Third-Party Risk Management Software: Important Features To Look For

In today’s highly interconnected business environment, companies rely heavily on third parties like suppliers, vendors, contractors, and more for critical business functions. However, these relationships also introduce significant cybersecurity, financial, regulatory, and reputational risks if not properly managed. Global spending on security and risk management has increased around 11 percent in 2023 from $158 million in 2021 to $188 million now. This is where a robust third-party risk management software solution can provide tremendous value.

However, not all TPRM software tools are created equal. As you evaluate options to strengthen your third-party risk program, be sure to look for platforms with these key capabilities:

Centralized Questionnaire Management

Send out questionnaires and collect responses seamlessly without manual follow-ups or spreadsheets. The system should centralize information and documentation in one platform to eliminate data silos. Look for built-in libraries of standard questions as well as the flexibility to customize risk surveys. Automated reminders and notifications keep the process moving forward efficiently.

Real-Time Risk Rating

TPRM software should provide dynamic risk ratings of third parties based on their responses to risk assessments and supporting documentation review. Higher-risk vendors may require additional due diligence. The best systems quantify and weigh risk factors to determine composite scores. Dashboards and reports give instant visibility into current managed third-party risk exposure across the enterprise.

Automated Due Diligence Workflow

Leading solutions guide users through risk-based due diligence procedures including document collection, asbestos review, background checks, financial analyses, and more specialized processes. Automation increases efficiency by reducing the manual effort of email exchanges and spreadsheets. It also provides audit trails of completed tasks, outstanding items, and risk acceptance decisions as needed, making the third party due diligence procedure easier.

Continuous Monitoring

Third-party relationships and risk profiles constantly change so ongoing monitoring is critical after onboarding. Automatic alerts and scheduled recurring assessments let you track vendors over time. Integrations with external data sources also feed into the platform to detect financial stress, cyber incidents, compliance violations, legal issues, natural disasters, and other red-flag events that may impact a third party.

Contract Management

An integrated contract repository centralizes legal agreements signed with vendors, partners, and suppliers in one searchable system. This avoids fragmented contract records stored on local drives or email inboxes across the company. Best-in-class contract management also extracts key terms and obligations to inform risk analysis based on liability exposures within the actual agreements.

Workflow Configurability

Every organization has slightly different processes, approval chains and requirements when managing vendor and third party relationships. TPRM software should provide the flexibility to configure workflows, assessment templates, dashboards and reports based on your environment rather than forcing you into predefined settings or methodologies. Role-based permissions are also essential so users only see data relevant to their responsibilities.

Incident Management

Despite best efforts, vendor-related incidents will occur in areas like data breaches, service disruptions, regulatory non-compliance, IP theft, and more. The third-party risk management platform should incorporate incident management features such as reporting tools, response plan templates, mitigation tracking, and post-incident reviews. Integrations with security information and event management (SIEM) tools is also a valuable capability for faster detection and response.

Supply Chain Visibility

Modern supply chains are deeply interconnected which can obscure downstream risks. If one of your third-party’s partners experiences a significant disruption, it may directly impact your operations. Supply chain mapping and risk analysis chart out these connections so you can uncover risks accumulating across multiple supplier tiers. Advanced TPRM tools provide greater transparency into these complex vendor ecosystems.

Conclusion

When evaluating options, document feature wish lists from both cybersecurity and procurement leaders. Score platforms based on how many items they deliver from both perspectives. True enterprise-grade solutions provide maximum value to these frequently disconnected functions. They represent the best opportunity to get ahead of third party risks rather than playing catch up after major incidents occur. The capabilities above should factor prominently into any buying decision as they indicate advanced, holistic products with the greatest business impact.

Author Bio:

Nagaraj Kuppuswamy is the Co-founder and CEO of Beaconer, an esteemed enterprise specializing in managed third-party risk using the cloud-native AI-based solution. With an extensive portfolio of accolades and industry certifications, Nagaraj stands out as a seasoned expert, boasting over 16 years of dedicated involvement in the field of Cybersecurity. Throughout their career, he has predominantly focused on elevating the realm of third-party risk assessment. You can connect with him through Linkedin.