Need a Reminder Why Third Party Risk Management Is So Important? Consider Airport Security

At a conference we attended this year, one presenter represented a global bank and was responsible for global third party risk. He and his team were responsible for performing both assessments via questionnaire and onsite for many thousands of vendors. Some of the stats he shared were eye opening and he made a reference to his local airport and their TSA team which we thought made for some interesting insight and perspective.

In any given month, this airport had repeatedly detected and deterred over 15 items considered to be dangerous. Note, we are not referencing full tubes of toothpaste or nail clippers here!

So, what’s the connection with third-party risk management?

Ensure You’re Looking Close Enough at Your Vendors

On the outside, everything can look respectable, but once you go through a security scanner, issues are detected. You need to look closely at your third parties and sometimes that means doing more onsite visits.  

The presenter from the conference identified an alarming trend in defect gap rates between his assessments and his onsite reviews. Surely the findings would be similar between the two assessment approaches? Well, they weren’t. Here are the results:

• Reviews which consisted of issuing a questionnaire and reviewing responses identified just under 2% of defect issues
• When going onsite, the defects increased to 25%

Clearly going onsite, reviewing control data, testing and seeing how the vendor operated in the real world outside of walking through a questionnaire back in your own office was making a difference in effectively managing risk.

While this stat isn’t representative of all third party risk management programs, given the vast number of vendors annually assessed, it does highlight the issue that unless you are truly verifying the information provided then you may not be effectively managing risk.

The wide gap between both approaches indicates that the generic approach needs to be a little more than just a check-the-box exercise. You need to ensure your risk assessment conducted via questionnaires are adequate. While policy and procedures may provide you a sense of the vendor operation, it isn’t until you test the responses that you’ll be able to make a detailed assessment.

Vendor Questionnaire Best Practices

Follow these best practices to help you mature from a basic questionnaire review to a more informative questionnaire for your third-party risk management program:

• Do not send generic questionnaires. Develop questions that are geared to the risks associated with the vendor type.
• Do not include questions that result in a “Yes” or “No” response. Questions should insight answers that include data to enable you to make informed decisions.
• Review online information such as aerial maps from Google. Are there any identifiable environmental risks which are apparent?
• Use video conferencing or webinar sharing of information. Not all information may be shared by the vendor but review the information in a safe setting and ask questions and note the responses.
• Reference the policy and procedure documentation and ask for evidence of control data. This will help ensure they are following protocol.
• Consider that any assessment is a point-in-time exercise, so remember to ask about data points during the entire vendor lifecycle. Look at events during multiple time frames. Was a policy different in January vs June? Can the vendor demonstrate change management implementation and adherence?
• Physical security is difficult to test against unless you’re onsite. If this is not an option, consider video conferencing on a secure mobile device and request a walk through to highlight physical security controls.

While not every vendor will warrant an onsite assessment, you should make sure your critical vendors have increased levels of oversight.

So, every time you fly now and go through airport security, remember how your role is similar within third-party risk management and the importance of it.

To work through a risk assessment now, download our infographic. We'll walk you through a proper risk assessment for vendor risk management with these 9 steps.