How can you implement a risk management program for third-party vendors?

Implementing a risk management program for third-party vendors involves assessing, monitoring, and mitigating risks associated with outsourcing critical functions, services, or products to external vendors. Here are steps to implement such a program: Vendor Risk Identification Risk Assessment Risk Quantification and Prioritization Risk Mitigation Strategies Contractual Risk Management Ongoing Monitoring and Due Diligence Incident Response and Escalation Procedures Vendor Relationship Management By following these steps, organizations can implement a robust vendor risk management program to effectively identify, assess, and mitigate risks associated with third-party vendors.

In my experience, organizations are usually good at doing the initial due diligence when onboarding a vendor. When it comes to ongoing monitoring, sometimes a company can fall short. A few things a company can put in place are periodic performance and compliance guidelines to ensure the vendor is in compliance with the agreed terms and conditions, and the service level agreements.

First of all determine organization's risk appetite, tolerance levels. Then, determine potential vendors on the basis of their history of working, past performance with an organization, quality, grade, compliance, availability, response time, your trust level with vendor, financial stability, security etc. Then, create vendor management matrix / register and rate the available vendors on the basis of above-mentioned parameters. Finally, shortlist the vendor which best or closely matches to an organization risk tolerance level.

An iterative approach as opposed to point-in-time (traditional) approach is key in effectively managing third party vendors. This approach enables identification of risks post due diligence or prior to recertification processes through the use of internal triggers and consequently risk controls on an ongoing basis.

indentify and assess vendor is the most important step in third party management. if this step is not appropriate, it could cause some problem in the next step and the worst, it could be rise the potential of fraud. Thus, beside use risk matrix or scoring system after the comprehensive due diligent, the organization must prepare agreement with anti bribery clausul and give understanding to the third party that the organization implement anti bribery policy.

Defining and communicating expectations to vendors is critical for successful partnerships. Establish clear policies, standards, and guidelines regarding data protection, quality assurance, service levels, and incident response. Communicate these expectations effectively to ensure vendors understand and accept them. Utilise vendor management policies or codes of conduct to document and convey expectations clearly, fostering mutual understanding and alignment for productive collaboration. Regular communication and monitoring reinforce adherence to expectations throughout the vendor relationship.

During the vendor selection process and contract negotiations, make sure your expectations, policies, and standards are clearly communicated to the vendors. Make arrangements with vendors to discuss expectations, answer questions, and clarify any misunderstandings. It is important to ensure that the contracts you enter into with vendors explicitly reference your organization's expectations, policies, and standards. Incorporate clauses relating to data protection, quality assurance, service level agreements, incident response, compliance, and any other relevant requirements. Clearly state the consequences of non-compliance or breach of contract, such as penalties, termination clauses, or legal action.

- List third party vendors affecting business functions and rank them with criticality. - Implement risk assesent policy for third party vendors considering existing & new vendors. - Communicate expectations clearly and get them added into contractual agreement. - Implement periodic risk assessment process as per business functions.

Having an effective communication mechanism with vendors is essential. An issue often arises when vendors are unaware of company policy and protocols or when policy and protocols fade over time. Vendor management tools come in handy in these aspects. Providing training and testing vendors' understanding costs less than facing compliance issues and low-quality work.

Manter políticas e respectivos papeis e responsabilidades formais e claras, ajudam a garantir uma clara comunica??o e deveres de cumprimento dos fornecedores contratados.

Manter controles de monitoramento e reporte atualizados certamente ajuda na preven??o de materializacoes de riscos. Checagem reputacional constante, avalia??o periódica das entregas, verifica??o do volume de horas trabalhadas, cronograma e gerenciamento destes projetos, s?o mecanismos de monitoramento que ajudam na gest?o destes contratos.

Reviewing the vendor applications performance on regular intervals is a must. Pls measure their BCP, are the following regulator compliance

It is crucial to have a review and feedback system in place for vendors. This system should involve conducting regular performance evaluations and monitoring their compliance status. Currently, many organizations evaluate vendors only when they are close to contract renewals. However, it would be more beneficial to have a continuous cycle of review and feedback. This approach will benefit the organization and give vendors more time to adapt and improve. Using tools can help manage and track vendor performance effectively.

Implement a vendor management dashboard to continuously monitor key performance indicators (KPIs) like delivery time, quality, and cost. Conduct regular vendor audits to assess compliance with contractual obligations, policies, and regulatory requirements. Gather feedback from internal stakeholders and customers to evaluate vendor performance and customer satisfaction. Schedule periodic review meetings with vendors to discuss performance metrics, challenges, and improvement plans. Update vendor scorecards regularly to reflect performance and compliance status, facilitating informed decision-making.

