Third-party risk management (TPRM) is a best practice and, for many organizations, it’s also a regulatory requirement. Even so, the practice of third-party risk management can be difficult to execute, especially for organizations with fewer resources and people.
Vendor selection, vendor risk assessments, due diligence, and ongoing monitoring can be overwhelming, especially if the many interdependent processes are performed manually. Organizations that depend on spreadsheets, emails, and the collection of physical vendor documents often struggle to keep up and may experience a higher rate of avoidable errors, missed deadlines, and audit findings.
If this sounds like your organization, it may be time to consider investing in a dedicated third-party risk management software platform, services, or both. Today's TPRM software and services have been specifically designed to ease the burden of third-party risk management while increasing accuracy and effectiveness. With third-party risk management software and supplementary services, such as due diligence document collection and management, you can save time and maximize your existing resources. Furthermore, they can improve an organization's level of organization, project management, and oversight necessary to identify and manage vendor risk effectively.
The Cost of Manual Third-Party Risk Management Processes
Organizations struggling with TPRM are often doing so because they lack adequate funding. Asking for money for new software and services may seem impossible until you consider the costs associated with manual processes such as:
- Manual processes are time-consuming and error-prone
- Vendor risk and performance activities are inconsistently documented or aren’t documented at all
- Institutional knowledge can be lost when employees leave and there is no clear record of past TPRM activity or upcoming requirements
- Audits and regulatory exams become unnecessarily complicated when requested documentation or evidence isn’t easy to locate
- The volume of work can easily become overwhelming when processes are difficult or too time-consuming to execute.
- Essential TPRM components, such as vendor risk and performance management, are neglected or ignored because it’s too complicated to manage
- Other issues, such as document version control, duplication of effort, and contract management, can be exacerbated in manual TPRM environments.
Wasted time and rework are always unplanned expenses, as are regulatory fines, litigation, and loss of customer confidence and revenue. You're probably spending more money on ineffective TPRM processes than you realize without a centralized and effective platform for third-party risk management.
TPRM System Benefits Extend Beyond Automation
Automating third-party risk task management, workflows, record keeping, and scheduled activities are all excellent benefits of an effective TPRM software platform. Still, the value of TPRM software and services goes beyond keeping everything on track and organized. Here are a few:
- TPRM software platforms can help your organization manage vendor document collection and review. Meanwhile, outsourcing vendor due diligence document collection and review to an external TPRM service can help you increase your throughput and decrease the cycle time of due diligence. And, it can help you onboard more vendors faster and boost your capacity for internal resources.
- TPRM systems are useful for contract management. Automatic notification of key renewal dates and negotiation windows helps your organization preserve its leverage by not waiting until the last minute and unintentionally giving your vendor the upper hand in a negotiation.
- Reporting features as a major benefit in most TPRM platforms. Real-time reporting on vendor status, deliverables, risk, and performance means better vendor management and can help your organization easily identify underperforming vendors and risks in specific vendor categories or across the portfolio. Information is power, and robust reporting is an often-overlooked benefit of TPRM software platforms
- Audit or exam preparation is much easier when all the articles of evidence are easily located within a single platform. No more searching for the contract, due diligence documents, or vendor risk and performance records when they are organized and stored with the vendor record.
Before investing in third-party risk management software, consider examining the true hidden cost of your manual processes. Take an honest look at your TPRM process efficiency, effectiveness, and accuracy. You may find that investment in TPRM platforms and services can greatly improve your program and help close any critical gaps in your processes. It's always true that better TPRM results in better vendor management, which means more value for your organization both on a short and long-term basis. TPRM software and services are an investment that often pay for themselves by improving risk management and reducing errors and rework.