The risk surrounding third-party is continuing to grow, and is causing more and more firms to explore the potential for third-party risk management.
In a recent post by Diligent, the company outlined how businesses can best deal with third-party risk management and the automation that may help it.
The company said, “As the business landscape grows more complex and competitive, companies seek to outsource many non-core elements. But this complex landscape brings increasing risk — and the prevalence of third-party outsourcing, digitalization and complex supply chains only exacerbates the threats.”
Against such a background, the drive to automate third-party risk management becomes increasingly pressing.
Diligent highlighted that third-party vulnerabilities include issues like supply chain challenges, potential exposure to human rights abuses and risk of association with poor ESG practices.
A third-party risk assessment, meanwhile, is the term given to the due diligence companies do to assess the risk a third-party may pose to an organisation.
Diligent highlighted, “But complex supply chains can make clear visibility across your value chain difficult and third-party risk assessments challenging. The number of suppliers most companies have (some global organizations work with hundreds of thousands) makes the work needed to continually assess third-party risk almost impossible to realize.
“Increasing numbers of businesses are looking at third-party risk assessment automation to make risk management simpler, faster and more effective.”
Why do these risk assessments need to be automated? According to Diligent, there are a number of key reasons.
“First of all, it makes the workload manageable. Third-party risk automation frees teams’ time from manual due diligence, enabling them to focus on preventing threats, not reacting to them.As a result, it’s easier for your team to focus on the more strategic elements of risk, identifying and concentrating on the most pressing priorities.
“It also creates a more efficient vendor onboarding process. Onboarding checks are an essential step in the third-party risk management lifecycle. If you automate third-party risk management, you remove the wait for manual due diligence checks.
“Third-party risk management overall is also far faster. Identifying and prioritizing risks is one of the biggest challenges facing risk managers; software can significantly speed this up.
“Your third-party risk assessment is more objective, data-driven and rigorous as you remove subjectivity and the potential for human error.”
Diligent highlighted that fast and accurate risk identification and assessment also means less downtime, saving money for a company.
“Automating third-party risk gives you a quick snapshot of your whole supply chain. Fourth parties are firmly in scope when regulators are developing new supply chain risk management regulations — you need visibility of your entire supply chain,” said Diligent.
What steps should a firm take to automate this risk? For this, Diligent suggests setting out requirements, identifying potential risk management tools, creating a shortlist of the best solutions, explore each more deeply and streamline your shortlist and choose the best solution to automate risk.
Read the full post here.
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