12 Features to Look for in Third-Party Risk Management (TPRM) Software

Introduction

Used predominantly in the past to improve back-office operations and cut down on costs, third-party products and services have increasingly become mission critical.

These products and services, covering all aspects of the modern enterprise, from information technology to finance and accounting, customer service support to human resources administration, boost competitive advantage and accelerate innovation.

They aren’t without risk, however, as the recent CrowdStrike outage, which shut down millions of Windows systems around the world, demonstrated.

Third-party risk misses are common

Even before the CrowdStrike incident, third-party risk misses were common, necessitating the introduction of third-party risk management software.

In a September 2022 Gartner surveyⁱ of 100 executive risk committee members, for instance, 84% of respondents revealed that third-party risk misses resulted in operations disruptions.

Two thirds of those misses resulted in adverse financial impact. Meanwhile, 60% resulted in either increased regulatory scrutiny or adverse reputational impact, according to the same source.

More needs to be done to mitigate third-party risk

Given the frequency of misses, is enough being done to mitigate third-party risk?

Industry data paints a mixed picture.

In its latest third-party risk management survey, EY showed that less than half of organizations (48%) have exit strategies or contingency plans for high-risk third parties. More than half remain unprotected.

The same holds for integrated resiliency plans for critical third parties, another means to mitigate third-party risk and ensure efficient response to third-party incidents.

The same survey proved that only half of organizations (51%) maintain an integrated resiliency plan for critical third parties.

The numbers were worse for conducting integrated resiliency testing, which only 47% of organizations run. Even fewer (45%) perform scenario analysis.

Shifts in third-party risk management

Despite those dismal numbers, there’s clear evidence that organizations are starting to take third-party risk management more seriously.

Again, according to EY, more than three quarters of organizations (77%) send between 101 and 350 questions on third-party control assessments.

The consultancy also picked up on a beneficial cross-industry trend, “toward centralized, organization-wide standards for third-party risk management programs and additional due diligence around third-party risk that includes a governance or reporting component.”

It’s also noteworthy that organizations with advanced integrated resilience capabilities are “moving to include all third-party types into a single program rather than assessing them separately.”

Increased use of data and technology in third-party risk management

Those companies also stand out for the use of data and technology, specifically external data and automation, in their third-party risk management efforts.

Has the move to external data and automation in risk reporting been beneficial? The consensus is yes. Many companies have improved understanding of their overall third-party risk posture.

As a result, 42% of organizations plan to integrate automation to better manage reporting. And nearly two thirds of organizations (63%) plan to integrate external data providers and automation to better manage inherent risk assessments in the next 2–3 years.

Features to look for in third-party risk management software

Beyond introducing external data sources and leveraging automation, there’s a lot more to consider when trying to mitigate third-party risk in the present risk environment.

Such as?

Here, we’ve seen the rise of platforms purpose-built to streamline activities related to third-party risk management.

What do these products do?

Using automated workflows to invite vendors and gather due diligence information using questionnaires and documents, these third-party risk management software solutions serve to simplify the onboarding process for third parties. And once onboarded, service details, contracts, and risk assessments are set up in collaboration with vendors to ensure alignment between parties.

Of course, that only scratches the surface of what advanced third-party risk management software can do. For those creating a business case, we’ve compiled the 12 features to look for when considering third-party risk management software:

1. Prioritized activities’ mapping

With third-party risk becoming more prolific, heterogeneous, and complex, dependency mapping provides the means to manage information overload, enabling organizations to identify and prioritize what matters most in a way that’s digestible.

Historically, though, relevant platforms have presented a somewhat narrow view of prioritized activities’ dependencies. To gain a fuller picture, users have had to navigate away from original context to other dashboards.

Not anymore. Buyers can now seek out TPRM tools that allow them to easily visualize relationships and dependencies across their organization. Such relationship mapping functionality provides the requested visual representation, one that illustrates the relationships between different objects within the system, to enable teams to get a clear picture of what matters most to the organization and associated dependencies.

A further benefit: this functionality drastically enhances an organization’s ability to develop viable resilience strategies and make the right decisions when a business disruption occurs, as for instance the relationship map can reveal that a key supplier is a single point of failure for a critical product line.

