Jonathan PrewittThe postings on this site are my own and do not necessarily represent FTI Consulting’s positions, strategies or opinions.
Welcome to the whimsical world of third-party risk management, where the only thing more exciting than managing your own risks is managing someone else’s! If you thought keeping your own house in order was hard, wait until you try to tidy up your neighbor’s backyard while blindfolded. That’s right, folks, today we dive into the exhilarating, heart-pounding realm of third-party risk management. Buckle up!
Why Third-Party Risk Management? Because Drama Loves Company!
Remember that time you handed over your precious business operations to that super reliable vendor, and they totally didn’t mess it up? No? Neither do we. That’s why third-party risk management is crucial. You see, outsourcing is like letting someone else babysit your tantrum-prone toddler. Sure, you get a break, but you also get a lot of nail-biting worry about whether little Jonny is turning the living room into a Jackson Pollock masterpiece.
Step 1: Due Diligence – Or, How to Pretend You Know What You’re Doing
The first step in third-party risk management is due diligence, which is corporate-speak for “doing your homework.” But let’s be honest, nobody liked doing homework in school, and it’s not any more fun now. However, this stage is crucial for finding out if your potential third-party vendor is more of a reliable sidekick or a disaster waiting to happen.
Performing due diligence involves deep diving into financials, security protocols, and compliance records. Think of it as stalking your vendor on social media, but legally and with more paperwork. You’re essentially Sherlock Holmes with a spreadsheet, seeking clues to avoid future “elementary” mistakes.
Step 2: Contract Management – Because Handshakes Are So Last Century
Once you’ve vetted your vendor, it’s time to whip up a contract that makes Fort Knox look like a cardboard box. Contracts in third-party risk management are designed to cover your back better than the latest sunscreen. They should be airtight, watertight, and if possible, airtight again for good measure.
This is where you list every possible scenario that could go wrong and stipulate in painful detail how your vendor will handle it. If their data center is hit by a meteorite, you want to know who’s responsible for continuity. Spoiler alert: It’s probably not going to be them.
Step 3: Monitoring – The Joy of Constant Vigilance
Congratulations! You’ve signed the contract, and now you can sit back and relax, right? Wrong. Now comes the fun part: constant monitoring. This isn’t a “set it and forget it” rotisserie chicken commercial. Oh no, this is more like trying to keep an eye on 50 spinning plates simultaneously, each balanced on a different type of stick.
You’ll need to continuously assess the vendor’s performance, compliance, and risk profile. Are they adhering to security protocols? Are they meeting your SLAs? Did they just hire a guy named Bob who has a history of bankrupting companies? These are the questions you’ll be asking at 2 AM when you can’t sleep.
Step 4: Incident Response – Or, How to Keep Your Cool When the Sky is Falling
Despite all your best efforts, something will go wrong. It’s not a matter of if, but when. That’s where incident response comes in. This is your chance to shine, to prove that you’re not just another risk manager, but a risk superhero.
When disaster strikes, you’ll need a plan that’s more detailed than a Clancy novel. Who do you call first? What’s your message to stakeholders? How do you mitigate damage? If you’ve done your job right, you’ll have all the answers before the questions even arise. If not, well, there’s always the “blame the new guy” strategy.
Embrace the Madness
In conclusion, third-party risk management is like being the captain of a ship navigating through a storm, with a crew you’ve never met and who may or may not speak your language. It’s challenging, exhausting, and sometimes downright maddening. But it’s also crucial for ensuring your business stays afloat amidst the chaos.
So next time you’re knee-deep in vendor assessments, contract negotiations, or late-night incident response drills, remember this: chaos is just another word for opportunity. And in the world of third-party risk management, opportunity is everywhere.
Now, go forth and manage those third-party risks with the confidence of a tightrope walker juggling flaming swords. After all, what’s the worst that could happen?
Jonathan Prewitt