Business Case: Third-Party Risk Management With Venminder

Steps to Creating and Presenting a Third-Party Risk Management Business Case

• Step 1: Begin Researching

  Before you can create or present a third-party risk management business case, you should first understand the core concepts of third-party risk management, research any industry regulations your organization must comply with, and meet with stakeholders within your organization. You may have a limited view of your organization’s challenges or business strategies, so it’s essential to collaborate with different departments and collect information for your business case.

  It’s also helpful to find champions for third-party risk management across the organization. Support from other departments can help make your case for why your organization needs a third-party risk management program.

  Ensure your organization is aware of any industry regulations that you may be subjected to. Check out the free, searchable TPRM Industry Regulations Library to get started.

• Step 2: Collect the data

  Data is essential for your business case. It’s one thing to present the problem and solution, but it should be backed up with hard evidence.

  External data, like the number of third-party data breaches, the average cost of a third-party data breach, or the costs of supply chain disruptions, are helpful to include throughout the business case.

  Internal data, such as the number of third parties within your organization, the number of critical and high-risk third parties, or the average onboarding time of each third party, are also helpful to include to emphasize the need for third-party risk management. You should collect and understand this data before creating the business case.

• Step 3: Write an executive summary

  Your organization should understand the reason why it needs to invest in third-party risk management. Perhaps it’s a lack of visibility into third parties, a recent third-party data breach, or third-party performance issues. This is helpful to layout in an executive summary, which outlines the current problem or challenge your organization faces and how third-party risk management provides the solution.

  This section should remain brief and provide a clear description of the current state of the organization’s third-party risk management practices, including the gaps or deficiencies that need to be addressed.

  Outline how advanced third-party risk management platform solutions effectively address key challenges such as limited visibility into third-party operations and notable gaps in compliance. These solutions provide comprehensive oversight and enhanced control mechanisms, significantly reducing the risk exposure from external partnerships. By utilizing specific examples of improved risk detection and compliance enhancements, this approach not only bolsters compliance but also helps fortify your organization against potential disruptions and liabilities, ensuring operational resilience and sustained business growth.

• Step 4: Communicate the third-party risk management landscape

  It’s helpful to understand and then communicate the third-party risk management landscape in a business case. This includes reviewing your organization’s industry, the regulatory requirements in your industry, and the third-party risks your organization faces. Be sure to include how third-party risk management can help mitigate the risks and ensure compliance with regulatory requirements.

  For example, if your organization is in the financial industry, it would be subject to the Interagency Guidance on Third-Party Relationships. If your organization does business in the European Union, it would be subject to the General Data Protection Regulation (GDPR). Regulatory requirements are often a big motivator behind third-party risk management support, so your business case should provide a summary of each third-party risk management requirement.

• Step 5: Emphasize the value and benefits of third-party risk management

  Your business case should describe how third-party risk management can benefit both your organization as a whole, as well as individual departments. Reference the meetings with other stakeholders to communicate their needs, challenges, and how third-party risk management can provide a solution to those.

  For example, if the Legal department is handling a lawsuit because a third-party vendor mishandled customer data, this lawsuit could easily cost the organization about $500,000. A third-party risk management program could help ensure data security standards are outlined in the vendor contract and have identified the potential vendor risk before it became an issue.

  An actual use case Venminder has seen was when a company struggled with manual and inefficient due diligence processes that inadequately assessed and mitigated risks, potentially leading to severe financial and reputational damage. Through the deployment of Venminder’s Vendiligence™ product, due diligence processes were streamlined and automated, enabling more effective risk analysis and management. This transformation saved operational costs and significantly reduced the risk of compliance issues and potential legal challenges related to vendor mismanagement. It ensured that critical risk factors were identified and addressed proactively, safeguarding the company from potential disruptions and liabilities.

  These examples underscore the strategic value of investing in a structured third-party risk management program, demonstrating tangible benefits in operational efficiency and risk mitigation.

• Step 6: Identify the components of a third-party risk management program

  Once you’ve presented the organization’s challenges and the solution of third-party risk management, you should begin to outline what’s needed to create and maintain a program. This includes key documents, such as a third-party risk management policy and program, necessary tools, such as document storage or a software platform, and staffing requirements.

• Step 7: Calculate the cost estimate and return on investment (ROI)

  This is an optional step for your business case – don’t include it if you don’t have the data available. However, it can be helpful to present an estimate of the cost to implement a third-party risk management program and the potential ROI of a program. ROI formulas will be different for every organization, so consider what data points will resonate with your stakeholders.

  The ROI of third-party risk management is primarily calculated through cost avoidance. The cost of investing in a program is significantly lower than the potential costs of not having one in place. For example, consider the average cost of a credit monitoring service to cover customers impacted in a third-party data breach. Multiply that cost by the number of exposed customers and 12 months of coverage. This cost could be avoided with a proactive third-party risk management program.

• Step 8: Define the timeline

  This is also optional for your business case and depends on your organization and its resources and budget. If you do choose to include a timeline, consider the size of your organization’s third-party inventory, the scope of your third-party risk management program, identify the roles and responsibilities in the program, and establish a policy.