The Risk of Third-Party Engagements
As organizations flourish in today’s fast-paced business environment, it makes good sense to turn over specialized tasks to businesses that do it best via third-party engagements. These third-party arrangements give businesses the chance to focus on achieving core strategic objectives while keeping up with non-core—but still extremely important to operations—tasks related to administration, accounting, IT services and more.
While third-party engagements offer organizations many practical benefits, they do not come without a certain degree of risk.
If you are considering outsourcing one or more business tasks, it is important to develop and implement the appropriate third-party controls and monitoring strategies to ensure that third-party businesses are performing effectively, efficiently and in compliance with your respective agreements.
A solid third-party risk management plan can help.
What Is Third-Party Risk Management?
Today, it would be difficult to find an organization that does not rely on third-party business services in some capacity.
Are you considering outsourcing one or more tasks? Do you understand the risks that a third-party business might introduce to your organization?
Take the manufacturing industry, for example. Per a 2012 survey of U.S. manufacturers, courtesy of Industry Week, 75% of respondents reported that they experienced some sort of harm due to the action or inaction of a third-party business associate, resulting in poor security practices and ultimately leading to issues like data breaches and poor service quality for the engaging company.
Third-party risk management is essential to these vital relationships and should be a part of every company’s internal controls framework.
The Best Third-Party Risk Management Plans Include
- Creating and maintaining an inventory of third parties that includes the functions they perform, as well as the critical and/or confidential information they regularly access.
- Assessing the risks of using third parties for a certain task in its respective industry.
- Performing due diligence before engaging third parties.
- Drafting contracts that clearly define the responsibilities and expectations of the third-party.
- Developing and implementing a process for monitoring performance and ongoing risk management of third parties.
- Ongoing commitment to your third-party risk management plan, from the point of onboarding and throughout the life of the engagement until it is time to consider an exit strategy.
- Scheduling third-party risk assessments on a regular basis.
Why Is Third-Party Risk Management Important?
Outsourcing a business function or task to a third-party is largely incredibly useful to the growth and success of an organization. However, you can’t outsource the necessary responsibility from third parties that will allow your business to run smoothly. If your third-party associate fails to perform a critical task or allows for a breach of confidential data, serious negative consequences may impact your organization.
Additionally, in heavily regulated industries—banking, payment card, healthcare, mortgage and auto lending, as a few examples—third-party risk management is often required, or at least strongly encouraged.
Third-party Risk Management is an important part of any recognized security framework, such as the National Institute of Standards and Technology (NIST), International Organization for Standardization (ISO) and Payment Card Industry (PCI).
Third-party risk management promises to reasonably ensure a third-party organization’s duty of accountability and to greatly increase your peace of mind.
How We Can Help with Your Third-Party Risk Management Needs
I.S. Partners, LLC. can help with your organization’s third-party risk management needs in a variety of ways, including:
- Assisting you in developing a third-party risk management function, specifically tailored to your organization.
- Monitoring and assessment of third-party’s risk profile and any potential areas of vulnerability.
- Augmenting your organization’s current third-party management function by performing third-party risk assessments, following your vendor evaluation framework.
- Performing onsite third-party risk assessments, as required by your current process.
- Preparing and performing your third-party risk management process.
Make sure you are in peak position to reap all the benefits of third-party outsourcing engagements without worry. Call us today at (215) 675-1400 to ask any questions you may have regarding your third-party risk management needs, or you can simply request a quote.