)

Why is proper risk management needed for my critical third parties?

Critical third parties are often necessary to the business model of an organization, but can pose great risk if not managed properly. There are several types of risks that critical third parties can pose, including:

• Financial and Reputational: These risks arise when a third party’s performance has a negative effect on the reputation or financial success of the entity engaged with them. Examples of these risks include non-compliance with terms, tariffs, bribery and corruption, and more.
• Operational and Supply Chain: These types of risks disrupt the operations of the entity through actions such as data breaches, failures in the supply chain, irresponsible sourcing, and more.
• Regulatory and Compliance: These risks have an affect on the entity’s compliance with regulatory standards and legislation and can arise from actions such as fraud, breaches with contracts, violation of labor standards, failure to comply with data privacy laws and other factors.

Regulatory bodies, such as the OCC, expect companies to manage the complete lifecycle of their third-party risks, as well as to implement continuous monitoring.  This means organizations should conduct pre-contract risk assessments on critical third parties, as well ongoing monitoring and due-diligence, once the third party has been onboarded.

Despite this increased oversight, however, a survey conducted by Thomson Reuters found that global companies are only conducting due diligence on 62% of their distributors, suppliers and third-party relationships. Of those, only 36% are fully monitoring ongoing risks, and 61% do not know the extent to which third parties are outsourcing their work to Nth parties.

How can Aravo help me manage my critical third parties?

Aravo for Third-Party Risk Management (TPRM) helps organizations maintain a single inventory of all third-party relationships, their firmographic data, and their risk profiles. With ever-evolving risks that critical third-parties can create, the need for automation is more important than ever. Aravo helps organizations automate every stage of their TPRM program, including:

• Initial requests and intakes of a new vendor
• Automation of inherent risk assessments
• Facilitation and documentation of risk expert reviews of completed assessments
• Enhanced due-diligence matched to the party’s inherent risk
• Streamlined onboarding across functions with Transactional Enablement
• Management of the complete life cycle of the third-party relationship, including ongoing monitoring, performance management, issue management and remediation and termination and offboarding.

What are the benefits to choosing Aravo for TPRM?

With Aravo, you can manage end-to-end solutions for your critical third-party management, while knowing that due-diligence and continuous monitoring are in place to build resilience against operational, financial and compliance risks. Benefits to Aravo’s TPRM solutions include:

Standardization: Achieve a single version of truth by implementing centralized processes for management of all of your third parties. This helps to break down data and business silos, ensuring that users have a holistic, detailed view of all activities.

Efficiency and Cost Reduction: Operational burdens are reduced with automated processes which save time and resources.

Confidence: Aravo’s real-time reporting, role-based dashboards and complete auditability ensure compliance to management, board and auditors.

Continuous Improvement: Robust data management and business process workflows deliver visibility and adherence to policies, which help to continuously improve decision making.

Share with Your Friends: