How Third-Party Risk Management Can Be Your Competitive Advantage?
It is almost impossible for businesses to succeed in today’s competitive market alone without the help of third-party vendors. Supply chains globally require services and products from third parties for improved efficiency and maintaining high standards. However, with each partnership, an organization faces risks like digital security, privacy issues, business problems, regulatory compliance, physical security, and more.
Third-party risk management becomes really vital in such cases as it helps organizations from data breach, supply chain attacks, and maintains their brand reputation. Managed third party risk ensures safety and interconnected workflow of an organization with its vendors. It allows the identification, assessment, and mitigation of several risks that may arise.
Read further to learn how third-party risk management offers competitive advantage to organizations and helps them succeed.
Importance of Third-Party Risk Management (TPRM)
TPRM focuses on the identification and mitigation of risks that arise through partnerships with third-party vendors, suppliers, partners, etc. It allows organizations to understand the third-parties they partner with, how they utilize them, and how these partners safeguard themselves. The requirements and scope of TPRM depends on an organization, its industry, and several other factors.
Cyberattacks and data breaches are rising rapidly and third-party risk management is essential to fight them. Most businesses have a wide ecosystem and this also makes fourth party risk management important to identify and reduce the risks that partners of your third-party vendors pose. TPRM helps mitigate the following for an organization -
Cybersecurity risks
Operational risks
Legal and compliance risks
Reputation risks
Financial risks
How Third-Party Risk Management Offers Competitive Advantage?
A recent survey by Gartner stated that over 84% of executives believed that third-party risks led to disruptions in business operations and had a detrimental effect on their organization.
This makes third-party risk management really important for businesses that partner with third-party vendors. Organizations globally make use of TPRM services as this helps improve their business operations. They gain a competitive advantage in their industry through -
Reduction & Mitigation of Risks
Third-party risk management makes sure that you can identify and mitigate risks related to your partnerships within a timely manner. Through due diligence, activity monitoring, strategies for risk mitigation, etc. It allows organizations to tackle compliance problems, reputation damage, financial problems, data breaches, and ensure operational efficiency.
Regulatory Compliance
TPRM helps your business comply to all applicable rules, regulations, laws, and other industry standards. Through verification of your third-party partners’ compliance with legal requirements, you can stay safe from reputation damage, penalties, and other possible disruptions that your organization may face. It also sets your business apart from competitors that are non-compliant.
Improved Brand Protection & Reputation
When you get into partnership with third parties, your brand faces a risk of damage to its reputation. Risk management protects your brand and safeguards its reputation. This shows that your organization follows ethical practices and manages the supply chain in a responsible manner. Also, this maintains the trust of customers and stakeholders in your organization, thanks to your reliability and security.
Efficient Operations & Business Continuity
Managed third party risk ensures efficient operations and reduces any disruptions that your business may face due to third-party risk factors. It helps your organization perform better than competitors who have to tackle third-party failures. Through business continuity and performance reliability, you can reduce delays and ensure high-quality for customers.
Financial Protection & Cost Efficiency
Your organization can save many costs and benefit from financial protection through third-party risk management. Evaluation of third parties makes sure you don’t partner with vendors who may default on payments or those who may not be able to provide services and products on time for you. You also save on hefty fines and penalties by maintaining regulatory compliance.
Better Partnerships & Decision-Making
With a trustworthy and reliable TPRM program, you get proper insights and information about all your third-party partnerships. Therefore, you can partner with vendors that meet your requirements, business goals, values, and standards. With better decision making, you can build reliable and strong long-term relationships. Also, fourth party risk management allows you to evaluate further partnerships of your third-party vendors.
Data Protection & Improved Cybersecurity
Cyberattacks are steadily rising and data breaches are the most common issues that organizations face when dealing with third-party partners. TPRM offers high-level security that reduces unauthorized access, data leaks, and data breaching. This way, businesses can comply with data protection laws and protect their confidential information.
Conclusion
When your business partners with other suppliers and vendors, you have to stay ready to tackle third-party risks and respond to unforeseen problems. Third-party risk management doesn’t just identify and mitigate risks, but also helps improve your business operations.
As discussed above, managed third party risk helps businesses gain a competitive advantage through business sustainability, reputation management, financial stability, shareholder and customer trust, cybersecurity and data protection, and much more. In order to have reliable partnerships and improve business operations, third-party risk management is a must.
