Fourth-Party Vendors: Managing Risk Throughout the Extended Supply Chain

Mapping Fourth-Party Relationships

Because you don't directly interact with fourth parties, it is vital to have a sound strategy for identifying them during the procurement and due diligence process. If you're going through a competitive bidding procedure with prospective third parties, your proposal request (RFP) should include a question concerning fourth parties. Once you've narrowed it down to a finalist, you must ask additional questions during the vendor onboarding phase. Besides identifying the fourth parties your vendor will use, you should ask the following questions regarding each fourth party:

• Will they deal directly with your clients, customers, members, or employees?
• What kind of due diligence have you done on them in the previous 12 months?
• Were there any noteworthy discoveries, and if so, what were they, and how were they addressed?
• Do you have a contract with them right now?
• What kind of client information do they have access to?
• Will any of the vendor services be performed in another country?
• Do you require information security certifications for third parties?

Taking Control with a Vendor Risk Management Platform

Your head may spin a bit as you consider the broader scope of your supply chain, start identifying fourth and Nth-party vendors, and understand the risk they potentially bring to your business. That's why companies with large vendor ecosystems and deep supply chains usually implement a centralized vendor risk management platform to deliver more visibility and control over their vendor populations.

A vendor risk management platform can be a central repository for your third-, fourth- and Nth-party data. While these platforms are known as third-party risk management (TPRM) solutions, many offer robust capabilities for managing and reducing fourth- and Nth-party risk. The process starts with bringing your third parties under management and then leveraging the solution to extend your visibility to the fourth, fifth, and Nth levels. To start, you can leverage sources of vendor intelligence to build a comprehensive supplier profile that includes industry and business insights and ownership and identifies 4th-party relationships.

During third-party onboarding and periodically after that, you can leverage a vendor (or third-party) risk management solution to automate questionnaire-based risk assessments designed to gather information about each third party's vendor relationships. Prevalent's solution also includes relationship mapping capabilities that enable you to identify connections between your organization and third, fourth, and Nth parties to discover dependencies and risks in your extended vendor ecosystem.

Once you gain visibility into fourth and Nth parties that impact your business, you can use continuous vendor monitoring to monitor critical vendors. Continuous monitoring of private and public sources of vendor threat intelligence can provide early warning of cyber, business, and financial events and exposures that could ultimately affect your operations. All assessment and monitoring content should be correlated and mapped to the vendor profiles in your VRM solution.

You can bring additional scale to your third, fourth, and Nth-party risk management by tapping into vendor intelligence networks containing completed assessments, monitoring data, and standardized risk scores on thousands of vendors. Organizations with limited internal resources should also consider leveraging managed vendor risk assessment services to scale their vendor data collection, analysis, and remediation initiatives.

Finally, since effective vendor risk management relies on collaboration between IT security, procurement, risk management, legal, and other stakeholders, be sure that your VRM platform provides role-based access, workflow management, and task management capabilities.

A Programmatic Approach to Fourth-Party Risk Management

A successful fourth-party risk management program is not a one-and-done project but an integral aspect of your vendor management strategy. Fourth-party risk should be identified as a risk category to manage in your vendor management policy, and fourth-party evaluations and monitoring should be built into your standard operating procedures. Vendor risk management should be a continuous, programmatic process that accounts for risk at all levels of the supply chain.

Prevalent can help you build a holistic risk management program with unmatched visibility, efficiency, and scale, regardless of where you are today. We’ll work with you to find a mix of managed services, network membership, and/or TPRM platform access that works best for your organization. You’ll gain a fast time to value, be equipped to make intelligence-driven decisions, and measurably reduce vendor-related risk – all with fewer headaches for you and your team.

Next Steps for Managing Your Fourth-Party Risk

With recent breaches and supply chain disruptions, understanding downstream risk is more critical than ever. Businesses often disregard fourth-party risk management because they assume their third parties apply the same due diligence to their third parties. Whether you employ an internal team, leverage a vendor risk management platform, or use managed services, you must evaluate all fourth parties that impact your business.

Find out how Prevalent can help you identify and mitigate fourth and Nth-party risk in your supply chain. Request a demo today.