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State of Third-Party Risk Management 2022

Venminder's sixth annual whitepaper provides insight from a variety of surveyed individuals into how organizations manage third-party risk today.

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Top Vendor Management Challenges and How to Overcome Them

7 min read
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Earlier this year, Venminder released our annual State of Third Party Risk Management survey results. Venminder distributed the survey in late 2020 to an unfiltered group of clients and non-clients. We also used social media to reach an even wider swath of companies. This year's respondents came from industries such as financial institutions, healthcare, mortgage and other lending, education, insurance, fintech, wealth & asset management, retail and more.

We also got a great sampling of various organization sizes: 

An Overview of the Biggest Vendor Management Challenges

While there were definitely some nuanced differences in the selections between various industries, both large and small, the results were fairly indicative that regardless of where you’re coming from, third-party risk management (TPRM) personnel often share the same struggles.

When surveyed, we found that the number one challenge for small and mid-sized organizations is time management and larger organizations are challenged most with getting adequate resources. These challenges are almost looking at both sides of the same coin, perhaps one with a little more maturity and understanding of the necessary requirements.

Let me explain. When you’re starting to piece together all the complexities of managing third-party risks, it often gets overwhelming, and you struggle to find the time necessary to keep up with it all. As these requirements expand and multiply, the result is a painful understanding that you simply need more resources, be it through support services, technology, additional personnel or all of the above.

This hypothesis is further strengthened when you factor in some other leading challenges across the board, which are completing risk assessments, tailoring due diligence to be appropriate for each vendor and getting the right documentation from vendors.

Another heavy hitter was automating the process. This can also be seen as:

  1. The need for a technology resource
  2. Recognizing that the work is not being accomplished adequately or efficiently
  3. An awareness that streamlining and automation is a viable solution to that issue

The same can be said for the majority of responses across various industries.

Top 3 Challenges by Industry

We decided it’d be beneficial to understand how third-party risk management challenges vary industry by industry. The following are the top three challenges each industry experiences. See below for a breakdown:

Banks:

  1. Getting the right documents from vendors
  2. Having enough internal resources
  3. Time management

Credit Unions: 

  1. Having enough internal resources
  2. Getting the right documents from vendors
  3. Time management

Education:

  1. Keeping track of all the documents and data
  2. Knowing who their vendors are
  3. Determining which vendors are critical to their organization

Healthcare:

  1. Having enough internal resources
  2. Tailoring our due diligence requests to be appropriate for each vendor
  3. Automating the process

Insurance:

  1. Having enough internal resources
  2. Automating the process
  3. Getting the right documents from vendors

Mortgage:

  1. Completing risk assessments
  2. Knowing who their vendors are
  3. Keeping track of all the documents and data

Fintechs:

  1. Automating the process
  2. Tailoring due diligence requests to each vendor
  3. Having enough internal resources

All Others: (e.g. Telecommunication, Consulting)

  1. Having enough internal resources
  2. Tailoring our due diligence requests to be appropriate for each vendor
  3. Getting the right documents from vendors

Organizational Support

Aside from the top 3 challenges, we separately asked how things were going with support from business units within their organization. 85% of respondents stated that it was challenging or very difficult. That is a huge majority. And, 10% of respondents even revealed that getting leadership support was a top challenge.

Recommendations to Overcome These Challenges

Traditionally, our number one solution to overcome these challenges has been to continue to invest time and resources in TPRM. Well, what a dilemma, then, that getting to that solution is a challenge in and of itself!

So, the million-dollar question is:

How do we garner additional resources for our third-party risk management program?

  1. Be honest with your board of directors and executive team. Every board is different and might need to hear different key concerns in order to recognize the need for more resources. We understand this is tough, considering today’s trying times and the fact that TPRM doesn’t directly generate revenue. But, the risk of leveraging third-party relationships is more alive and well today than ever before. Be honest, and don’t be afraid to help your organization by admitting that this process is a massive undertaking, or that you need help. Honesty is key.
  2. Use case studies. There is daily news pertaining to organizations being hit hard by fines associated with vendor breaches or by simply failing to dedicate the appropriate time and resources to vendor management. Use that to your advantage, if possible.
  3. Keep an issues log. Include as much detail as possible, especially when it highlights the need for more dedication or conflicting priorities in time management.
  4. Try to demonstrate a return on investment. 80% of respondents cannot be wrong when they say that investing in TPRM does in fact provide a positive ROI. It might take a little creativity but try to present your needs to the board or c-suite in a way that shows it’s budget well spent.

Another game changer in alleviating the challenges of TPRM would be to have more holistic support internally, not just from the top but with your peers, business line owners, vendor managers and subject matter experts. For this, we have three main suggestions:

  1. Education. Mitigating vendor risk is an enterprise-wide function. Every person who utilizes a vendor service in any way plays a part. However, this isn’t obvious to most people. Just like we take regular information security and compliance training as an employee requirement, the same should be said for education around third-party risks. This is especially true when it comes to those personnel who directly engage with and own the vendor relationships. Leveraging some basic education on the matter will go a long way in gaining support for the overall TPRM function.
  2. Candid and frequent communication. More than just education, having communication with vendor owners about your process can be very valuable. They may not know or understand what the risks are that they own as part of that relationship or why it’s important. You may uncover issues that they didn’t know about and vice versa. Good communication, as with any relationship, is a win-win.
  3. Holistic reporting. Reporting shouldn’t be a check-the-box process. The reason that reporting is a requirement is because leaders and stakeholders need to know what is going on in the vendor environment. There is no such thing as “no risk,” so don’t try to pretend there is. Stakeholders and business owners need to be kept abreast as well, so at a minimum, make sure key concerns get to the right people in a timely fashion.

7 Best Practices to Know

We truly feel that by investing in adequate resources and effectively gaining internal support and education around your process, the other main challenges will begin to subside. Of course, that doesn’t change our general recommendations and best practices, which include, but aren’t limited to:

  1. Maintain well-written governance documents like policy, program and set of procedures.
  2. Apply the lessons you learned in the pandemic to determine where to improve and areas that went well.
  3. Ensure that your staff has adequate and appropriate experience.
  4. All levels of senior management should be educated, along with anyone else who works with vendors.
  5. Due diligence documents and other records should be kept updated and relevant.
  6. Keep up to date with industry news and enforcement activities.
  7. Use remediation to monitor and track any vendor issues.

Interested in learning more third-party risk management trends discovered? Check out the whitepaper.

state of third-party risk management 2021

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