In the current interconnected business world, organizations primarily rely on Third parties like vendors, suppliers, partners, and service providers. This relationship brings operational efficiency and innovation but poses several risks, such as cyber security threats, regulatory compliance issues, and reputational damage. To mitigate these risks, organizations adopt TPRM.
TPRM stands for " Third-Party Risk Management." It's a method for discovering, evaluating, and mitigating risks when dealing with an external third party or vendor. This blog will discuss the top 5 TPRM challenges and how you can overcome them.
Why is TPRM Important?
TPRM is crucial for an organization's security as it:
- Safeguard the company from possible risks such as data breaches or compliance breaches.
- Also, ensure that the vendor lives up to expectations and requirements.
For instance, a firm hires a Third-party IT vendor to operate its Data Center. The IT vendors may have access to customer-sensitive data, posing a massive compliance risk. The risk can be mitigated by implementing ServiceNow TPRM, resulting in the following actions:
- Performing Risk assessment using a Questionnaire.
- Implementing stringent rules for Data Protection.
- Audits periodically assist in keeping track of the provider’s compliance.
As an outcome, the firm mitigates any possible risk and ensures customer trust.
Key Challenges in Third-Party Risk Management (TPRM)
Third-party risk management within an organization has challenges that impact security, compliance, and operational effectiveness. Some of the major challenges in TPRM are:
1. Identification of Cybersecurity Risk:
Cyberattacks are on the rise, and poor third-party or vendor security exposes the organization to "data breaches," "ransomware attacks," and "unauthorized access" to sensitive data. A compromised vendor results in financial loss and reputational damage for the organization.
Following are the solutions for these issues
- Periodic cybersecurity audit for all vendors.
- Automating risk assessment, security audits, and compliance tracking using ServiceNow TPRM.
2. Lack of Visibility in Third-Party Risks:
Third-party information is stored in various departments (such as IT, Risk Management, Legal, etc.) in different organizations, which results in incomplete risk assessment. Lack of visibility can result in risk identification delays, security gaps, and regulatory breaches.
These issues can be tackled by
- Adoption of "real-time dashboard and analytics" in ServiceNow TPRM to consolidate third-party information.
- Centralized risk repository to monitor vendor performance and regulatory compliance.
3. Regulatory and Compliance:
Suppliers or third parties must abide by standards such as "GDPR," "HIPAA," "CCPA," and "ISO 27001". Non-compliant third parties or suppliers can expose an organization to the risk of legal fines, lawsuits, and reputational damage.
These issues can be tackled by
- Map Vendor risk assessment to regulatory obligations using ServiceNow TPRM.
- Automate compliance monitoring and flag non-compliance vendors.
- Schedule recurring compliance audits for optimum security standards.
4. Managing the Volume and Complexity of Third-Party Relationship:
Organizations deal with hundreds or thousands of vendors across various locations and industries. Manually tracking risk levels and compliance can be inefficient and a contractual obligation.
Poor vendor management can cause missing compliance deadlines, increased security vulnerabilities, and operational inefficiencies.
These issues can be tackled by:
- Assist in Automating Vendor Risk Assessment according to risk tiering.
- Beneficial for categorizing vendors according to Services, criticality, and compliance requirements.
5. Absence of Continuous Monitoring:
Most organizations discover vendor risk only during onboarding, thus exposing them to emerging threats for the rest of the relationship. A vendor who is initially compliant might become non-compliant over time, offering the organization unmonitored risks.
These issues can be tackled by
- Having constant vendor monitoring through automated alerts for security breaches, policy non-compliance, or breaches.
- Employing ServiceNow TPRM's real-time risk scoring to monitor vendor risks dynamically.
- Performing regular reassessments and audits to verify that vendors stay compliant.
How does ServiceNow TPRM solve these Challenges?
ServiceNow provides a powerful TPRM1 solution that allows organizations to automate and continuously monitor third-party risk management of their processes.
1. Automated Vendor Risk Assessment and Onboarding:
Organizations are bogged down while manually onboarding and evaluating vendors; this poses compliance risks and delays. ServiceNow TPRM provides solutions like:
- An automated onboarding process and the sending of risk assessment questionnaires2 (IRQ) assign vendors a risk tier according to pre-defined parameters.
