Navigating the Third Party Risk Management Lifecycle: A Comprehensive Guide

Steps In The Third Party Risk Management Lifecycle

There are a few primary stages involved across the lifecycle of a third party, each of which comprises numerous steps. These involve specific points across the relationships, and it is vital to know about the risks that prevail, ensuring the risk mitigation of the vendors as follows:

Pre-Contract Risk Management

The initial stage involved in the third party risk management lifecycle arrives right before the initiation of the relationship before you enter into the best contractual agreement. There are two complex activities taking place. The initial activities involve the third party risk assessment with the aim of identifying and understanding the risks that are specifically inherent across the relationships.

Knowing about these inherent third party risks is important since you can use the details to third party cyber risk assessment. It is a vital step in the risk management process that enables you to dive deeper into the systems, policies, and controls to determine whether there are any residual risks that you should address.

Contracting

The main element involved with third party risk management is creating good contracting principles and provisions. It is vital to know about the risks that are often shared or assumed by the relationship parties, striking a significant balance in the manner in which the risks are distributed. The following are the provisions that mitigate the third and fourth party risks involved in the contracts.

• Business Continuity and Disaster Recovery cover what happens in the event of a service interruption. It includes the right to test the business’s continuity plans. 
• Data Ownership and Transfer: It identifies the ones owning data that gets stored or collected and the processes that get followed to get the data back whenever required.
• Indemnity and Liability: Enables relief when the vendor performs anything wrong or falls at performing as it sets the limits surrounding the losses resulting from vendor failure.
• Information Security and Privacy: It is different from data ownership as it limits the data use that permits the vendor to use data whenever needed for performing these services. 
• Right to Audit: Offers audit to the vendor operations and records, ensuring that they meet the contractual needs, industry standards, and compliance with the laws and regulations.

Post-Contract Monitoring

The last stage involves the monitoring stage that initiates after the signing of the contract. It is where the real risk takes place. Sadly it is when the one that gains less amount of attention and focus. It is the reason why effective risk monitoring is essential for robust third party risk management. There are about four vital activities that get integrated into the process of post-contract monitoring. 

• Continuous Monitoring: These are used to offer ongoing visibility into the posture of risks as the core third parties, mainly through the data collected from business intelligence tools. Continuous monitoring allows you to maintain a recent look into the risks with the third parties arriving from the changes made to the new lawsuits, credit ratings, main layoffs, and significant events impacting their health.
• Point-In-Time Monitoring: These activities enable you to periodically perform an in-depth dive into the risks by examining and questionnaires evidence-based documents like SOC reports, information security policies, and financial statements.
• Risk Re-assessments: Risks change like the third party connections as they evolve or grow. It is important to reassess the risks periodically evaluating things that have changed to determine the additional diligence that is required whenever there are contractual changes required.