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Discover the risk management lifecycle and how to manage third-party, vendor, and supply chain risks effectively at every stage.
Third-party vendors and supply chains more generally can expose organisations to significant cyber security risks that can impact the security of their data and systems, with potentially serious operational and business implications. As supply chain attacks are becoming more prevalent and their fallouts more severe, this makes effective third-party risk management so critical for organisations today. But it is still too common for organisations to only assess third-parties when initially onboarding them. However, security postures of suppliers could change at any point.
So, to adequately protect themselves businesses must adopt an effective but flexible and adaptable strategy. This is where the risk management lifecycle offers a structured framework, one which enables companies to identify, assess, mitigate, monitor, and review supply chain cyber risks on a continuous basis.
This is what we discuss in this article - the complete risk management lifecycle, and how you can implement it into your organisation.
The risk management lifecycle offers a repeatable process that helps organisations address risks within their often extensive network of third-party suppliers, vendors, and partners.
It’s designed to help protect sensitive information, ensure regulatory compliance, manage risks from newly onboarded as well as existing vendors, and protect the data, systems, business operations and reputation of an organisation.
Traditionally, organisations only conducted initial, one-off risk assessments during the onboarding of new suppliers, or at best annually recurring re-assessments. In an era of rapid digitalisation, however, these approaches fall well short, and also can’t keep pace with a fast evolving threat environment and regulatory landscape.
On the other hand, a lifecycle approach promotes proactive risk management, delivering real-time intelligence that helps organisations anticipate disruptions and ensure they have a complete view of their risk landscape.
The first stage of the risk management lifecycle is to identify any risks or vulnerabilities present in their existing supplier network.
Organisations can achieve this by first mapping their third parties to ensure they have a full view over all their supplier dependencies, and then to uncover risks that could compromise their data and cyber security through comprehensive risk assessments.
When identifying risks, organisations should look for cyber security risks like unauthorised data access, to potential non-compliance with regulations such as the GDPR.
Potential supplier breaches introduce operational risks, while unethical practices — for example, environmental violations — raise ESG and regulatory concerns. Moreover, political unrest in a supplier’s geography can further disrupt service continuity.
Companies can use supplier assessments to pinpoint potential risks. A thorough questionnaire is often one of the best starting points to evaluate vendor security and compliance.
Furthermore, organisations can also conduct external vulnerability scans to uncover overt system flaws and use threat intelligence to access external data on emerging threats. Platforms like Risk Ledger help with this continuous surveillance, by providing up-to-date insights into supplier risk profiles and enabling early intervention.
After identifying risks, the second stage in the risk management lifecycle is understanding and assessing these risks.
Organisations evaluate the likelihood and potential consequences of identified risks, which helps them to prioritise the most critical threats and ensures resources are allocated efficiently.
Firms apply risk scoring models to measure threats according to severity, organisational impact, and supplier criticality. Risks are classified, for example, as high, medium, or low to highlight the most pressing issues.
Risk Ledger’s platform automates this process, offering user-friendly dashboards that inform strategic decision-making.
Failing to assess third-party risks accurately can carry grave financial consequences. The 2017 Equifax data breach is a notable example.
Equifax missed a known flaw in a third-party software component, which cyber criminals then exploited to access the personal data of 147 million people. The breach cost over $1.4 billion, including between $575 million and $700 million in regulatory fines and settlements with the U.S. Federal Trade Commission, Consumer Financial Protection Bureau, and state authorities. Additional expenses arose from legal fees, customer redress, and cyber security improvements.
Equifax’s share price plunged by as much as 35% at some point and the company suffered significant reputational damage, resulting in diminished consumer confidence and strained business ties.
This incident underscores the critical importance of thorough due diligence to avoid costly breaches, regulatory sanctions, and brand damage.
After assessing risks, organisations should deploy clearly defined methods and processes for managing and minimising them.
This stage involves developing remediation strategies, strengthening safeguards, or, in some cases even withdrawing from doing business with high-risk suppliers.
To manage identified risks, firms can request that suppliers address weaknesses. This might involve patching software or tightening security protocols.
Organisations will also incorporate contractual clauses to mandate compliance and cyber security standards and introduce technical safeguards like encryption and access restrictions to reduce their risk exposure.
Collaboration with suppliers helps tackle shared vulnerabilities. Risk Ledger’s platform streamlines mitigation by tracking remediation activities and providing a platform where security teams of clients are in direct and constant contact with the security teams at their suppliers.
The next stage in the risk management lifecycle is to monitor for, and report, any newly identified risks. This essential lifecycle phase ensures visibility across dynamic, ever-changing supplier networks.
Risk Ledger’s platform supports continuous monitoring, tracking changes in suppliers’ security profiles and allowing organisations to fine-tune mitigation strategies as needed.
Firms are able to provide regular updates to stakeholders and regulators to meet compliance demands and reporting. Furthermore, automated alerts and dashboards bolster oversight, keeping organisations proactive in their risk management efforts.
The last phase of the risk management lifecycle involves assessing the effectiveness of the newly-implemented risk management initiatives.
This stage involves reviewing incidents, near-misses, and supplier performance to extract lessons and improve practices.
By incorporating feedback into different stages of the lifecycle, organisations can continuously improve their cyber security posture by analysing assessment outcomes to close control gaps, evaluating supplier behaviour during incidents, and updating strategies to counteract new risks.
A strong third-party risk management policy forms the foundation of the entire lifecycle. A strong policy sets out clear governance structures, defining ownership and accountability for risk oversight across departments. It establishes well-defined roles and responsibilities, ensuring that every stakeholder understands their part in managing supplier risks.
An effective supplier assessment framework in the meantime is designed to align closely with established standards and regulatory requirements, such as ISO 27001 for information security management, GDPR for data privacy, and NIST for cyber security practices, but is tailored specifically to vendor and third-party risk management.
Organisations must also comply with industry-specific rules, such as FCA guidelines in the financial sector or healthcare regulations.
Platforms like Risk Ledger help organisations map supplier controls to these requirements, making it easier to demonstrate compliance, simplify audits, and reduce the manual effort needed to meet evolving regulatory demands.
Organisations customise risk management strategies based on their risk appetite, industry context, and vendor reliance.
They empower business units with decentralised accountability or adopt collaborative approaches, sharing responsibility for vendor risk management across teams.
Companies should favour proactive strategies, anticipating threats through early detection and strong safeguards to prevent risks from materialising. Reactive approaches, which address problems only after they arise, typically incur greater costs. The lifecycle emphasises prevention while equipping organisations with the ability to obtain information from their suppliers faster when incidents occur.
Organisations craft a structured third-party risk plan with clear targets, such as cutting high-risk suppliers by a defined percentage.
They outline workflows for assessments and mitigation, prioritise critical vendors through tiered classification, and set review intervals based on risk severity. Contingency plans prepare the organisation for supplier failures or disruptions.
Effective risk management depends on cooperation between procurement, security, compliance, legal, and IT teams.
Risk Ledger’s platform fosters this collaborative oversight with shared data and centralised visibility, ensuring robust risk management across the organisation.
The risk management lifecycle consists of five stages:
The 4 P’s: Predict, Prevent, Prepare, and Perform - underpin vendor and supply chain risk management.
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