Risk Management
Why Third-Party Risk Management Is More Than Just A Checklist
By Reuben Kisigwa
If your company relies on vendors, suppliers, or partners, you’ re already sharing sensitive information beyond your own walls. That’ s the reality of doing business today. But along with all the benefits these third parties bring- efficiency, expertise, new capabilities- they also come with risks that can’ t be ignored.
A data breach or disruption caused by one of your vendors doesn’ t just affect that vendor. It impacts your customers, your revenue, your reputation, and could even land you in trouble with regulatory bodies. It’ s a domino effect that can quickly spiral into something costly and damaging.
Managing this risk isn’ t as simple as running a quick background check once when you bring a vendor on board and calling it a day. Experience shows that risk evolves throughout your entire relationship with a vendor- from the moment you consider them as a supplier to the day you part ways and everything comes to a close.
You have to keep an eye on things all along the way. That means carefully choosing vendors who meet your minimum risk requirements, continually monitoring their performance and any changes that might affect your risk exposure, and making sure you properly offboard them when the time comes to go separate ways.
Trying to do all this manually? That quickly becomes overwhelming, slow, and prone to errors- especially if you’ re working with dozens or hundreds of vendors. So, the smart move is to automate as much as possible. That way, you can get reliable insights faster and focus your energy where it really matters: making decisions that protect your business.
Different Levels of Managing Third- Party Risk
Not every company approaches thirdparty risk in the same way. Some barely think about it until there’ s a problem, while others treat it like a strategic business priority. If you had to put companies on
If your company relies on vendors, suppliers, or partners, you’ re already sharing sensitive information beyond your own walls. That’ s the reality of doing business today. But along with all the benefits these third parties bring- efficiency, expertise, new capabilities- they also come with risks that can’ t be ignored.
a spectrum, you’ d find five broad stages of maturity when it comes to managing vendor risk.
At the lowest level, companies don’ t really have a formal risk management program in place. They tend to handle vendor issues only when something goes wrong. Their processes are unstructured, inconsistent, and mainly reactive. They might send out basic questionnaires or emails to vendors but don’ t really have a system to track or analyze the answers. This approach isn’ t reliable or repeatable, and it leaves companies vulnerable.
A step up is when organizations begin to create some standardized processes. Maybe certain departments have their own checklists or risk assessments, but it’ s not coordinated across the company. Because each team does things their own way, you end up with silos that slow things down and create gaps. This inconsistency can mean some vendors are barely checked while others get scrutinized unnecessarily.
Moving further up, companies get more serious. They start to break down those silos and bring risk management activities together in a more consistent way. They standardize how vendors are tiered by risk and begin to integrate their processes with contract management and vendor offboarding. They use some automation to speed up parts of the workflow, like onboarding questionnaires, but many parts still rely on manual effort. This lets them scale their efforts somewhat but leaves room for improvement.
At a more advanced stage, companies
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