Third-party risk management in the new marketplace
The risks posed by third-party vendors and suppliers has become a board-level topic in many industries. While many organizations understand the importance of third-party risk management (TPRM), few have implemented the strategies, technologies and protocols for effectively managing and properly governing this critical area of risk.
In a 2021 study of third-party risk management performance, roughly 50% of companies report reliance on spreadsheets and email to manage their third-party risk. An even larger number admitted to taking a reactionary rather than proactive approach to risk in their supply chain, and only 20% report efforts to monitor business risk continuously.
The Hackett Group® can help. Our approach to third-party risk management is built on best practices and establishes technology-enabled capabilities that are well-suited for today’s complex risk environments. With help from our third-party risk experts, businesses can accelerate implementation of programs for robust diligence throughout the vendor lifecycle.
The benefits of TPRM solutions
Disruptions to global trade during the Covid 19 pandemic revealed anew the complexity and fragility of supply chains. Third-party risk management programs help to identify, manage and reduce supplier-related risks to ensure long-term stability and supply chain resilience.
An effective TPRM program must be able to assess risk based on a set of predetermined risk components, build a system to mitigate issues and monitor suppliers for changes in risk while triaging actions to mitigate.
When performed successfully, TPRM programs can create offensive and defensive strategies that can improve an enterprise’s competitive position. Additionally, third-party risk management solutions can:
- Reduce supplier costs.
- Increase financial stability.
- Identify vulnerabilities in the supply chain before they become a major threat.
- Improve supplier relationships.
- Prevent data exposure and cyberattacks.
- Protect an organization’s reputation.
- Increase health & safety code measures.
- Improve overall social responsibility.
Third-party risk management with The Hackett Group
The Hackett Group is a leading enterprise benchmarking firm and strategic consultancy for global companies. Dedicated to helping customers achieve digital transformation, our firm offers a broad array of services that range from smart automation, integrated business planning and application managed services to business process engineering initiatives and continuous improvement programs.
Our third-party risk management services include:
- Assessment. From onboarding to management and recertification, we evaluate current processes and identify gaps to top performance.
- Optimization. Based on insight from our leading benchmarking practice, we provide access to best practices around governance, people and processes while working to help prioritize initiatives.
- Technology selection. After determining business, functional and technical requirements, we help select the right technology from the large field of TPRM offerings.
- Implementation. We use a proven, iterative implementation approach to ensure best-in-class results from TPRM technology.
Governance for third-party risk management
While many organizations feel an urgency to develop strong third-party risk management capabilities, it’s important not to rush into decisions or deploy a new solution before developing a plan for governance of TPRM people, processes, data and technology.
Our TPRM experts can help develop a governance structure that reinforces overall communication and alignment of TPRM with executive leadership and business needs, based on several key guiding principles.
Establish clear definitions
To achieve program goals, organizations must clearly define the process, roles and responsibilities of engagement with key executives, stakeholders and peers.
Create well-organized teams
Strategic and knowledge-centric teams are key to achieving high-performance TPRM services that are aligned with stakeholder needs and that balance risk and demand requirements.
Governance or TPRM programs must provide direction and focus to ensure that the organization continually strives for top performance.
Seek stakeholder feedback
By including “the voice of the customer”, organizations can ensure that services delivered match the needs and expectations of stakeholders, who can also play an important role in the continuous improvement process.
Plan for risk resolution
Risk events must be resolved by a defined structure and process for risk resolution and escalation.
Why customers choose The Hackett Group
The Hackett Group is a leading enterprise benchmarking firm and intellectual property-based strategic consultancy for organizations in diverse industry verticals. Drawing on unparalleled intellectual property developed through more than 26,000 benchmarking studies, we facilitate digital transformation through a wide range of services, including enterprise analytics, integrated business planning, working capital management, business partnering, managed services and global business services.
Customers choose TPRM services from The Hackett Group for three key reasons.
- A holistic approach. We look beyond technology to the policies, processes, governance organization and other aspects that drive effective third-party risk management.
- Insight. Our unparalleled body of intellectual property and proven performance improvement accelerators includes a third-party risk management playbook for accelerating implementation and time-to-value.
- Expertise. Our professionals have years of experience and deep insight into the evolving landscape of third-party risks and how they impact businesses.
Along with managing third-party risk, customers rely on The Hackett Group for sourcing and procurement executive advice, benchmarking, transformation, eProcurement and supplier management.
What is third-party risk?
Third-party risk is the potential threats to an organization posed by the suppliers and vendors in its supply chain as well as partners, service providers, and other parties that provide products, services or have access to privileged systems. Third parties may represent risk to an organization’s financial position, operations, reputation, compliance efforts, information security, corporate responsibility and quality of products and services.
What is third-party risk management?
Third-party risk management is the practice of monitoring and mitigating the risks posed by third-party vendors, partners or service providers. TPRM solutions identify risks in potential third-party relationships, classify vendors by risk categories and thresholds, assess the security posture of each third-party organization, recommend actions to remediate risks, and monitor risk in the vendor portfolio on an ongoing basis.
What are the benefits of third-party risk management?
TPRM programs help organizations to comply with industry regulation, improve visibility into the supply chain, reduce the cost of onboarding and managing suppliers, and mitigate a wide variety of risks.