2. Integration of third parties into resilience initiatives

Buyers should also seek out TPRM software that incorporates third-party risk management into the wider resilience workspace to align third parties with all resilience initiatives – from anticipating disruptions using risk intelligence, improving preparedness with risk assessments and dependency mapping, through to collaborating during incident response.

3. Automation of ongoing monitoring and follow-up activities

Automation is booming in the TPRM software space. But not all automation is created equal.

Buyers should, therefore, seek out third-party risk management software that supports monitoring of third parties on an ongoing basis, to ensure that the organization has the right data to improve the resilience of the third-party ecosystem. This includes automated document and questionnaire updates, third-party status updates, risk assessment and action monitoring, plus risk intelligence to stay ahead of emerging threats.

4. Configurable analytics to identify top issues

As noted, data is power when it comes to third-party risk management. And to this end, the right TPRM solution can enable organizations to leverage the data collected from their ecosystem and visualize it using configurable analytics to identify top issues and opportunities for improvement.

To satisfy obligations, insights can then be shared with internal stakeholders or externally with regulators as required.

5. Vendor onboarding

Buyers should also seek out TPRM software that empowers vendors to participate in resilience initiatives through their own workspace, resulting in less manual work following up with vendors and better-quality data to enable the team to identify the top opportunities to improve resilience.

6. Vendor services

Along the same lines, the right third-party risk management solution will help organizations understand the dependencies that exist in their organization, by capturing the services each vendor provides and relating these to contracts, fourth parties, risk assessments, corrective actions, and incidents. This will help provide a full picture of the dependencies that exist in the organization.

7. Risk management

Buyers should also consider TRPM software that enables their teams to proactively identify and assess risks at a service level, identify and implement controls, and monitor on an ongoing basis to manage vendor risks as part of the wider risk management program.

8. Action management

Data is important, because it leads to action throughout the third-party risk management lifecycle. To streamline that lifecycle, TPRM software should help assign actions to vendors to complete in their workspace. Leveraging automated reminders to ensure actions aren’t missed, that functionality ensures actions are delivered on time and at the standard expected.

9. Due diligence

Third-party risk management software should also help streamline due diligence using questionnaires which will be sent to vendors to complete or request documents including insurances and certifications. This will then be set on a recurring refresh cycle to ensure vendors have adequate controls in place to deliver services on an ongoing basis.

10. Contract management

What about contract management? Here, TPRM software should help manage vendor-service contract details to ensure they are aligned with the resilience needs of the organization, then monitor performance to ensure vendor-service levels are maintained over the lifetime of the contract, and take action if obligations are not upheld.

11. Risk intelligence

Smart third-party risk management software is aware of emerging threats, not just responsive to current incidents. To find smart solutions, organizations should be looking for TPRM software that proactively detects emerging threats to vendors using threat intelligence capabilities so that organizations can anticipate potential disruptions, improve preparedness, and respond effectively when threats escalate into incidents that have the potential to cause disruption.

12. Analytics and reporting

To capitalize on the trend toward better third-party risk reporting, organizations should seek out a solution that helps consolidate data to gain valuable insights and visualize it through interactive dashboards, charts, and maps in real-time.

Noggin for Third-Party Risk Management

Finally, third-party products and services are increasingly becoming mission critical. The boost in efficiency, however, must be counterbalanced against the risk of dependence.

That risk is becoming increasingly acute as third-party incidents become more frequent and costly.

What can be done? Many organizations are embracing automation in third-party risk management software.

However, not all TPRM software is created equal. As we’ve laid out, considering the solutions with the 12 features we’ve suggested will help streamline the third-party risk management lifecycle.

Where to turn to, though? Solutions like Noggin help you collaborate with third parties in a unified workspace dedicated to enhancing resilience. From onboarding and due diligence to risk monitoring, contract, and action management, Noggin equips your teams to pinpoint and address the top issues across the vendor ecosystem.

Don’t just take our word for it, though. Request a demonstration to see Noggin in action for yourself.

Sources

ⁱ Gartner: Gartner Survey Shows Third-Party Risk Management “Misses” Are Hurting Organizations. Available at https://www.gartner.com/en/newsroom/press-releases/2023-02-21-gartner-survey-shows-third-party-risk-management-misses-are-hurting-ororganizations.