What Is Third Party Risk Assessment And How Can It Help My Business?
Hiring a robust team of verified, reputable vendors is key to any project’s success.
On the other side of the coin, failing to find the best fit can lead to reputation damage, debts, poor information security and other risks that can reflect negatively on contractors, and by extension, your business, creating liabilities and other impacts.
Businesses that select the right vendors from the start, frequently rely on third-party risk assessments to highlight potential liabilities before entering into contracts.
These simple tools create full visibility into vendor profiles, data, and strategy—enabling seamless risk mitigation, improved project flow, and better business connections.
What Are Third-Party Risk Assessments?
Third-party risk assessments comprehensively evaluate various aspects of potential contractors to identify associated risks, from reputation and data security to overall mission and financial standing.
Doing so empowers companies to make informed hiring decisions and improve overall project flow. As a result there are several factors to consider.
Each company should develop a risk assessment process that makes sense for them.
Let’s take a look at some assessment areas and how they can inform hiring companies.
Reputation & History
Businesses should diligently evaluate a vendor’s reputation for any litigation, negative press history, and other damaging events. By affiliating one’s business with a given vendor, any red flagswill ultimately reflect poorly on the organization that hired the contractor.
Further, understanding a vendor’s history of non-compliance and liability will undoubtedly predict their dealings with your company.
Data Security & Cybersecurity
Despite all the money and resources governments and organizations throw at cybersecurity, it is clear data breaches and cyber threats aren’t going away considering how hacker strategies continue to evolve and become more complex.
Since cybercrime is projected to cost the world $10.5 trillion annually by 2025, it is prudent businesses consider any vulnerabilities in third-party security, networks, cloud devices, and data backups.
As you’ll be corresponding with vendors often, you’ll want to ensure all parties are proactively safeguarding data and enforcing adequate monitoring and security to prevent breaches.
Ensure prospective tenants are in good financial standing by evaluating outstanding loan amounts, any unpaid business debts, or other extraneous financial liabilities. You want to be able to avoid potential relationships with vendors with a poor financial track record, a pattern of late or missed payments, and unprofessional accounting.
For some organizations, partnering with mission-minded companies is an important element of their vendor-hiring process.
Companies should review a contractor’s mission, vision, and general purpose to ensure affiliation with the vendor would be desirable.
In fact, a recent study from global communications agency Zeno Group found 94% of surveyed global consumers say it’s important companies they engage with have a strong purpose. Respondents were also more likely to support purpose-driven frims and speak out for them publicly.
Assessing a potential vendor’s mission informs companies of its priorities, values, and sourcing—all of which affect consumer perceptions.
How Does This Help My Business?
Simply put, creating a risk assessment evaluation tailored to your company’s unique needs empowers you to identify, assess, and make important hiring decisions.
Implementing a customized third-party risk assessment process ensures your business is fully informed when entering into contracts that ultimately affect the project workflow, liabilities, and reputation.
Thorough evaluations empower your company in several ways, including but not limited to the following:
- Risk Mitigation: By fully understanding associated risks of each vendor, you empower your business to develop robust mitigation strategies and improve hiring.
- Optimized Project Workflow: By selecting the right vendors from the start, your business can empower an optimal project workflow and business dealings—from onboarding and routine communication to the expiration of the contract.
- Better Business Connections: Connecting with verified vendors creates success—not only during a particular project, but for potential re-hires or referrals in the future.
Automating Your Vendor Risk Assessment Process With bcs
While third-party risk assessments are essential tools for verifying, analyzing, and selecting the right vendors, manual processes can take up valuable time and resources.
However, the latest software advances enable organizations to broadcast automated requests for proposal (RFP)—sometimes, through a streamlined app—so you can compare bids from a pool of pre-qualified vendors, with a few clicks.
By automating your hiring process, you save time otherwise spent researching which sites to broadcast RFPs, increase exposure, and thoroughly weigh your options.
These streamlined processes empower you to select verified candidates, engineer successful projects, and forge better third-party partnerships.
bcs is a preeminent vendor management solution, helping you automate your hiring process, optimize workflow, and build better business connections. View a software demo or contact us today to find a full- or self-service solution that’s right for you.
Learn from the pros about risk-mitigation, document tracking, and more, with expert articles from bcs.