- Auto vendor risk calculation from responses.
- Integrations of compliance frameworks (ISO 27001, NIST, GDPR, etc.) ensure that vendors comply with security standards.
2. Centralized Third-party Portfolio Management:
Due to siloed and fragmented data between departments, third-party information is challenging to manage. The solution is delivered through ServiceNow TPRM:
- Single, unified repository for all third-party vendors, contacts, and activities.
- Real-time tracking of vendor relationships, risk level, and compliance status.
- Compatibility with existing supplier management tools to facilitate uninterrupted data synchronization.
3. Continuous Monitoring & Risk Alerts
Organizations usually do point-in-time assessments rather than continuous risk monitoring. ServiceNow TPRM allows:
- Real-time vendor monitoring via up-to-date data and security feeds.
- Security incident alerts, compliance threats, and policy violations.
- Seamless integration with security solutions (BitSight, RiskRecon, Security Scorecard, etc.) for round-the-clock risk intelligence.
Also, read Leading Emerging Trends in Vendor Risk Management
4. Vendor Security Issue and Risk Remediation Workflow:
Firms face challenges in monitoring and resolving Vendor security incidents promptly. ServiceNow TPRM provides:
- Risks issue automated generation on vendor security and compliance test failure.
- Risk issue prioritization based on impact and severity.
- Task assignment to remediation responsible stakeholders.
- Dashboards for tracking offer transparency into issue resolution progress.
Case Study: How Companies are Implementing ServiceNow TPRM
Consider a global finance services organization with over 5,000 vendors experiencing growing third-party risk. The manual vendor risk assessment process was time-consuming, inconsistent, and did not provide real-time risk visibility.
Challenges Faced:
1. Manual Process: Manual execution of risk assessment causes inefficiencies.
2. Vendor Risk Evaluation: Inconsistent vendor risk evaluation due to varying teams.
3. No Real-Time Monitoring: No adequate system to monitor vendor risk scores dynamically.
ServiceNow TPRM Implementation:
ServiceNow TPRM was adopted by the organization, as a component of Integrated Risk Management (IRM), which automates and enhances Third-party risk management.
1. Risk Assessment Automation: Suppliers have to complete pre-defined risk questionaries. Responses were also auto scored, classifying suppliers as Low, Medium, or High Risk.
2. Risk Monitoring in Real-Time: External risk intelligence sources integration to refresh vendor risk profiles.
3. Vendor Risk Centralized Dashboard: This dashboard provides a unified view of all vendors, their risk levels, and mitigation activity.
4. Remediation and Issue Management: Discovery of security deficiencies and action plans assigned to the vendor.
Outcomes:
- Reduced timing of vendor assessments.
- Enhanced compliance.
- 360-degree risk visibility in real-time.
Best Practices in Implementing ServiceNow TPRM
Firms can review, monitor, and minimize third-party and vendor risk with ServiceNow TPRM.
1. Define thorough TPRM strategy: Determine the goal of your TPRM program, e.g., regulatory compliance, vendor risk reduction, and operational resilience improvement. Involve the vendor, risk manager, procurement, compliance, and IT security in the process too.
2. Automate Vendor Onboarding & Assessment: Every vendor will undergo a Risk Assessment prior to contract authorization. The TPRM workflow will trigger evaluation automatically based on vendor risk categorizations.
3. Incorporate External Risk Intelligence: Continuously monitor vendors by integrating external risk intelligence sources, keeping stakeholders informed about expired certifications, high-risk vendors, and emerging threats.
Also, read A 4-Step Guide to Vendor Risk Management
Conclusion
A properly implemented ServiceNow TPRM solution enhances organizations' capability to recognize, evaluate, and mitigate vendor risk effectively, leveraging automation, real-time monitoring, and ITSM & GRC integration.
To maximize the value of TPRM, organizations must prioritize clear risk evaluations, ongoing monitoring, and process refinement. Periodic reviews aid in AI-based insights and proactive mitigation tactics ensure a safe vendor ecosystem.
Secure your vendor ecosystem with inMorphis, a ServiceNow-invested partner. Automate risk assessments, ensure compliance, and gain real-time vendor insights, all in one powerful solution. Contact us now!
