Monday 30th August 2021
BLOG: Why is a Third-Party Risk Management Budget Important?
A great way for organisations to deal with the expanding cyber threat landscape is to have a third-party risk management budget. Our recent third-party risk report found that 44% of organisations budgets stayed the same with increasing regulation but also increased financial pressure on business, a newfound understanding of third-party risk may be encouraging organisations to increase their budgets as we found that 33% of organisations increased their budgets. A worrying figure we found was that 22% of organisations had decreased their third-party risk budgets, but perhaps unsurprising given the landscape for the past year, to read more about our third-party risk findings, click here.
There are numerous laws in place to manage and alleviate any cyber threats and vulnerabilities. Organisations must make it a priority to understand these regulations to avoid challenges and obstacles. Many organisations fall within a regulated industry and need to follow the standards and procedures, to follow these standards and procedures a third-party risk budget guarantees that the appropriate number of resources will be allocated in the right areas. Organisations without a sufficient third-party risk budget allocated to their vendors could put their sensitive data at risk.
Third-party risk management budgets provide organisations with key preparation procedures. A widespread third-party risk management program, including disaster recovery or business continuity plans, can help an organisation foresee problems when they arise and be more responsive to them. Organisations should opt to receive disaster recovery or business continuity plans, a business continuity plan focuses on defining how business operations should function under non-standard and atypical circumstances during a disaster or emergency, a disaster recovery plan focuses on getting applications and systems back to normal.
Third-party risk budgets allow organisations to allocate the funds towards the areas of business and good partners who will support the organisations’ objectives. By identifying expense risk and comparing vendors in an effective selection process, organisations will be able to lower costs. Risk management helps identify and consolidate, or eliminate, duplicate use of vendors by different lines of business. A sound budget means stronger operational control, and ultimately, better customer satisfaction. Monitoring service levels through vendor oversight better ensure your organization and customer needs are being met.
Reputational risk is a consequence of not having a third-party risk budget. Organisations not investing in third-party risk management can result in the loss of their reputation due to vendor issues, but unfortunately, the organisation will bear the brunt because due to a lack of suitable and sufficient third-party risk management on vendors. Customers that feel they have been inconvenienced by an interruption are likely to prefer the services of an organisation’s competitors. Furthermore, organisations may be obliged to provide compensation for certain instances to customers which may improve reputation and customer feedback, however, the financial impacts of this can be huge. Loss of sales and customers as well as expenses on compensation could lead to organisational failure, the longevity of an organisation could be an irreparable consequence.
Third-party risk management can be an intricate and costly process, but it is essential to the wellbeing of organisations worldwide. Contact us to understand how Orpheus Cyber can protect your organisation.
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