5 Best Practices for Third-Party Risk Management

Blog 5 MINS November 4, 2020
5 Best Practices for Third-Party Risk Management

Over the course of the past few months, we’ve explored third-party risk management best practices to help your organization streamline operations. As this series comes to an end, we want to review key details from each best practice to give your team the information necessary to improve your third-party risk management program.

1. Monitoring Third-Party Cybersecurity Risk

Oftentimes, businesses experience data breaches as a result of the poor cybersecurity practices of their third-party vendors. As a result, organizations must maintain a watchful eye on all third parties over the course of an engagement. And while there’s not a “one-size-fits-all” approach to cybersecurity monitoring, here are a few ways you can begin the monitoring process.

First, build a ‘who, what, when, where, why’ plan with your end goals in mind. This entails:

1) Outlining the categories of vendors that require coverage, or more frequent coverage
2) Determining if you need separate processes per vendor type
3) Establishing how frequently information needs to be updated
4) Identifying where you want to streamline steps
5) Deciding whether your defined metrics capture and assess reasons behind changes

Next, build an action plan. This entails:

1) Creating a third-party risk support team (if one does not already exist)
2) Establishing key metrics for risk data quality, analyst productivity, remediation effectiveness, and third-party feedback
3) Partnering with a third-party risk management technology provider for ongoing monitoring
4) Applying your findings and documenting your data into your vendor engagement model
5) Planning ahead to prioritize which vendors to engage in the next phase of your ongoing monitoring program

After taking these steps, you’ll have an adequate understanding of how to establish continuous monitoring efforts and gain a centralized view of ongoing third-party risks.

Read the blog: A Practitioner’s Guide to Monitoring Third-Party Cyber Risks

2. Reducing the Cybersecurity Risks for Vendors and Third Parties

We’ve already reviewed how to monitor third-party cybersecurity risks, but how do we reduce cybersecurity risk for an organization before it becomes an issue? Here’s 10 ways:

1) Train employees across departments and authority levels, both internally and externally
2) Create a breach response plan in advance and ensure it is distributed across stakeholders on a regular basis in the event of an employment change
3) Build a vendor-focused framework that outlines the regulations that must be followed
4) Leverage a third-party risk exchange to have access to a community of shared (and pre-completed) vendor risk assessments
5) Ensure your third-party contracts include clauses that specify data protection expectations for your vendors
6) Distribute vendor risk assessments to identify potential third-party risk weaknesses
7) Ensure compliance with common regulations across all areas of the business, especially high vulnerability areas like HR
8) Consistently update and improve cybersecurity based on specific areas of concern that are critical for success
9) Onboard technology with role-based access controls to limit access to certain information, thus making it harder for bad actors to gain access
10) Purchase a cybersecurity insurance policy to protect your organization from the fallout of cyber threats

Read the blog: 10 Ways to Reduce the Cybersecurity Risks for Your Vendors and Third Parties

3. Identifying and Mitigating Third-Party Privacy Risks

The evolving landscape of third-party risk operations, the COVID-19 crisis, and the increasing amount of data protection regulations continue to increase your privacy risk exposure. The solution lies in having a process that allows your company to identify privacy risk faster, as well as set up an ongoing process that mitigates it moving forward.

There are seven key areas you must be on the lookout for when working with third parties:

1) Strategic risk
2) Reputational risk
3) Operational risk
4) Transaction risk
5) Credit risk
6) Compliance risk
7) Privacy risk

The fact of the matter isn’t whether your organization should take third-party privacy risks seriously. Instead, it’s how you should go about mitigating existing privacy risks to avoid loss and reputational damage.

Read the blog: Managing Third Parties: Identifying and Mitigating Privacy Risks

4. Identifying and Mitigating Anti-Bribery and Corruption Risks

How are you supposed to know what your third-party vendors are up to? What if they’re posing a bribery or corruption risk for your business? Here are some ways to avoid such damages:

1. Establish a culture of governance and commitment to integrity
2. Develop an integrated approach for managing third parties
3. Build a trustworthy relationship with your third parties
4. Know who all your third parties are
5. Use risk assessment processes for addressing third-party risk
6. Develop a selective approach when engaging third parties
7. Carry out an appropriate level of pre-engagement due diligence on third parties and repeat them periodically
8. Use customized training and communications
9. Put in place rigorous monitoring procedures to detect bribery incidents and breaches of the anti-bribery program
10. Review your third-party anti-bribery and corruption program periodically

Senior management should review each of these to add suggestions and improvements when necessary.

Read the blog: Managing Third Parties: Identifying and Mitigating Anti-Bribery and Corruption Risks

5. Managing Third Parties: Improving Business Resilience

The health crisis has clearly uncovered supply chain vulnerabilities and drastically shifted the way businesses operate. As a result, businesses are working to adapt and improve their business resilience and continuity. Here are steps your business can take to identify and resolve any business resilience issues before they happen:

1. Conduct business impact assessments (BIAs) on vendors before onboarding
2. Distribute short questionnaires in the wake of an unexpected occurrence (g., health crisis, natural disaster, geopolitical conflict)
3. Ensure business resilience stipulations are included in the vendor contract
4. Determine concentration risks
5. Report on business resilience

Read the blog: Managing Third Parties: Improving Business Resilience

The reality is, third-party risk management is no small feat. So, as you think about third-party risk management, consider Vendorpedia. The Vendorpedia™ Third-Party Risk Exchange offers intelligence and automation to solve all of these challenges and provides value throughout the vendor relationship, from faster onboarding, real-time monitoring, and unprecedented vendor visibility.

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