Reputational Risk Management in Third-Party Relationships

Manage Reputational Risks Through Contracts

Organizations expect ethical conduct from their third parties because they can be held accountable for brand damage and regulatory violations caused by those third parties. Contracts should clearly outline these expectations to ensure accountability for negative impacts. Understand relevant regulatory compliance requirements for your industry and address them in your contracts.

Contracts with third parties are critical tools for mitigating reputational risk. Consider including the following provisions:

• Ensure that Master Services Agreements (MSAs) address operational risks adequately.
• Include key clauses such as breach notification, right-to-audit, and remediation commitments.
• Extend contractual obligations to subcontractors to ensure accountability at all levels.
• Add green provisions to address ESG compliance.
• Establish termination rules in the event of reputational damage.

These provisions ensure accountability and mitigate risks arising from unethical or negligent third-party behavior. Streamline this process with automated contract lifecycle management tools.

Risk-Aware Onboarding Practices

When onboarding third parties, consider whether your organization needs another vendor for a specific service or if existing ones can meet the need. Duplication of services increases risk, including reputational risk. During onboarding, always ask for recent independent risk assessments from potential vendors. Reviewing these reports can help expedite the due diligence process and avoid repeating assessments unnecessarily.

Onboarding is a key opportunity to evaluate and mitigate reputational risks associated with third parties. Minimize risks with a structured approach:

• Start with independent risk assessments conducted in the past 12 months.
• Assess data access, critical services, and subcontractor roles.
• Use continuous monitoring tools to validate information and identify new risks over time.
• Revisit relationships annually to assess changes that could introduce risks, such as new subcontractors or increased data sharing.

Continuous Monitoring For Proactive Risk Mitigation

Continuous monitoring is crucial for effective third-party risk management. It allows you to respond quickly to new and emerging risks that may impact your organization. Understanding multi-tier relationships and monitoring all types of operational risks is vital.

Reputational risks evolve rapidly. Implement tools to monitor adverse media, financial intelligence, regulatory changes, and operational updates. Multi-tiered, multi-factor continuous monitoring provides actionable insights into vulnerabilities across your supply chain.

Event Triggers May Increase Reputational Risk

Certain events can significantly increase reputational risks. Data breaches, mergers, acquisitions, regulatory changes, and service migration or expansion are all examples. Properly monitoring these changes and evaluating their potential reputational impact is essential.

Effective Incident Response Can Reduce Reputational Risks

Quickly assessing whether an incident impacts an organization's reputation, operational resilience, critical service availability, or the confidentiality and integrity of assets is crucial. Efficient incident management minimizes disruptions and mitigates reputational damage, securing the organization’s long-term credibility. Document and regularly test incident response protocols.

• Establish clear communication protocols, roles, and responsibilities.
• Conduct periodic tabletop exercises involving critical third parties.
• Ensure fast, transparent communication with stakeholders, including customers, suppliers, leadership, and regulators.

When incidents occur, time is of the essence. You need predefined procedures and updated contact information to respond effectively and minimize reputational damage. An incident management plan can help manage incidents effectively and reduce the risk of snowballing into more significant issues.

Safeguard Your Brand and Operations from Vendor Reputational Risks

Reputational risk management isn't just about preventing negative press; it's about fostering trust, ensuring operational resilience, and aligning with organizational values. You can safeguard your brand and operations by embedding these strategies into your third-party risk management lifecycle.

Next Steps: Streamline Reputational Risk Management With A Unified Solution

Assessing and monitoring reputational risk can’t be done using spreadsheets or scanning dozens of disparate intelligence sources. Instead, organizations should look for solutions that normalize, correlate, and analyze information from multiple sources to enable actionable reporting and remediation.

The Prevalent Third-Party Risk Management solution continuously monitors public and private sources of reputational, sanctions, and financial information, delivering the insights and reporting needed to avoid potential disruptions. With Prevalent, you can unify reputational risk management activities with broader cyber and business risk initiatives across every stage of the vendor lifecycle, including:

• Add risk intelligence insights to third-party sourcing and selection decisions, consolidating disparate cyber, operational, reputational, ESG, and financial data feeds.
• Manage all vendors in a single platform that unifies vendor profiles, intake processes, and onboarding and offboarding workflows.
• Gauge vendor inherent risk, enabling your team to tier and categorize all vendors according to the risk they pose to the organization.
• Assess vendors using any one of more than 750 risk assessment questionnaire templates. These templates feature workflow, built-in remediation guidance, and regulatory-specific reporting.
• Continuously monitor vendor cyber, operational, reputational, ESG, and financial risk, centralizing insights assessment results and filling gaps between regular risk assessments.
• Measure vendor performance against contractual obligations, simplifying the process of establishing and enforcing key performance indicators (KPIs) and key risk indicators (KRIs).
• Offboard vendors using a prescriptive process and checklist to ensure data destruction, compliance with all relevant laws, final payments, and more.

For more on how Prevalent can help you simplify your third-party risk management program, request a demo today.