Using Third-Party Risk Management Software for Supply Chain and IT Vendor Risk
4 minute read
Third-party risk management (TPRM) is an umbrella term for the process of tracking and mitigating the risks brought into your organization by vendors, suppliers, contractors and consultants. When other companies do business for you, your organization can be held responsible for service interruptions and regulatory violations that occur on their end, even though your third parties aren’t directly accountable to you in the same way that your employees are. Luckily, third-party risk management software can be a powerful tool to help you mitigate this risk across domains and identify potential issues before they result in penalties.
IT vendor risk management and supply chain risk management are two prominent subcategories of TPRM that focus on different types of risk:
IT vendor risk management deals with the risk that arises when third parties handle or have access to your intellectual property, information or data.
Supply chain risk management focuses on the risks associated with the extraction, manufacturing, shipping and distribution of physical materials.
Though different risks arise in each of these domains, risk managers in both areas share the same goals: to avoid regulatory penalties and prevent service disruptions. This blog will provide an overview of each domain, key differences and similarities between the two and explain how a strong TPRM platform can help.
IT Vendor Risk
As stated above, IT vendor risk is the risk associated with any third parties that handle intellectual property or sensitive information. If an individual or organization outside your company has access to any of your systems or data, that means they introduce a degree of IT vendor risk to your assets. Possible violations in this domain include data breaches that leak customer data and noncompliance with industry regulations. If a hacker gains access to your users’ data through one of your third parties, you are still held responsible by the regulatory authorities. Additionally, if a breach on one of your systems prevents you from delivering services or hampers data availability for your users, that can result in reputational damage and lost revenue.
Supply Chain Risk
Supply chain risk is the risk associated with organizations that extract, manufacture and distribute physical goods and materials. If your organization deals with physical products of any kind, supply chain risk is the chance that something might happen between the extraction or delivery of materials or parts and the sale of a product to either incur regulatory penalties or disrupt production. Common violations in this domain include environmental, social and governance (ESG) issues like modern slavery, bribery, inadequate environmental practices or poor labor practices. Additionally, interruptions in the transport and manufacturing of goods can disrupt your ability to deliver your product: natural disasters, strikes and financial failure at the vendor are all events that may prevent you from delivering your product in a timely manner.
How they’re different
Each of these domains demands attention to different risks. Supply chain risk managers tend to have an increased focus on ESG risk, strikes and adverse weather conditions, while IT vendor risk managers tend to focus on the cybersecurity posture of critical vendors. Additionally, each domain demands a different level of assessment depth. Supply chain risk assessments tend to be conducted at a much higher volume and a lower level of depth: the imperative in onboarding suppliers is to keep the process moving and ensure that your assessments don’t hold up the business. By contrast, IT VRM assessments tend to go into greater detail and be conducted at a lower volume.
How they’re alike
Both IT VRM and supply chain risk management share the goals of avoiding regulatory violations and service disruptions. While the risks posed by each domain may look very different, both the management process and the desired outcomes have a lot in common. All forms of third-party risk management consist of monitoring third parties, sending assessments and responding to incidents when they occur.
Additionally, the lifecycle is the same across domains: both track third parties from sourcing to onboarding, then into due diligence, ongoing monitoring, performance reviews, contract and issue management and eventually offboarding.
Both domains are also handled by the procurement department, though IT VRM involves standards set by cybersecurity. This proximity means that managers handling IT vendor risk and managers handling supply chain risk are working toward the same departmental goals, and often engage in open communication.
Though their operations may differ in focus and depth, risk management across these domains occurs within the same department with the same lifecycle and goals. It makes sense, then, that a strong piece of third-party risk management software should handle both domains and more.
How a strong platform can help
Third-party risk management software is a powerful tool for managing risk across these domains, but not all TPRM software is created equal. Software that will help your teams manage supply chain and IT vendor risk more efficiently should have the following features:
- Automated assessments: Automating assessment cadences for the full duration of the third-party lifecycle with TPRM software ensures that your team handles risk without leaving anything behind.
- Risk scoring and prioritization: By enabling risk scoring, a TPRM platform helps organizations tackle the most critical risks first.
- Compliance monitoring: An automated TPRM platform enables your organization to monitor your vendors’ compliance with regulatory standards like GDPR, SOC 2 and ISO 27001 to help your team avoid unanticipated violations at the vendor level.
- Incident management: By enabling your team to respond quickly and effectively to incidents when they occur, a TPRM platform helps minimize their impact and promotes operational resiliency.
- Centralized repository: Compiling all your third-party assessments, risk scores, incident reports and compliance data into a single platform, a TPRM platform can grant your team visibility into your complete vendor ecosystem.
Looking for a third-party risk management platform that encompasses all the above-mentioned functionality and more? ProcessUnity for Third-Party Risk Management is the leading choice for teams looking to boost their efficiency, efficacy and visibility across the vendor ecosystem.
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ProcessUnity is a leading provider of cloud-based applications for risk and compliance management. The company’s software as a service (SaaS) platform gives organizations the control to assess, measure, and mitigate risk and to ensure the optimal performance of key business processes. ProcessUnity’s flagship solution, ProcessUnity Vendor Risk Management, protects companies and their brands by reducing risks from third-party vendors and suppliers. ProcessUnity helps customers effectively and efficiently assess and monitor both new and existing vendors – from initial due diligence and onboarding through termination. Headquartered outside of Boston, Massachusetts, ProcessUnity is used by the world’s leading financial service firms and commercial enterprises. For more information, visit www.processunity.com.