Why Financial Services Companies Need a Robust Third-Party Risk Management Solution
Financial services companies are amongst the most highly-targeted type of business when it comes to the criminal element, including cybercrime. Businesses operating within the financial space are also highly vulnerable to regulatory compliance-related challenges, which translate into some very serious — and costly — third-party risk management and mitigation issues.
For a financial services company, a robust third-party risk management solution is essential for long-term success. The risks within this industry are quite serious, with the potential to have a very broad and deep impact on a business, its customers/clients, and its interests. A robust third-party risk management solution can go a long way toward minimizing the risk factors and vulnerabilities that a financial services company is facing.
What is Third-Party Risk Management?
Third-party risk management — also known as TPRM — refers to a form of risk management and mitigation. TPRM focuses on the risks that are associated with the various third parties that a financial services company may encounter in the course of doing business. These third parties may include:
- Contractors and Subcontractors; and
- Temporary Staff.
Third-party service providers pose a very real risk in the financial space because some believe that it’s an easy way to penetrate an organization’s security defenses. Why hack into a company’s IT infrastructure when you could be handed the keys to the kingdom as an IT professional who is invited behind the curtain? This is what makes third-party risk management so extremely important for businesses in the financial space.
What Does a Third-Party Risk Management Software Solution Do for a Financial Services Company?
A TPRM software solution provides a centralized framework for identifying and acting upon the risk factors, vulnerabilities, and threats that a financial services company faces. These platforms usually have several modules or regions that are dedicated to the various aspects of third-party risk management.
Risk Screening and Identification
The risk identification module of a third-party risk management solution is used to screen individuals and even entire companies. The goal is to determine whether they represent a risk to your organization. As a result, these platforms often include reputation checkers and background-checking capabilities. Risk screening and risk identification are two very important parts of the equation for effective TPRM, especially within the financial space.
Once a risk has been identified, it must be evaluated and assessed as you work to determine how this fits within your broader risk management and mitigation strategy. The potential payoff for crimes targeting a company in the financial services space can be significant. With so much at stake financially, there are individuals and groups who will go to extreme lengths to appear legitimate and professional. There are countless real-life anecdotes involving criminal groups that have formed fake companies in an attempt to infiltrate a business within the financial space for the purpose of gaining access to data and finances. This underscores the importance of a robust, well-developed risk management and mitigation plan.
For financial services companies, risk monitoring is an important part of the risk management and mitigation puzzle. The best TPRM software platforms will allow you to configure alerts via integrations with a company’s enterprise software systems, cloud data storage platforms, and other technologies. Each of these platforms must be protected and by monitoring these defenses, a TPRM platform can send out alerts if a breach attempt is detected.
Monitoring is one of the most important proactive measures that a financial services company may consider as part of its risk mitigation strategy. The reason? An early alert allows you to take action immediately, positioning you to limit the damage and losses that could arise from an incident such as a data breach.
Why Does My Financial Services Company Need a Robust Third-Party Risk Management Solution?
Some business leaders may be reluctant to deploy a TPRM solution due to the time and expense associated with this sort of project. But there are lots of benefits that must be considered as you examine the potential for ROI and weigh the pros and cons of this sort of investment.
- The best TPRM software solutions can be integrated with a variety of background-checking and reputation-checking tools. This is beneficial because you’ll have the ability to leverage information from multiple sources instead of just one. The end result is a more accurate evaluation of a third party or even an entire business.
- You’ll have a centralized, broad, eagle’s eye view of your company’s TPRM landscape. This can be very advantageous for risk assessment and for the purposes of developing your financial services company’s risk management strategy.
- You’ll be able to shift from a reactive stance to a proactive stance in your TPRM efforts. This is extremely important because by being proactive in your risk management strategy, you can greatly minimize damage and losses. This is true whether you’re dealing with an existing threat or a potential (albeit unrealized) threat.
- You can plan and mount a response when the need arises. The best TPRM software platforms include a project planning-type interface where you can develop an action plan, assign tasks, collaborate on those tasks, and then monitor progress on those tasks as you work toward mitigation.
- You’ll have a way to effectively monitor prospective and existing vulnerabilities. This is extremely important from a third-party risk management perspective since an individual’s circumstances — and behaviors — may change over time. Concerning data may also take time to become available to the background checker and reputation checker platforms that a TPRM platform may utilize as part of its evaluation process. As a result, someone who was previously in the green may now represent a very real risk management threat to your organization. In fact, threats are constantly evolving and changing, which underscores how important it is to monitor this aspect of your company’s risk management landscape.
Third-party risk management is multi-faceted and complex to say the least, especially if your company specializes in the financial services industry. But a robust TPRM platform with all the most important tools, features, and functionalities will position your company to succeed. You’ll have everything you need to guard against third parties such as vendors, contractors, and other bad actors who may be targeting your business.
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Finding the Right TPRM Software System for Your Financial Services Company
There’s no such thing as a one-size-fits-all solution when it comes to third-party risk management software. This is especially true for companies in the financial space where the threats are so numerous and varied. You need a risk management and mitigation software platform that will centralize operations while empowering your business to monitor and react to threats in real-time. But beyond this, you also want a TPRM software platform that includes monitoring tools and other features that will support your company’s proactive stance on risk management.
At iTech, third-party risk management software solutions are among our specialties. This includes platforms for clients in the financial services business space. First, our team will collaborate with your company to pinpoint your risk management needs as they relate not only to third parties, but also to other risks, threats, and vulnerabilities. Then, we’ll architect a robust third-party risk management solution that will serve your business well into the future. Contact the iTech team today and let’s begin a dialogue concerning your company’s third-party risk management challenges.