Third Party Risk Management
What is Third Party Risk Management Software?
Third-party risk management (TPRM) is a form of risk management that focuses on identifying and reducing risks relating to the use of third parties, sometimes referred to as vendors, suppliers, partners, contractors, or service providers.
Recent events, such as the global pandemic and the Ukraine invasion, highlight the huge strategic impact of third-party failures and how quickly risk strikes. These events have helped organisations know that they need to improve the resiliency of their supply chains and critical third parties.
Post-pandemic trends show an increase in leadership focus and investment in third party risk management, driving transformational change. Recent studies have shown this is characterised by smarter third-party segmentation, increased focus on sell-side third parties and integrated technology solutions that improve efficiency and reduce cost. However, organisations face challenges from emerging risk domains, including geopolitical and climate change.
Recent surveys (of more than 1,000 organisations across more than 30 countries) report that organisations have made incremental improvements to the way they manage third party relations, from an efficiency, cost effectiveness and decision-making perspective. Hindered by functional silos and decentralised systems, they aspire to develop a more holistic and integrated approach.
Business responsibility and social purpose is a key element of integrated business strategies. These recent surveys note that this is demonstrated by significant growth in the level of awareness and focus on ESG in the extended enterprise, however, many organisations don’t have the formal mechanisms to assess or prioritise ESG risks in their extended enterprise.
Third Party Risk Management software supports an organisation with the end-to-end management of their third party due diligence and ongoing monitoring of the risk posed by any third party. This includes the collection of information from the third party via questionnaires and the usage of external data sources that when combined enable the risk of a given third party to be scored. CoreStream’s TPRM capability has been designed to bring the latest capabilities to any organisation, whatever data sources a business wants to use.
It enables business owners, compliance and procurement teams to engage with the platform to commence a third party due diligence process with the third party interacting with the platform. Automated data sources are leveraged with the platform facilitating the end-to-end process. This enables the solution to automatically risk score third parties and provide recommendations to management for a final decision regarding take-on and ongoing engagement with the third party.
What are the benefits of Third Party Risk Management Software?
TPRM Software helps to ease the time consuming, administrative burden of performing due diligence over third-parties to determine the risk to an organisation prior to engagement of that third party. CoreStream’s capability goes further through its unique flexibility and features that enable it to meet any organisation’s need.
It enables business relationship owners and/or procurement to request a third party be set-up and based on the service being required assess the inherent risk of the third party service combination. This enables an organisation to determine the risk of a third party based on the service they wish to procure from them.
Based on the inherent risk profile, third party questionnaires are issued to the third parties for risk domains that pose a higher threat to determine how the third party addresses the risk, including the provision of evidence. At the same time, third party data sources are utilised to assess sanctions risk, adverse media for the elevated risk domains and financial health of the third party. Different levels of screening can be performed depending upon the inherent risk profile and/or the results of the first phase of screening from automated data sources.
A risk rating is generated for each third party to enable a decision to be made regarding engaging the third party or otherwise. Mitigating actions may be required on both the organisations side and the third party, these can be agreed and tracked as part of the engagement with the third party.
If the third party due diligence were to be performed manually, this process would be inefficient and costly. The utilisation of a leading digital solution not only drives cost efficiencies and timely due diligence but it enables the collection of multiple data sources to assess the risk of a third party. Without this, an organisation may enter into a relationship with a third party that could cause regulatory, reputational and/or financial damage.
What are the risks of not having Third Party Risk Management Software?
Without TPRM software the process of performing third party due diligence is inefficient, costly and due to the time taken to perform the due diligence risks are highly likely to be missed. This could result in an organisation engaging with a third party that may create regulatory, reputational or financial damage to their business.
The TPRM solution configured on the CoreStream platform leverages decades of experience in TPRM along with the intuitive and flexible nature of the platform. There are a number of different pre-configured versions depending on your organisations approach to TPRM or we can configure the platform to your exact requirements and chosen data sources.
Key features include:
- Risk segmentation based on your organisation’s chosen approach;
- Based on the inherent risk of a third party and service workflow automatically facilitates the assessment;
- Third party questionnaires, with branch logic, based on your requirements with the ability to upload third party documents;
- Ability to consume data from various providers through API, including screening, adverse media and financial information;
- Interface with your ERP and CRM solutions;
- Ongoing sanctions and adverse media monitoring via API connectors;
- Ability for enhanced due diligence with your chosen provider having access to the platform; and
- Realtime dashboarding and reporting, including risk alerts against third parties.