Define key performance indicator (KPIs) & metrics to measure vendor performance, such as service uptime, response times, incident resolution rates, and adherence to SLAs. Regularly track and analyze these metrics to assess vendor performance & identify areas for improvement. Conduct regular audits and assessments of vendor operations, processes, & controls to verify compliance with contractual requirements and industry standards. Assess the effectiveness of vendor security measures & identify any gaps or deficiencies that need to be addressed. Establish open channels of communication with vendors to provide feedback, address concerns, & collaborate on resolving issues. Foster a collaborative relationship based on transparency & mutual trust

Keep reputation risk as one of the key risk factors in your evaluation of third party vendors. Their reputation and perceived reputation will reflect on your company if you use them. Reputation risk evaluation of third parties will include but not limited to legal activities (past or pending litigation) ESG, shareholder value, public opinion, ethical behavior test (see worlds most ethical companies by ethisphere), community support, employee morale (see Glassdoor) and workplace conditions. Their reputation can taint your company’s reputation. Do your homework.

Agree with Lance Ewing and note that reputation risk cannot be adequately insured--not enough capacity to adequately cover the loss. So, risk mitigation is critical and for threats arising from vendors, Vendor Management reputational risk evaluation is key.

Clearly define the objectives of the risk management program for the third-party .Conduct a thorough risk assessment of the vendor. Identify potential risks such as financial, operational, legal, and reputational risks.Conduct regular audits to assess the effectiveness of the risk management program and ensure compliance with contractual requirements and regulations.

Third-party risk is one of the most complicated risks to assess and mitigate. Threats from external partners are hard to quantify and monitor due to a lack of data and visibility into vendors internal processes. There is also a belief that vendors are adequately secure. Cyber threats constantly evolve so you need to be proactive in understanding the cascading effect a breach could have on your organization’s goals. A good start is to categorize all the sensitive data your vendor maintains and also when they will purge it. Don’t rely solely on vendor self- reporting. Periodic audits can help mitigate this risk. Finally, contracts should have clear data security requirements and real consequences for non- compliance.

It is essential to conduct a thorough background check on the vendor before signing the contract. Before finalizing a contract with a vendor, it is crucial to mitigate four key risks: financial, compliance, operational, and unforeseen risks that may arise due to political, technological, and environmental factors. It is important to establish clear expectations with the vendor regarding delivery, compliance, billing, work hours, company policies, and protocols. All these details should be included in the contract. Provide support to the vendor throughout their term and help them succeed in their job. Continuously monitor these risks throughout their tenure to prevent vendor-related risks and ensure a risk-free smooth vendor relationship.

A comprehensive model is needed in order to add value to TPRM. Depending on the dependency grade, even a segmentation can be developed. BCM (including business impact analysis and BCPs) should play a great role.

Third party risk management is a domain in itself due to its complexity and evolving nature. However, some key elements are: - Define third parties (vendors, technology service providers, channel partners, affiliates, joint ventures, alliances, etc.) - Identify critical third parties (based on operational & strategic dependency, access to critical systems, confidential and sensitive data, etc.) - Ensure thorough due diligence of third parties and their KMPs while onboarding third parties (incl. aspects such as financial, operational, compliance, operational, legal, IT, ESG, negative media, sanctions, etc.) - Mitigate risks through indemnification, contractual safeguards, insurance, BG, etc. - Monitor and reassess risk periodically

Why does company uses third party vendors? It could be many reasons but generally speaking ; A) Delegate the risk B) Reduce insurance risk and cost C) it is cheaper than doing in-house When we look at from this reference points; Main company still has the all risk, labour risk, insurance risk, reputation risk, loss risk etc. So my approach to this issue is clear ; “ mirroring system” . It means you can manage the third party vendor risk as much as the main company’s “ risk environment “ “ risk appetite” and process procedure of risk management . I called it “ mirroring system” so main company must test himself first and use the third company vendor as a mirror.

Many organisations struggle to implement and manage a fit-for-purpose third party due diligence framework. Further complicating this situation is the diverging maturity levels of existing efforts across businesses. Key components of a foundational program include pre-contract due diligence on new vendors, risk-based approach to ongoing monitoring and a robust program governance. More sophisticated business may look at further improvements such as automation, establishing a center of excellence or going beyond its immediate vendors to include fourth parties and affiliates.

- Overall Risk Policy - Data and Information Security - Risk Assessment - Standardize Contracts - Incident Management and Business Continuity - Training and Awareness - Continuous Monitoring for improvement