The Secret Struggles of Third-Party Risk Management

We all know that trying to accomplish anything in the corporate world that involves the coordination of various departments can be a struggle. It’s especially difficult when it involves adding work that is outside someone’s normal course of operations, or when you’re trying to convince co-workers and people that outrank you and/or vendor personnel that the work you need them to do is imperative. 

The History of Vendor Management

Vendor management, in general, is not new. Contracts have been around forever and any organization that has a lot of them has thought about how to manage them. But add risk to that equation and we’re in a whole different ballgame. Vendor risk management, third-party risk, outsourcing risks, etc. are all different ways of explaining the same auxiliary function that has created a new wave of corporate obligations. At some point, software solutions boomed, and outsourcing primary functions became a survival mechanism. Now, slowly but surely, industries everywhere are realizing that we need to take a better handle of the associated risks. It makes sense, right? We can all agree that third-party risk management is an important function.

The Skeleton in the Closet 

So here's the real reason so many organization's struggle with effectively implementing a third-party risk management program:

It's a lot harder to change the culture of a corporation than it is to change a policy.

Everyone knows risk management is a good idea, but it’s hard to convince people that it’s currently their problem, or that they’re already behind the curve. Furthermore, to support these risk management functions properly, you need to add administrative resources that do not produce any revenue. Luckily, the third-party risk management bug is starting to spread. (too soon?) 

Getting Your Organization Onboard

Even in the last five years, we’ve seen a great shift in the overall acceptance of adapting these functions. But even when an organization and its culture embrace the process with open arms, there are many heavy moving parts that require a lot of grease. Some elements include:

1. Involvement. Here are just a few involved with the coordination of standard third-party risk management:

• Senior-level officials
• Anyone that owns a contract with a third-party service provider 
• Vendor personnel
• Legal or procurement folks who assist with contracts
• Information security
• Infrastructure
• Compliance
• Business continuity and disaster recovery 
• Enterprise risk management  

2. Process Implementation. Aside from coordination with outside areas and vendors, let’s talk about two of the most complex administrative requirements for tracking and reporting:

• Data Management. I’d argue that any successful third-party risk management professional needs to have a strong knack for data mining. Tracking information on hundreds of vendor engagements and assessments is no joke. We’re talking about their names, contract status, who owns them internally, contact information, risk ratings, the data points that determined risk ratings, risk assessment statuses, specific risk implications and that’s barely scratching the surface.  
• Executive and Real-time Reporting. The standard requirement for a TPRM team is to provide risk details to senior management at regular intervals. However, there is often the expectation within organizations to be able to provide risk information on any vendor at any given time. Maintaining real-time status updates for the entire vendor population is a huge task given that the amount of information that must be maintained in order to do so.
  

The Silver Lining of Third-Party Risk Management Struggles

I know it seems I’m doing a lot of complaining but don’t get me wrong, despite having to climb uphill both ways in the snow backwards to meet requirements, I love this job. Third-party risk management professionals get unique insight into a large variety of businesses. The tasks are not just challenging, but also very rewarding. We help protect our organization, and in doing so, enhance the quality and integrity of business relationships.

When done right, third-party risk management is a mutual and persistent effort towards making positive changes. Ultimately, we do our part to help all of us who put our trust a plethora of corporations, every day, to protect our personal assets, health and livelihood.

So, while the struggle can be very real, never take your eye off the big picture. If you are, or work closely with, a third-party risk team, I hope you’ve found some solace here. If not, maybe you have some new perspective. Just remember, every challenge or problem is an opportunity for growth and improvement.

Learn other third-party risk management struggles and myths. Download the infographic.