Top Risks in Third Party Management
When you observe a business ecosystem, it’s important to note that it’s dynamic and constantly changing as it interacts with outside elements, such as a third party. These vary from distributors, vendors, suppliers, agencies, etcetera. If your business is going to flourish, you have to accept that third party risk is a necessary evil, but that doesn’t mean you can’t be prepared.
Why Third Party Management is Needed
Third party risks to business organizations are on the rise due to a changing legal climate and increased activism from a socially aware global consumer-base. With unrestricted access to media platforms, it doesn’t take too long for damaging information to make its way onto the internet where countless others can see your mishaps. One mistake can have a lasting impact on your brand in the eyes of customers. Even long after the event has passed, you will both actively and subconsciously be compared to your competitors as potential customers decide who is the best provider for their needs.
Earlier this year Saks Fifth Avenue and Lord Taylor experienced a breach through their point of sale system, resulting in 5,000,000 exposed records! The reputational impact was significant, and many will continue to associate insufficient security with the brands.
Understanding what potential damages could affect you and what risks to look out for is paramount to prevent any accidents. Check out the following risks to see what you should avoid.
1. Not Researching New Relationships
Okay, this is an easy one. Research a third party before you do business with them. Try and put in a little more effort than looking at their stars on a Google search. You can immediately eliminate a majority of your potential risk right at the beginning of a relationship. First, look at the scope of their potential risk. Next, perform due diligence risk assessments to determine problem areas. Set up a conversation and establish a date that the third party will have to have these issues addressed by, whether that is before you actually start doing business or a reasonable time afterwards. Based on their risk profile, you can determine the frequency of assessments.
2. Neglecting ongoing risk monitoring
Now that you assessed your third-party’s risk… keep doing it! Too often companies think the initial assessment is enough. Without regularly monitoring your third party, new risks can occur and quickly cause a catastrophe. Imagine a new manager was recently hired at a third party and, although mostly compliant, she never locks her computer that has access to your private data. Worse, her employees now see this and not wanting to waste the time to log in and out, don’t lock their computers. Now you have a whole facility with unprotected access to data that you’re responsible for. Yikes! A fundamental component of third party management is to make sure you are continuously looking for red flags and monitoring risk score.
3. Not customizing your process
Yes, many risks will be covered with industry standards and compliance can be checked with off-the-shelf standards, but your business is always going to be unique in some respects. Some unique risks include Monster, who has to be aware of government regulations that limits caffeine content in beverages. Check out a list of unique company risks from Business Insider. Customers have even required risk assessment criteria for their on-site pets. Does Flapjack have a doggy door to the outside? You’ll need to make sure it’s secure. Take note of what unique risks exist with your third party relationship.
4. Using a manual system
Just like with television and cellphones, there have been those of us that grumble at evolving technology. We’ve heard it all from “I’ve done it this way for 30 years,” to “Manual reports work just fine for us.” Accept that technology is here to help. When assessing third parties, you really can’t afford to waste the time performing a manual process of emails and spreadsheets. Not to mention the human error that inevitably comes with a manual process. Many companies insist on using Excel, but research shows up to 90% of spreadsheets contain result-altering errors. Third party management is a lengthy and difficult process without the right tools; a single error in an assessment can result in huge legal fees down the road when you end up ignoring a problem you didn’t know existed.
Solution for Third Party Management
SecureWatch offers a proactive approach to understanding your security threats with third parties. Our platform calculates threat, vulnerability, and risk level and even offers recommendations. You’ll be given a cost/benefit analysis and shown residual risk level if the recommended mitigations are applied. Isn’t technology great? You can even complete your assessments in about 70% less time, all while keeping your data organized in a central location and creating automated reports with the click of a button.
No matter what method you use, know that third party risk is nothing to take lightly. Stay on top of assessments and your business should be fine. As always, let us know if you have any questions.