When building a framework for a third party risk management program, a good solution must cover the ongoing due diligence of third parties.

This part of the process requires deeper dives into areas of risk such as IT security, financial stability, corruption and bribery etc. This is accomplished through multiple activities including the use of in-depth questionnaires, the screening of third parties against external databases such as World-Check, Dun and Bradstreet for financial standing and the scheduling and documenting of activities such as on-site visits, phone interviews etc. 

It is estimated that 90% of the risk management team’s time will be spent on activities around existing vendors and third parties. This on-going due diligence is essential to the success of the program and an area where automation can make a significant contribution.

The priority Is to execute your defined monitoring program to protect against reputational and regulatory risk. Any vendors or business partners who are classified as high risk must be monitored more closely and an automated system allows you to do this efficiently.

Now that your ongoing due diligence program is active, you can start to look at specific tasks such as certifications and attestations to ensure your policies are being followed through by all parties.

Third party due diligence is only one part of an effective third party risk management program.

Click below to learn more about the other essential elements of a third party vendor risk management framework.

Third party data and contracts repository

Overcoming data dispersion to create a single integrated data pool is vital.

One of the principal challenges initiating the process to more effectively manage your third parties is the probable dispersion of third party data across the firm.  This is exacerbated if there are multiple divisions, departments, countries and if they are stored in multiple data repositories. 

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Missing third party data

It is highly probable that you will not have all the data you need from internal sources to conduct your risk assessment on the third parties. You will need to be sure that your platform is capable of gathering data from multiple external data sources.

To learn more about the different external data sources you will need, click here.

Risk scoring and assessment

Consistent risk assessment, scoring and classification are foundation activities.

Once you have your initial data about the third party, it is time to assess the risk and assign a risk classification to each vendor or third party. You will need to be methodological in your approach as regulators are expecting to see a robust, well-designed structure.

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Onboarding and terminating third parties

Onboarding of new third parties is a key process for the firm and implementing procedures to ensure that the correct third parties are on-boarded is critical.

It is an important part of your third party risk management program. 

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Oversight, reporting and analytics of third parties

Good oversight delivers better management and program control.

Once your third party risk management program is up and running, oversight of the program and the ability to conduct analytics of the program is very important. An automated solution should enable firms to quickly see the risk classifications of their third parties, the risk assessment and due diligence activities that are upcoming and past due. 

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Issue and case management of third parties

A robust solution must be able to handle and help you to resolve your issues and cases.

When you are classifying the risks and conducting due diligence you also need a robust system that can manage those occasions when a supplier or third party does not meet the standards set out in your policy documents.

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