Third-Party Risk Managed Services: Building a Business Case

Third-party vendors often have access to sensitive data and systems, and any IT security breach or data compromise by (or through) the vendor could result in significant financial, legal, regulatory and reputational damage to a company.

Because of this, companies often prioritize IT vendors in their third-party risk management programs by conducting due diligence assessments, monitoring their security postures, and establishing vendor contractual obligations for security and compliance. This approach has helped companies ensure that their IT vendors were properly vetted and managed to mitigate any potential risks.

However, the scope of risks continues to increase to include non-IT risks that can be just as damaging to a company as IT risks. And the problem is compounded by the persistent use of spreadsheets and other manual methods to assess vendors. Considering that most organizations lack the resources and expertise to address new risk types and handle increasing scale, how can companies keep pace?

This post examines how the need for third-party risk management is changing; presents key justifications for leveraging third-party risk managed services, and shares six steps for outsourcing your TPRM program.

More Third Parties + More Threats + More Regulations = More Resources Required

Organizations face several realities in their third-party risk management programs:

More Third Parties Requires Greater Collaboration Across the Vendor Lifecycle

The COVID-19 pandemic drove many organizations to accelerate their digital transformation efforts, resulting in the need to expand their vendor ecosystems. This, in turn, drove companies to take a more strategic and proactive approach to managing risks throughout the third-party relationship – from onboarding to offboarding. This more disciplined approach requires greater collaboration between business users, procurement teams and IT security professionals to keep pace with expanding vendor populations and third-party risks.

Expanding Regulatory Requirements Increases Accountability

Government regulations and industry standards have placed increased pressure on companies to ensure that their broader supply chains are secure and resilient. For example, the General Data Protection Regulation (GDPR) in Europe requires companies to ensure that their suppliers and partners comply with strict data privacy regulations. In addition, new environmental, social and governance (ESG) laws have been passed to require organizations to demonstrate transparency in their supply chains.

Increasing Cyber Threats Exposes New Attack Surfaces

Cybersecurity threats are becoming more sophisticated, and attackers are targeting third-party vendors as an avenue to access their clients' systems and/or to disrupt supplier operations. Procurement teams need to be aware of these risks and ensure that vendors and suppliers have appropriate security measures in place before, during and after onboarding.

The bottom line is that your organization will be required to assess ever more third parties against an increasingly diverse set of risks.

Justifying Third-Party Risk Managed Services at Your Organization

As the scope of your third-party risk management program grows from assessing the cybersecurity of a few dozen IT vendors to requiring comprehensive and proactive risk analysis and remediation across hundreds (or thousands) of third parties, your organization will likely struggle to keep up.

At first glance, this challenge might appear to force you to decide between ensuring program quality or achieving scale. However, you can have the best of both worlds when you outsource some or all of your third-party risk management functions to a third-party service provider.

With third-party risk managed services, you:

Gain Access to TPRM Experts

Managed services providers have the expertise and experience to effectively manage third-party risks. They can provide a range of services, including onboarding, third-party risk assessments, due diligence, monitoring, reporting, and ongoing vendor management.

Increase TPRM Efficiency

Outsourcing third-party risk management functions can free up internal resources, enabling you to focus on driving value in your core business activities. Managed services providers can supply the technology and automation necessary to streamline processes and reduce the time and effort required to manage your third-party risks.

Mature Your Third-Party Risk Management Program

Managed services providers can provide a more comprehensive and consistent approach to third-party risk management, reducing the risk of gaps and inconsistencies in the TPRM process, and enabling you to integrate with your organization’s broader enterprise risk management efforts.

Reduce Costs and Hedge Against Economic Uncertainty

By using managed services, you can reduce the risks associated with staffing and managing your own TPRM program, while maintaining the flexibility and scalability you need to adapt to changing economic conditions.