Third-party relationships have become an integral part of many financial institutions' operations in the modern, interconnected business world; while offering numerous benefits, these relationships also introduce many risks. 87% of organizations have reported incidents with third parties that disrupted their operations. As the reliance on third-party vendors intensifies, the imperative to manage the associated risks becomes paramount.
Best Practices of Third-Party Risk Management for Financial Companies
Update Your Data Map to Include Third-Party Vendors
The foundation of your third-party risk management program should encompass all consumer data that your vendors have in a data map. A clear view of the data your vendors can access, and their usage patterns will guide you in establishing appropriate agreements and seeking compliance information.
Have a Framework and Defined Processes for Assessing Third-Party Risk
Your organization should have a third-party risk assessment framework before beginning vendor research. This framework should be a high-level guide detailing vendor risk management procedure providing steps for senior management across different business lines.
The framework should also describe day-to-day third-party risk management responsibilities, ensuring that every effort is logged. Review past application vulnerability assessments and consult your company’s compliance policies to ensure vendors meet your standards.
Base Your Vendor Risk Management Program on Industry Standards
You can utilize vendor assessment programs from established enterprises, like Microsoft and Adobe, as a foundation for your vendor assessment framework. For instance, Adobe’s Vendor Assessment Program white paper details the security controls they assess for every third-party risk management effectiveness. Some rules to consider include the following:
- Assertion of Security Practices
- User Authentication
- Logging and Audit
- Data Center Security
- Vulnerability and Patch Management
- End-point Protection
- Data Encryption
Develop Structured Vendor Onboarding and Offboarding Processes
Just as employees have an onboarding process, financial institutions should also have one for vendors. Ensure vendors understand your information security standards and have agreed to adhere to them. For instance, communicate your "Bring Your Own Device" policies if vendors use personal devices for work.
Implement Third Party Risk Management System to Streamline Processes
In the digital age, implementing a third-party risk management program, to manage third-party risks, is not just a luxury but a necessity. Here's how software solutions, like Predict360's Third-Party Risk Management Software, can streamline the process:
Centralized Data Repository
It provides a centralized platform where all third-party data, including contracts, risk assessments, and compliance documents, can be easily stored and accessed.
Automated Risk Assessments
Automation ensures that risk assessments are conducted regularly and consistently. It also helps in identifying potential threats promptly.
Real-time Monitoring
With real-time monitoring capabilities, any changes in the risk profile of third parties can be detected instantly, allowing ample time for swift action.
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