Did you know that vendor risk management, also known as third-party risk management, started gaining traction in 2008 with the issuance of Financial Institution Letter 44-2008 by the FDIC? This regulatory guidance introduced the concept of taking a risk-based approach to managing vendors and other third parties, emphasizing the need for risk assessments, due diligence, and ongoing oversight.
Since then, other regulators in financial services, healthcare, nonprofit sectors, and states like New York, South Carolina, and California have implemented their own regulations focusing on the systematic approach to managing vendors.
So, why is this approach important? How does it impact organizations and their relationships with third parties? Let’s delve into the details to understand the significance of third-party risk management and its evolution.
The Importance of Non-IT Risks in Third-Party Risk Management
In recent years, there has been a significant shift in the focus of third-party risk management. While IT-related risks have traditionally been the primary concern, there is now growing recognition of the importance of non-IT risks. These non-IT risks include factors such as environmental, social, and governance (ESG) concerns, issues related to modern slavery, and considerations of diversity.
Organizations are facing increasing pressure from boards, consumers, and shareholders to address these non-IT risks in their vendor risk management practices. Chief Security Officers (CSOs) are adapting to this shift by expanding their risk programs to incorporate non-IT risks and considering a broader range of risk dimensions.
Procurement teams are also taking on a more significant role in third-party risk management, with a specific focus on understanding factors related to diversity, modern slavery, and ESG. This expanded scope of third-party risk management highlights the need for a comprehensive understanding of risk across different dimensions.
Recent research studies have highlighted the growing importance of non-IT risks in addition to traditional IT risks. To effectively manage third-party relationships, organizations must develop comprehensive risk management programs that consider both IT and non-IT risks.
In response to this shift in focus, organizations are now seeking unified solutions that provide a comprehensive understanding of risk across different dimensions. These solutions help organizations address non-technology centric risks such as ESG concerns, modern slavery, and procurement-related risks.
By adopting a holistic approach to third-party risk management that encompasses both IT and non-IT risks, organizations can proactively mitigate the various risks associated with their third-party relationships.
How Prevalent’s Third-Party Risk Management Platform helps address Regulatory Requirements
Prevalent offers a comprehensive third-party risk management platform that is designed to help organizations address regulatory requirements effectively. Their SaaS platform provides a unified solution that covers the entire vendor lifecycle, from sourcing and selection to offboarding and contract termination.
With Prevalent’s platform, organizations can gain a deep understanding of and effectively manage risks throughout the vendor relationship. The platform enables collaboration among different teams, fostering a culture of proactive risk management.
One of the key features of Prevalent’s platform is its ability to consolidate information from various sources, including vulnerability scans, business reputational risk, and financial risk. It also incorporates assessment capabilities to understand third-party policies and procedures, as well as to gather relevant artifacts.
Prevalent’s platform provides organizations with a comprehensive risk profile that is relevant to different job functions within the organization. This empowers teams to move beyond mere compliance checkboxes and enables thoughtful and purposeful risk mitigation throughout the entire vendor relationship.
In addition to the platform, Prevalent offers a range of services for program design, implementation, and optimization. Their experienced service teams are dedicated to supporting and assisting customers in maximizing the value of the platform and achieving their risk management goals.
By leveraging Prevalent’s third-party risk management platform, organizations can eliminate the need for cumbersome spreadsheets and manual processes. They can scale their risk management efforts and effectively address a broader range of risks beyond just IT vendors, helping them navigate the complex landscape of regulatory requirements.
