Partner Article

Understanding Third Party Due Diligence

There can be many risks associated with engaging a third party, be it a supplier, distributor, an agent, intermediary or reseller.

It is important to taking all relevant rules and regulations into consideration to ensure a company has a process in place to manage third-party risk. Your third party management process should also include training programs, controls, policies, due diligence processes, remediation, audits and other possible issues. In order to ensure that a third party does not present a risk to your organisation it is important that these issues are dealt with at an initial stage and have a programme that can minimise risk exposure.

An effective and efficient due diligence method is thus crucial. But the complexities and scope of an organization’s third-party network can make it a difficult process for many companies. High costs of managing compliance and complexities in conducting due diligence are added factors that present challenges when managing third party relationships.

Since third-party networks are crucial for the businesses to maintain their hold in the ever growing and expanding competitive market, such networks cannot be avoided.

Engaging experts can be a good option to deal with the process in the most effective way. As organisations may not have the necessary technology and expertise to engaging experts would be a viable solution for organisations to effectively manage third party risk in their business network.

Understanding the complexity of the entire process, it is important for the companies to consider these tips of strengthening the visibility and vigilance of third party due diligence. This can immensely help in minimising the risk.

1. Evaluation of leadership

Evaluating the top participants of a business gives an idea about the reputation and the practices that the business follows. It gives an overview of the track records of the company and the top management and also helps in knowing the points of their associations as well as the areas of interest conflicts.

2. Having a third party management process in place

Having a defined process allows you to ensure third parties are being dealt with in a consistent manner. The basic elements of this process may include conducting due diligence on all third parties, categorising and assessing third party risk, ability to escalate for moderate to high risk third parties, ongoing monitoring of third parties and reassessment of compliance procedures. Such a process needs to be modified overtime and should allow for changes to the third parties’ risk profiles.

3. Trust the professionals

Taking assistance from due diligence and third party management experts can help you to minimise the risks to a greater level. Such companies prove to be more cost effective and efficient in ensuring results. They use online tools in order to enhance your due diligence service and can also provide assistance and advice.

In conclusion, it is the best of the interest of the company to keep a check on the risk related to third party partnership. Since this is not an easy process, engaging experts can immensely help your company in dealing with things most effectively.

This was posted in Bdaily's Members' News section by Jennifer Roberts .