The risk surrounding third-party is continuing to grow, and is causing more and more firms to explore the potential for third-party risk management.
In a recent post by Diligent, the company outlined how businesses can best deal with third-party risk management and the automation that may help it.
The company said, “As the business landscape grows more complex and competitive, companies seek to outsource many non-core elements. But this complex landscape brings increasing risk — and the prevalence of third-party outsourcing, digitalization and complex supply chains only exacerbates the threats.”
Against such a background, the drive to automate third-party risk management becomes increasingly pressing.
Diligent highlighted that third-party vulnerabilities include issues like supply chain challenges, potential exposure to human rights abuses and risk of association with poor ESG practices.
A third-party risk assessment, meanwhile, is the term given to the due diligence companies do to assess the risk a third-party may pose to an organisation.
Diligent highlighted, “But complex supply chains can make clear visibility across your value chain difficult and third-party risk assessments challenging. The number of suppliers most companies have (some global organizations work with hundreds of thousands) makes the work needed to continually assess third-party risk almost impossible to realize.
“Increasing numbers of businesses are looking at third-party risk assessment automation to make risk management simpler, faster and more effective.”
Why do these risk assessments need to be automated? According to Diligent, there are a number of key reasons.
“First of all, it makes the workload manageable. Third-party risk automation frees teams’ time from manual due diligence, enabling them to focus on preventing threats, not reacting to them.As a result, it’s easier for your team to focus on the more strategic elements of risk, identifying and concentrating on the most pressing priorities.
“It also creates a more efficient vendor onboarding process. Onboarding checks are an essential step in the third-party risk management lifecycle. If you automate third-party risk management, you remove the wait for manual due diligence checks.
“Third-party risk management overall is also far faster. Identifying and prioritizing risks is one of the biggest challenges facing risk managers; software can significantly speed this up.
“Your third-party risk assessment is more objective, data-driven and rigorous as you remove subjectivity and the potential for human error.”
Diligent highlighted that fast and accurate risk identification and assessment also means less downtime, saving money for a company.
“Automating third-party risk gives you a quick snapshot of your whole supply chain. Fourth parties are firmly in scope when regulators are developing new supply chain risk management regulations — you need visibility of your entire supply chain,” said Diligent.
What steps should a firm take to automate this risk? For this, Diligent suggests setting out requirements, identifying potential risk management tools, creating a shortlist of the best solutions, explore each more deeply and streamline your shortlist and choose the best solution to automate risk.
Last year, Diligent partnered with capital markets communications platform Q4 to provide pre-IPO and public companies with IR and board governance solutions.
Read the full post here.
