How Third-Party Risk Management Benefits Organizations

Our State of Third-Party Risk Management 2021 survey shed a lot of light on the different ways organizations are implementing vendor risk management. Most business leaders are aware of the value that a third-party risk management program brings to their organization, but the reasons for this value may vary. For example, one leader may appreciate the cost reduction that comes from properly canceling contracts with unsatisfactory vendors. Another may see the organizational benefit of managing and understanding vendor risks.

Survey Highlights: Top Benefits of Third-Party Risk Management

When asked about the primary benefit of third-party risk management to their organization, the respondents’ answers fell within three main overall categories, with many answers overlapping into two or more areas.

1. Organizational visibility into the third-party environment: A fundamental benefit to a well-formed risk management program is the overall visibility it gives you into your organization’s relationships with vendors, and how the interconnectivity with other entities affects various areas of your organization as a whole. There is a lot of data that can be leveraged from the output of managing vendor risks at a granular level.

Here are some of the things third-party risk professionals are saying about the benefits of TPRM in this category:

• •  “Manage vendor relationships; identify inactive or duplicate services; reduce risk.”
  •  “Visibility into risks that our vendors pose to our company, and once our program matures, and understanding of supply chain gaps.”
  • “Visibility into the tools being used across the business to better understand the presented risk from a legal, security, and privacy standpoint. This also allows to help ensure we are in compliance with any applicable regulations.”

2. Understanding risk: It isn’t a surprise that assessing and mitigating risk is one of the primary benefits of performing vendor risk management. Beyond just protecting your organization, though, one of the key words that was highlighted in many responses was “understanding.”

• • “Understanding our risk of outsourcing.”
  • “Understanding about what type of risk is caused by vendors, better discipline over vendor performance, tighter adherence to complimentary controls required by key vendors.”
  • “Understanding our risks with each vendor, negotiating better contracts based on the due diligence results.”

Understanding the risk is step one to mitigating it, but when we’re focused on the details of getting assessments and due diligence completed, or as they say, “checking the box,” sometimes we lose sight of how beneficial it is just to have a better understanding of the risk environment.

3. Regulatory Compliance: Compliance issues are known to result in hefty fines and other penalties, so it’s understandable that third-party risk management is vital to remain in compliance with regulators.

Needless to say, it was also another heavy hitter for our respondents:

1. • “It helps centralize the information into one area for consistency and allows us to remain in compliance with all of the regulating authorities.”
   • “Compliance with regulatory requirements. Structured review with SME provides occasional End-User-Compensating-Control adjustments.”
   • “Compliance with regulatory guidance and mitigating risks to fall within the enterprise risk appetite.”

We don't need a whitepaper survey to know that 2020 brought an increased focus on the need to manage third-party vendors and understand the risks associated with these relationships. But, when we dive a little deeper and put these practices into place, it's easy to see the many ways in which third-party risk management can benefit an organization. Not only does it satisfy regulators, but by having a better bird's eye view of the vendor environment and truly understanding the associated risks, it also serves as a significant operational advantage. 

Check out the State of Third-Party Risk Management Whitepaper to discover more survey highlights. Download the whitepaper.