Protect Against These Risks when Working with Third-Party Vendors

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Spend Matters welcomes this guest post from Matt Kunkel, the CEO of LogicGate, a provider of risk management solutions.

A recent study revealed more than 60% of organizations in the U.S. that have encountered a data breach were compromised because of a third-party vendor. Organizations use vendors as a means to efficiently complete tasks, but they can create vulnerabilities for which the organization is ultimately responsible. Vendor decisions and operations are frequently out of a chief information security officer’s control, but they still carry serious risks to the organization’s business and reputation.

Inadequate operations

Many organizations still rely on manual operations despite the availability of digital options. Manual operations are slow, inefficient and labor-intensive, forcing managers to keep risk registers updated through spreadsheets. Further, notifications are often managed through email and are easily missed. When managers spend their time overseeing a bulky, manual system, they lose the ability to analyze data comprehensively to mitigate risk. Small and mid-size companies may be able to survive with a manual system, but as a company grows it needs an automated, holistic system capable of scaling with new vendors and suppliers without struggling to keep up with increased data collection, retention and analysis.

Robotic process automation (RPA) assists with third-party risk management, reducing human errors by automating data collection, retention and analysis. Through automation, an organization can more easily scale its third-party risk program, as the best systems can adapt as an organization grows and changes vendor and supplier relationships, whether it brings on new vendors or alters the capabilities of vendors already in the system.

No single source of truth

Data spread across different systems cannot be easily interpreted as a whole and can confuse any one person attempting to understand an organization’s third-party risk landscape. Critical information is not uniformly stored or reported, making it impossible to understand how vendors across multiple data centers impact one another and the organization as a whole. Information needs to be gathered in a single, uniform system so a company can truly understand its risk.

Risk managers need to monitor all risks, threats and assets in a central system, which can act as the single source of truth for the entire organization. With a vendor risk management system, vendor data is housed in one place, easily accessible and free of department- or vendor-specific siloes. Data is clear and verifiable — must-haves when attempting to reduce risks and prevent a crisis.

No risk plan

Organizations need a plan to address present and future risks. To prevent third-party risks from evolving into breaches or other forms of crisis, they need to monitor risks on a regular basis. They should be consistently assessing whether a vendor is delivering worthwhile ROI, as well as investigating all incidents that occur with the vendor as they arise. By tracking relationship and performance data in a centralized system, companies can protect against risks and ensure their vendors consistently provide measurable value.

Outsourcing is often the most efficient way an organization can accomplish its objectives and gain competitive advantage. However, vendors can only be assets when their potential dangers are uncovered and addressed. By properly housing all relevant third-party data so it can be analyzed and acted upon, risk can be monitored and mitigated before it escalates.

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