Third-Party Risk Assessment Basics: Common Risk Factors


Almost every business has third-party relationships, including those with vendors, service providers, and any additional suppliers that they may work with. Unfortunately, those third-party relationships will usually also come with some inherent risks. It's important that you understand the risks that your company is assuming in doing so. That's where a third-party risk assessment comes in. Here's a look at some of the types of risk that your assessment might consider.

Strategic Factors

Strategic risk factors are those risks that could potentially prevent your business from reaching specific milestones, achieving certain operating and performance targets, and more. For example, if you are considering a third party to handle your payment processing solution, that could put your business at a strategic risk if there's a problem with the vendor and customers are unhappy. A third-party risk assessment would help your business analyze this type of risk factor and make an educated decision on your future plans.

Financial Factors

Financial risk factors, as the name suggests, are those risks that can potentially cost your business money due to a poor decision with a vendor or supplier. Whether it means that your company ends up facing additional costs from the vendor themselves or because a disruption or problem with the vendor leads to supply chain issues that increase your costs and disrupt your sales, all of these things are risks. A risk assessment can help your company to determine the likelihood of an issue like this.

Regulatory Factors

When your business is in an industry that's highly regulated, you have a lot more to be concerned about when it comes to the vendor, supplier, and partner relationships. Your company may be held responsible if you have a contract with a supplier or vendor that's not compliant with these industry regulations. Remember that you need to ensure regulatory compliance for any and every third-party contract that your company takes on. A risk assessment can help you to evaluate this as well, ensuring that compliance is a priority.

These are a few key considerations when it comes to risk assessments for your business. It's essential that you protect your company from any potential exposure, including these strategic, financial, and regulatory ones. However, these aren't the only risk factors. That's why you should reach out to a risk assessment professional right away to have your company's operations evaluated and any third-party agreements assessed carefully for risk factors and vulnerabilities.


9 May 2022

Learning How To Manage Finances

I still remember the day that my wife and I bought our first home. We were excited about filling the place with new furniture and looking for great area rugs. Unfortunately, before we knew it, we found ourselves deeply in debt. It was difficult to dig our way out, but over the course of the next several years, we were able to make things right. I want to teach other people how to manage finances so that they can avoid the turmoil that we went through. Financial planning might seem impossible, but with a little practice, I know it can become second-nature.