In a recent webinar (listen here), Randy Stephens , VP of our Ethical Leadership Group, and Mike Vermilion, Senior Director of Third Party Risk Solutions, outlined a best practice approach to risk-adjusted due diligence for third party relationships.
The fact is, many organizations can’t even come up with a complete list of third parties let alone confidently state they have a depth of knowledge about each relationship. Yet international laws and guidance hold organizations accountable for the actions of their third parties – regardless of internal processes that may be nonexistent, inconsistent, incomplete, unsupported or just plain ignored.
The Stephens/Vermilion approach to best practices may seem daunting when considering that third parties are on-boarded on a regular basis, that third parties themselves evolve and transform and that an organization’s risk appetite changes as a reaction to both internal and external conditions.
Most organizations are aware that successful implementation of a third party risk management program requires sponsorship at a high level, cross-functional teams, appropriate resources, phased deployments and communication (with both business partners and third parties). But the reality of dealing with the constant change of the third party landscape presents almost mind-boggling challenges when thinking about defending a compliance program á la Morgan Stanley.
Automating a third party risk management process – think: automating any business process like customer relationship management (Salesforce.com, etc.) – offers tremendous advantages regardless of the organization’s size, scope or current number of third parties. Automation frees up staff from routine tasks in order to focus efforts where they can bring real value. Think of the time involved in activities like e-mailing, copying and pasting into spreadsheets, internet research, calculating weighted risk, aggregating information from various departments, determining who has and hasn’t completed questionnaires.
Tasks that can be automated might include:
- notifications (e.g. automatic e-mail to relevant departments and third parties when a screening process has begun)
- online questionnaire administration (instead of gathering input through email)
- easier analysis and research enabling you to validate self-completed questionnaire answers to external databases
- ongoing monitoring of international news and government sources for new developments relating to third parties
- risk assessment weighting and scoring
- report writing
- tracking processes through workflow
- audit compliance
Just as importantly, automation provides consistency of process and ensures that once business rules are established, they apply across the board. Screenings can be repeated on a schedule or on demand, new third parties can be added without undue angst, and monitoring can be ongoing, with full knowledge by all parties about the process, how it works and what the next steps will be. You now have a compliance business process that is sustainable and defensible.
Listen to the webinar for a fuller understanding of how we help companies tackle third party risk management.