Small to midsize companies are increasingly feeling financial pressure on their operations. According to Harvard Business Review, midsize businesses have consistently seen lower growth in profits and sales over the past 50 years, and between 2010 and 2019, nearly 40% of midsize companies reported a loss.
This leads to frugality among growing businesses, which conflicts with the need for more robust services like third-party risk management (TPRM) programs. Deloitte’s post-COVID analysis identified increased spending in TPRM as one of the key ingredients in recovering during turbulent economic conditions.
It’s not that decision-makers in these companies are reluctant to buy software. It’s that they don’t have the budget for it — at least, not for the solution that will actually help. Instead, they repurpose another platform or buy the cheapest option, even though it doesn’t fit their needs. However, if the software can’t grow with your program, then you’ll end up draining more resources in the long run. It’s far more cost-effective to proactively allocate a controlled budget upfront than pay huge costs when your solution fails.
Small businesses are doing more with less these days, and that’s why TPRM could be the ideal solution. Let’s break it down.
Risks of Not Investing in TPRM Processes
Manual processes are riddled with errors because of the sheer amount of work and resources needed to manage a vendor. Even the most well-meaning teams can miss deadlines and overlook red flags in risk assessments. Sometimes, things fall by the wayside, and the business is gambling with little to no information. Teams can find themselves subjected to repeating or catching processes after their deadlines, needlessly adding to the burden of stressors they already have when working manually.
A spreadsheet-based vendor risk assessment process is too difficult to manage and maintain, and it becomes apparent over time that they become less useful, even with documented processes and procedures in place. It leads to bringing the wrong third-party vendors on board and missing critical opportunities to mitigate risk.
This creates unnecessary risk. The same Deloitte analysis found that over half of businesses that responded (51%) had faced at least one third-party risk incident since the beginning of the pandemic. That’s why it’s imperative to unify the TPRM process on a single platform that can wholly contain and assess all data points and risk vectors.
Consolidating Vendor Assessments
Software is about consistency, efficiency, and effectiveness. TPRM is a labor-intensive process that involves sending questionnaires to vendors for completion. If you’re a small to midsize bank with 70 vendors, for example, a simple annual assessment with 400 questions means your analysts need to review 28,000 answers each year.
That’s a lot of time, labor, and other resources being spent on something that could be automated. ProcessUnity Vendor Risk Management reduces this investment by up to 85% while ensuring consistency throughout the process. Everything from busywork to regulatory reporting is consolidated and automated to deliver a comprehensive analysis.
This includes uniformly assessing vendors based on cybersecurity and financial ratings, along with performing deep due diligence on everything from reputational risk to business sustainability. Not only that, but you’ll get real-time reporting through a sleek, powerful dashboard that monitors the entire process, providing five key benefits:
1. Optimized staffing: With a uniform process on a centralized platform, you can assess more vendors with the same number of people. Spreadsheet-based questionnaires are hard to distribute, which slows down your due diligence process. This is especially true when you’re managing dozens to hundreds of vendors. Everything is manually tracked this way, and it’s easy for things to slip through the cracks. But a unified vendor risk assessment process keeps everything in one place, so you can track the process and make informed risk-based decisions.
2. Consistent processes: The pandemic and subsequent Great Resignation triggered a lot of setbacks as organizations struggled to maintain staffing levels. Meanwhile, risks were left unidentified, and it’s only recently that companies are starting to implement changes to due diligence. In its analysis, Deloitte found that 49% of respondents had updated their risk assessments in 2021 versus only 35% in 2020.
As more companies start understanding total risk, which includes risks posed by third parties, the TPRM industry will grow. Navigating these vendors to identify and mitigate risk accurately requires gathering intelligence through a consistent process.
3. Streamlined reporting: Because it’s a special project, it’s difficult to justify the time spent performing due diligence to upper management. The C-suite and board want results, and tracking spreadsheets means adding another spreadsheet to the mix. That’s an inefficient process that’s doomed to fail — especially when daily reports (which take half a day to create) are needed.
A centralized platform enables one-click reporting that anyone can access in real time to keep a bird’s-eye view of the pipeline. The TPRM dashboard prevents errors and fatigue from large-scale data analysis while sifting through scattered risk assessments.
4. Shorter onboarding: Vendor onboarding is a detailed process that starts long before the request for proposal and requires a lot of research and references. Although it may be tedious, it’s necessary to ensure your company doesn’t get stuck in a long-term contract that doesn’t work. If it starts to take too long, pressure from the board could lead to even more frantic mistakes.
Third-party risk management platforms like ProcessUnity shorten the time needed to onboard new vendors. It takes organizations approximately 20 hours to onboard new vendors. ProcesUnity brings this time down to 3 hours. Everything key decision-makers need to gather and organize is contained in one place so no other mistakes can be made. The long-term cost savings can pay for themselves over time. However, the relationship doesn’t stop at onboarding; vendor management must continue throughout the relationship.
5. Efficient post-contract monitoring: Once the contract is signed, the third-party vendor risk needs to be reassessed on a reasonable schedule. Things change as time goes on, and performing routine audits ensures everything runs smoothly through contract renewals. This helps you determine which contracts to move forward with or whether amendments need to be made to the service-level agreements.
Without a centralized solution, businesses can quickly find themselves in a never-ending due diligence cycle. Tracking changes proactively helps you take the proper steps throughout the life cycle of any vendor contract. It all starts at the crucial vendor-selection phase. When this step is done right, the rest of the process becomes more efficient.
Choosing the Right Third-Party Risk Management Platform
Once you select your vendor, it’s time to manage them with a consolidated platform. ProcessUnity provides full support for every stage of the vendor life cycle. ProcessUnity Vendor Risk Management creates a uniform process with one-touch reporting.
Now, you can conduct the same streamlined TPRM process across all potential vendors to find the best fit for your organization. And after you’ve selected them, you can regularly monitor them for possible amendments and renewal determinations.
What used to be a laborious process that bogged down organizations can become a strength that reduces overhead and optimizes existing resources. Don’t hesitate to reach out to our consultants to determine how we can help your business organize its vendor risk management process to create powerful, long-lasting ROI.