Today the risk of doing business with a third party is real; one area that has bedeviled the corporate executives is on How to measure the third party risk. Now it’s really important for the entities to consider, if not implement a collaborative synapse that helps companies of all sizes effectively govern their third-party universe. Let’s consider formulating ROI (return on investment) around the risk management of third parties.
The consequences of a risk event are not only disruptive but unimaginable but often result in reputational damage that can seriously affect the bottom lines of both the customer and the third party. Suppliers that can make third-party risk management (TPRM) easier for customers (be it banks.) by being more proactive, transparent, and helpful will distinguish themselves in a more competitive environment. At the same time when you start combining TPRM with ROI may seem like a doubly daunting task. It is now your job to bring in TPRM into the organization as a business process, with a technological solution, the ROI becomes not only clearer but easier to calculate going forward.
It is no longer going to be sufficient for a third party supplier to rely on its reputation. To become a trusted partner of a customer, third parties must demonstrate that they are compliant with the customer’s TPRM throughout the RFP, due diligence, onboarding processes, and lifecycle of the engagement. When a risk event does occur, third parties must be willing to share responsibility. A technological solution with a framework to evaluate the potential financial impact of the 3rd Party Risk Management solutions for your organizations, to leverage risk assessment automation tools to reduce, mitigate, and de-lever the risks associated with a number of 3rd and 4th party vendors. TPRM associated with threat monitoring will help the customer to streamline and automate processes to perform higher-quality assessments at scale, if you are able to provide a technological platform, you can enhance both the speed and efficiency of your risk assessments on an ongoing basis. The decrease in the time it would take for every individual risk assessment, both in terms of length and compliance department man-hours will yield an immediate cost saving for your compliance function enabling you to better meet business objectives and reduce overall third party risk witnessing dramatically improve compliance and security risk exposure.
The speed and robustness of this approach or solution is a key element in operationalizing your compliance program in the area of third parties. The prevent component of any compliance regime is improved as you would have better visibility into each and every potential non-compliant third parties which you may have to discharge. You would also have the ability to work with non-compliant third parties to remedy any issues before they become legal obligations and violations and then recommend an extra monitoring as appropriate. Using this approach as a guide for the ROI calculation would be something along the lines of the number total number of hours you spent on each risk assessment x the total risk assessments performed x the hourly rate of the compliance professional performing the services. Of course, you will have to subtract out the cost of any technological solution but with these types of efficiencies, your ROI will still be quite impressive.
There are still a wide variety of other factors that could increase your ROI, which include renewal of assessments, ongoing monitoring, and an increase in business efficiencies for both your organization and the third parties, which would all work to uplift your ROI with a smiling curve. Most critically you would be able to demonstrate the operationalization of your compliance program into the very fabric of your organization
Authored By - Saiprasad Villivalam
TCS Enterprise Security and Risk Management
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