Thursday 24th February 2022
BLOG: Third-Party Risk Management Lifecycle
Third party risk management has become a key focus for organisations. Organisations are needing to assess all aspects of their third-party risk management lifecycle. The importance of the role that the third party and third-party risk assessments play in maintaining a strong security posture across the organisation is magnified.
The third-party risk management lifecycle is a conventional phrase used to define the stages of risk that organisations need to manage with their third parties throughout the duration of relationship with them. Third parties come with a variety of risks and all these risks need to be assessed and managed, that include reputational, operational, information security, compliance risks and more.
Managing third parties should be a continuous and consistent process. It is a relationship that must be managed throughout the third-party risk management lifecycle. Having a well-established protocol for dealing with third parties is critical and it is important that organisations can respond quickly and accurately. Effective risk management allows you to work with those third parties that provide you organisations with success.
At Orpheus Cyber we find it vital to understand and mitigate risks throughout the third-party risk management lifecycle. Organisations need to identify and understand risks that are naturally inherent in the relationship. Such as critical are the services being proposed by the third party or whether the third-party have access to their sensitive data and the other access and permission that the third-party will have.
Once an organisation has found a third party service they’d like to work alongside, this is where the lifecycle begins. From this stage the aim and objective is to thoroughly detail the relationship’s purpose and include the beginning definition of risk, compliance, and performance needs and concerns so that the best relationship can be properly identified. The screening process will also go through due diligence steps to see if the third-party service vendor is a good fit for the enterprise.
After this stage, the organisation will then move into the onboarding phase. This includes setting up the third-party service provider in your system with master data records, contact and payment information, cybersecurity insurance, and licensing documentation. Further onboarding steps include fully communicating the company’s code of conduct, successfully completing associated training requirements, and conducting inspections and audits.
Organisations need to be clear with their third parties regarding what may happen in the event of a variety of situations. For instance, being clear about remuneration and liability helps relief in the event a vendor does something wrong or fails to perform, and sets the limits around losses incurred as a result of a vendor failure.
Communication is another vital part of the third party management lifecycle. The regular communication and reminders to third parties about code of conduct and related policies and procedures they need to follow.
Forming a solid business relationship with a third-party service provider is vital for a company’s ongoing success. This is one of the reasons as to why continuous risk monitoring is so important to third-party risk management.
Organisations must be conducting continuous risk monitoring the purpose of this is to monitor for external and regulatory threats as well as opportunities that affect the third-party management program. Many circumstances, such as economic, environmental, geopolitical, internal business, and regulations can impact the success of the business relationship.
Many organisations do not have a clear and concise process when dealing with third parties, this is usually down to the want to rush through contracting. This is one of the reasons as to why continuous risk monitoring is so important to third-party risk management lifecycle. Continuous risk monitoring is used to provide ongoing visibility into the risk posture of key third parties primarily through data collected through business intelligence tools.
Continuous monitoring enables you to maintain a current view into risks with your third parties that may come from changes to their credit ratings, new lawsuits, major layoffs or other events that may impact their overall health
The third party risk management lifecycle begins prior to a contract being signed and continues all the way through the conclusion of the relationship. It’s crucial that organisations establish and create the right systems and controls throughout the lifecycle in order to effectively identify and mitigate risks with third parties. To understand how Orpheus Cyber can help mitigate your risks, find out more here.
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