What is Third-party Risk Management?

Businesses depend on third parties for everyday services and technologies, with almost 80 percent utilizing at least one cloud-based application regularly.

Companies invested $3.5 million in cloud computing in 2018 alone, and this is predicted to increase as the model becomes the norm.

But managers have a responsibility to keep their business, their employees, and — critically — their customers safe from any potential risks caused by third parties.

Effective third-party risk management is essential to identify and mitigate threats for the duration of your company’s relationship with a vendor.

Let’s take a closer look at what this involves, and how to get it right.

Why is Third-Party Risk Management So Important?

Taking a proactive approach to managing third-party risks empowers companies to reduce dangers which could potentially prove catastrophic.

For example, a vendor with a lax attitude towards cybersecurity could expose your business to attacks. This can lead to major downtime, fractured customer relationships, and severe financial strain.