It's not a secret that risk-averse business models do not have the same potential for growth within a corporation that finds certain risks more palatable. That doesn’t mean that you should throw caution to the wind and operate as if you don't have a care in the world. Not only is that a recipe for disaster, but it leaves you open to civil and criminal fines and penalties for doing business recklessly or negligently.
This means that to enable growth and drive profit, your company must find a way to navigate the minefield of risk management across the entire enterprise. As businesses have shifted to vendor utilization to streamline costs and reduce overhead, a significant portion of that risk exists within the third-party vendor space. The rapid expansion of the infrastructure and software as service fields proves this trend. Here are three significant challenges facing the vendor risk management field as we begin 2022.
TOO FEW EMPLOYEES VERSUS NOT ENOUGH FUNDING
A survey across a broad sample of business sizes has shown that small to medium-sized corporations struggle with having enough risk management employees to accomplish all of the tasks set before them. Conversely, large corporations are more challenged by getting adequate funding for the programs they need and the time to complete necessary due diligence. When it comes down to it, both of these issues are resource-related.
Your job entails either making money or saving money in the business world, and many companies place an understandable emphasis on the making money aspect. It falls to the vendor risk management team to present the data to the C-suite to make them understand how mission-critical the risk management process is and just what is required to fulfill that mission. Properly advocating for your team can get you the resources you need, whether human capital or funding. Alternatively, you could outsource part of your vendor management process to specific vendor risk management specialists instead of hiring more internal employees.
COMPLEX VENDOR NETWORKS IN A TIME OF INCREASED REGULATORY PRESSURE
As we just mentioned, the shift towards third-party vendors was driven by cost savings, efficiency, and several other factors, and this trend has continued to expand across many industries. Each of your vendors has an exhaustive list of vendors that they use. Those vendors then have their vendors, and so on. The vendors’ use shifts some of the burdens to the vendor and leverages their expertise to your benefit. Still, the cost of regulatory compliance and the responsibility of most of the risk remains with you. As stringent regulations continue to become more popular around the world, particularly in the area of information security and data privacy, your due diligence procedures must be targeted and on point. Emphasis must be placed on identifying and evaluating your fourth party vendors or those vendors that your third-party vendors use to fulfill their contractual obligations to you.
This is the perfect time to be able to differentiate between high-risk vendors and critical vendors. While it may seem like those terms can be interchangeable, they are indeed two different categories entirely. High-risk vendors may hold all of your customers' personal private information or proprietary business information. Data breaches of their systems could be embarrassing, costly in public relations, or even create significant civil liability. On the other hand, the compromise of critical vendors would directly threaten business continuity.
In terms of due diligence procedures and vendor risk assessments, critical vendors should be placed in the very highest priority level and followed closely by high-risk vendors. In addition, these vital vendors should be subject to continuous monitoring and not just periodic check-ins, surveys, or questionnaires.
THIRD-PARTY RISK MANAGEMENT AUTOMATION
In healthcare, insurance, and even financial technology, a significant challenge has been finding successful ways to leverage technology to automate the vendor risk management process. This can be reflected across businesses of all sizes. As we discussed earlier, resources are finite, and obtaining the right personnel and funding is a challenge in and of itself. The right vendor management tool can automatically send out onboarding questionnaires, annual surveys, and even flag responses or take additional actions.
The right vendor can exponentially increase your efficiency even with an automated, cloud-based vendor management program. Venture Lynk vendor risk management teams are staffed by subject matter experts in the fields of information and cyber security capable of conducting a wide range of tasks from within your vendor management platform.
Whether you're looking for continuous risk monitoring, information security evaluations, or other advisory or training services, let Venture Lynk provide you with a quote for completely customized third-party vendor management solutions.