Here’s How to Choose Third-Party Risk Management Software
When you form vendor relationships with third-party vendors, you assume a certain amount of risk — after all, each one of these relationships opens up more pathways for regulatory violations, reputational risk, or cyber security attacks. Forty-four percent of firms have experienced a data breach caused by a vendor, for example — and only 15 percent of vendors notify the firms they work with when they suffer a breach.
So it’s largely on your company to make sure that vendors are remaining in compliance with regulations, maintaining strong cyber security practices, and even conducting themselves in ways that mesh with your company mission. If the public finds out that one of your vendors uses forced labor, for example, your reputation could never recover. If one of your vendors falls out of regulatory compliance, your company could be on the hook for the fines, even if the vendor is located outside of the U.S.
You’ll need third-party risk management software to help you keep track of all your vendors and their risk level, especially if you intend to grow your company and acquire a lengthy list of vendors. You should look for a software solution that streamlines vendor compliance reporting, email contacting and logging, assessment, and reporting. Here’s what to look for.
Scalability is one of the most important things you can look for when you invest in third-party risk management. As your business grows and evolves, you’ll probably need to add more vendors. Your organization might change focus, requiring you to scale down or reach out to a different kind of third-party supplier. The software solution you choose should have the flexibility to accommodate these changes.
The ability to automate much of what previously made vendor relationship management grueling and prone to errors is a big part of what makes third-party risk management software so appealing to many organizations. Managing vendor risk the old-fashioned way involves a lot of man hours emailing vendors and logging those communications for compliance purposes, reaching out to vendors for compliance checks, and collecting vendor compliance reports.
Doing all of this the old-fashioned way not only takes employees a lot of time and effort that’s ultimately much more expensive than a software tool, but also opens up your organization to regulatory, reputational, and security risks. Many risk management processes can be easily automated by risk-management software, so that your team can focus on important tasks that require a human touch, such as reading and interpreting reports and crafting solutions that can help eliminate risk factors from your vendor relationships.
Vendor self-reporting allows the third-party vendors you work with to conduct their own compliance reports, without the need for one of your employees to reach out, ask the relevant questions, and collect the answers. It might seem on the surface that asking an employee to do this work wouldn’t take too much time away from their other duties, and that might be the case if you’re only working with a few vendors.
But as your company grows and you work with more and more vendors, the ability to allow vendors to self-report is going to become more and more valuable. As you gain more vendors, your employees will need more time to collect these regulatory, reputational, and cyber security reports from vendors. It will quickly become much easier, more cost-effective, and more accurate to allow vendors to self-report through a system that automates prompting when it’s time for vendors to give up their compliance information.
You’ll save all the time and cost of hiring people to chase after your third-party vendors’ regulatory and reputational compliance information, and some data, like cyber security reports, can be uploaded directly into the software by your vendors so that IT can assess it for potential security threats when convenient. It’s all around a much more efficient means of generating compliance reports.
There are many third-party risk management software solutions available on the market these days, and it’s not always easy to decide which one is right for your business. When it comes to choosing the right software, consider your organization’s needs and your plan for the company’s future, and purchase a software solution that can grow with you.
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