Third-Party Risk Management in 2022
If the last two years taught us anything, they taught us to expect the unexpected. But as we look ahead into 2022, your third-party risk management needs to reflect a new mentality. One that stops thinking in terms of pure compliance and starts thinking in terms of proactive management.
So, we think it’s time to dust off our (figurative) crystal ball.
Here are some of our major predictions for the future of third-party risk management in 2022 and what smart businesses can do to stay one step ahead of the curve.
Rising Executive-Level Awareness
Executives have always had an outsized role in enterprise risk management. But looking ahead to 2022, more and more executives are becoming aware of the need for third-party risk management–and more of them name third-party risk management as one of their top priorities going into this year.
Third-party risk management is a top priority partly because of the growing threat. Third-party risk incidents are on the rise, and the most significant issues arise in customer service disruptions. That’s a huge deal for businesses–if you can’t service your customers, you won’t be able to keep them.
Worse, we still live in a COVID-centric world, which means our lives (and businesses) are still running online. The problem is that the total data breaches by the third quarter of 2021 exceeded the year-end total of 2020 (a record-breaking year in itself). Customers demand better service. And with an increasingly tech-savvy customer base and digitally available options, they’re quite willing to take their business elsewhere.
Because of this, more and more executives are prioritizing third-party risk management this year. That’s a huge deal since it also comes with a much-needed shift in how to tackle third-party risk. Programs will now be assessed based on their degree of successful risk remediation without hindering normal business operations. This is an opportunity for businesses to start thinking about risk management as part of everyday business.
The Continued Rise of Ransomware
2021 was the year of ransomware. We saw an unprecedented surge of attacks throughout the year driven by our increasing reliance on digital infrastructure, the ease of executing ransomware attacks, and the prevalence of criminal-friendly payment methods.
In 2022, all signs say that ransomware will remain just as strong, if not stronger. All the indicators of a ransomware-friendly environment remain the same. Worse, third-party vendors are among the most popular targets.
The reasons behind that aren't new. Every interface with a third-party vendor introduces a new chink in your digital armor, making it easier for malicious cyber actors to find a way into your system. And while you can't predict when you might get hit, you can plan ahead to prevent such attacks.
Here's the good news: you can tackle the rising ransomware threat using the same best practices you used in previous years. Be diligent about cybersecurity. Educate your team, and stay abreast of the latest developments. And always stay one step ahead of risk management for your vendors so that you will not get caught off guard.
Vendor Risk Management to the Nth
Of course, the risk doesn’t just come from your third-party vendors. Remember, you’re not the only one who relies on third-party vendors. Your third-party vendors rely on third-party vendors, and those vendors rely on their third-party vendors, who become fourth- and fifth-party vendors to you.
And in 2022, we’re likely to see increasing attention on the fourth-party and beyond tiers.
The increasing attention is partially due to rising regulatory awareness of the issue. However, it also signals a shift from a compliance mindset into a proactive, risk-oriented mindset. Because the threat landscape is so large and diverse, smart businesses will become more and more proactive about managing vendor risks, no matter how many layers of removal they have to contend with.
Moving Beyond Cybersecurity Risk
Up until now, we’ve spoken primarily about cybersecurity concerns. After all, data security is at the top of your priority list (and at the front of your customers’ minds). But in 2022, more and more businesses will start looking beyond cybersecurity risk for a more comprehensive risk management strategy.
In 2020 and 2021, the larger public developed a strong interest in business best practices and ethics, including diversity and ethical sourcing. The difference is that customers are no longer willing to accept performative gestures.
That means increased pressure to show your work on the business and executive sides. Businesses now have to demonstrate the steps they’re taking to do smarter business, including holding their vendors to account. If anything, customers now hold businesses accountable for the actions of their vendors–and they’re willing to vote with their money.
Here’s the good news: you can tackle this as part of your existing risk management program. The key is to incorporate issues like sourcing, diversity, health, safety, and ethics into your risk management checklists and protocols when onboarding a new vendor and reviewing old ones.
If you’re unsure where to begin, turn a critical eye to your review process. Examine how you assess your third-party vendors and how well you hold them accountable for their actions.
It’s also essential to break down what areas you need to pay attention to in risk management, in much the same way you would break down your cybersecurity action items. Think about critical issues that are most relevant to your company, like sustainability, voluntary reporting, and labor relations (to name a few). Then, break down how you can tackle them with your vendors.
Managing Third-Party Risk in 2022
We know that third-party risk management can be a headache, and 2022 presents unprecedented company challenges. But that doesn’t mean that risk management is impossible. You just need the right tools for the job.
That’s where we come in. We make vendor risk management easier than ever, with powerful tools to manage and automate your whole risk management program. That way, you can always stay one step ahead of risk and focus on what you do best–giving your customers a great experience.