What is Third Party Vendor Risk?
Third party vendor risk is any risk brought to your company by a third party. For example, it could be partners, contractors, service providers, suppliers, vendors, or anyone else that has access to any of your company’s data. If they have access to internal customer or company data, the processes or systems, or any other sensitive data, they could pose a risk.
How Do You Manage Third Party Vendor Risk?
Right now, the risks are managed in a siloed approach which means one department does not share information to another department. This is risky because if one department knows of a risk, and another does not, it can be detrimental to the company. If they shared the information, they could both work on destroying the risk.
You want all the departments to talk with each other and respond to all the risks in a similar way so that you can destroy the risk instead of perpetuating it. To avoid a third party vendor risk, you can do a third-party vendor assessment. This will help your company to stop the risks before they have a chance to destroy your company.
Why is Third Party Risk Management Important?
You must have third party risk management – it is vital to the well-being of your business. It helps to ensure that the companies that you deal with are upholding the laws, regulations, and standards that you all must follow. If the vendors that you deal with do not uphold these laws, regulations, and standards, that can get your business in trouble, as well. This can not only ruin your reputation as a business, but it can also lead to financial ruin, as well.
There is a three-step process that you need to go through to mitigate the risks: risk identification, impact assessment, and risk mitigation. If you follow these steps and take care of things at each step, then you should have your risks mitigated before long. You might also be able to take legal actions if the risk was done by third party vendors maliciously.
What is a Third-Party Assessment?
When you are getting new partners, you need to go through a third-party assessment. To do this you need to collect information through interviews and questionnaires. You can also get the information through an external rating company that can give unbiased information. You can find out more about external rating companies here. This information might help you to find any weaknesses or vulnerabilities that the third-party vendor may have.
You also need to make sure that they comply with the regulations and the same ethics that you do. If they do not comply with the regulations or share your ethics, they may leave you open to severe consequences for financial, reputational, or legal issues and you can get high fines.
What is the Difference Between Vendor and Third-Party?
In business a third-party is an external party that provides products and goods to a company. Vendors are just one type of third party, as are suppliers and others who provide products to the company. A vendor is usually a seller but does not always manufacture the goods.
Sometimes the terms vendor, third-party, and third-party vendor all mean the same thing. It might not be factually accurate, but they can be used interchangeably.
What is a Third-Party in Business?
A third party is one that does not interact directly with the business but provides a service or product for it. The third party works with the seller and the buyer but does not interact directly with them. Learn more about how a third party interacts with others here: https://www.investopedia.com/terms/t/third-party-transaction.asp. An example might be a store that sells dresses and a buyer that buys the dress. The third party might supply the dresses to the seller but does not have any direct contact with either the seller or the buyer.
How Do You Manage Third-Party Vendors?
Most companies use more than one third-party vendor, sometimes there are many. It is difficult to manage just one third-party vendor, so imagine how much more difficult it is to manage more than that. You need to deal with different contracts, different pay rates, and different contacts. Because of this you might not want to manage them all, but it is something that you must do.
If you do not manage the third-party vendors that you work with, you may see a ripple effect that can affect your customers, the consumers, your employees, and maybe even your reputation. You really need to manage the third-party vendors so that you and your business are safe.
These are just a few of the things that you need to know about third-party vendor assessments. They are basically assessments that help you to determine anything that your third-party risks to your company. These assessments will help you to keep you and your business safe from financial and reputational ruin.