Third-party risk management (“TPRM”) programs have traditionally been focused on information security and compliance risk. As business models and the associated risk landscape continue to evolve, TPRM programs must consider broader operational, financial, and reputational risks. In order to provide valuable risk insights for a broader base of stakeholders and decision makers, TPRM programs must centralize distributed risk management activities. Streamlining these TPRM activities can be a hidden driver of operational efficiencies by reducing time-to-onboarding, tying risks to specific business objectives, and improving how risk is monitored and assessed for existing vendors. 

The risks of relying on third-party service providers are often considered by many business units throughout the organization: procurement, supply chain, IT security, compliance, operations, finance, legal, etc. TPRM programs are uniquely positioned to incorporate the different risk management objectives of these teams by utilizing a managed service model that addresses their requirements or provides the inputs they need to execute their activities. Below are five steps that organizations can take to begin shifting to a managed service TPRM model:

1. Identify business objectives and associated key risk indicators (KRIs): Develop a set of KRIs that address specific business objectives so that you can ensure your due diligence and monitoring activities provide actionable and relevant insights. 

2. Build relevant scoping procedures: Create a strategy to quickly identify how a third party will impact your operating environment, and the types of risks that must be considered. 

3. Clearly define the TPRM lifecycle: Increase accountability by documenting the specific activities that take place at each step of the vendor lifecycle, and who is responsible for ensuring the desired outcome is achieved. 

4. Translate vendor risk to business risk: For each risk identified, translate the risk into language that is understandable by both risk and operational stakeholders that are using this information to make decisions. 

5. Enable scalable technology: Implement a solution that allows you to scale your program across the enterprise and addresses the need for increased collaboration, continuous monitoring, and assessment customization. 

Current events continue to shape our understanding of the broad nature of third-party risk. As a result, organizations are beginning to consider how a holistic approach to TPRM can support the enterprise-wide solution for protecting their brand. Regardless of the maturity of your TPRM program, the five steps discussed above can provide a basis for implementing or improving practices that can help your risk management stakeholders make more informed decisions in an efficient manner.