Third-Party Risk Management: Gartner’s Best Practices for CCEOs

In today’s interconnected business environment, third-party relationships are indispensable. However, with every partnership comes potential risk. As networks expand to include third, fourth, and even fifth parties, the complexities of managing these risks multiply. For CCEOs and senior leaders, effective third-party risk management (TPRM) is not just a necessity—it’s a strategic imperative. Gartner’s insights on TPRM reveal actionable strategies to mitigate risk, optimize governance, and ensure data-sharing efficiency for better business outcomes.

Navigating Expanded Third-Party Ecosystems

Organizations now face unprecedented challenges as third-party networks grow in size and scope. According to Gartner, 40% of compliance leaders report that between 11% and 40% of their third parties are classified as high-risk. With increased exposure, board members and stakeholders are demanding greater transparency and oversight of TPRM programs.

To meet these demands, legal and compliance leaders are prioritizing a consolidated view of risk. By modernizing operational practices and enhancing governance frameworks, organizations can not only mitigate risk but also achieve better risk identification, remediation, and outcomes.

The Case for Efficient Governance

Effective governance lies at the heart of successful TPRM. Gartner’s research highlights a trend toward centralized or federated governance structures, adopted by 64% of organizations. These models foster improved information sharing, coordination, and accountability across functions. To build a strong governance foundation, organizations should:

1. Develop RACI Frameworks: Clearly define roles and responsibilities for third-party risk management. Establish who is responsible, accountable, consulted, and informed (RACI) across departments such as compliance, IT, procurement, and legal.
2. Appoint a Primary Owner: Assign ownership of TPRM to the function best equipped to deliver coordinated, assured outcomes. Whether it’s enterprise risk management (ERM), IT, or compliance, ownership should align with the organization’s strategic goals.
3. Partner with the Business: Collaborate with stakeholders closest to third-party relationships. Educate them on how scope changes, risk profiles, and escalation criteria affect the organization. This ensures proactive risk management and better communication across teams.

Operational Practices for Cost-Effective TPRM

Mitigating third-party risks doesn’t have to break the bank. Gartner suggests several operational strategies to maximize efficiency while minimizing expenses:

• Desilo Risk-Relevant Information: Ensure critical risk data is accessible across functions. Integrate systems and workflows to reduce duplication and enhance transparency.
• Educate Business Partners: Train internal teams on the importance of addressing scope and risk profile changes. This can improve risk outcomes by 36%.
• Define Escalation Criteria: Establish clear guidelines for identifying and addressing red flags in third-party relationships. Differentiate between risks that can be mitigated internally and those requiring enhanced due diligence.

The Role of Technology in TPRM

Technology is a cornerstone of modern TPRM programs. By leveraging automation, data analytics, and centralized platforms, organizations can streamline their processes and improve outcomes. Key benefits include:

• Enhanced Monitoring: Automation enables continuous oversight of third-party relationships, reducing reliance on manual processes.
• Better Risk Reporting: Data-driven tools provide real-time insights into risk exposure and compliance metrics, ensuring informed decision-making.
• Improved Collaboration: Centralized platforms promote seamless communication and coordination between stakeholders, improving overall governance.

Key Steps to Build a Robust TPRM Program

Gartner’s insights emphasize the importance of adopting best practices to build an effective TPRM framework. CCEOs and compliance leaders can follow these steps:

1. Understand Third-Party Risks: Conduct thorough assessments to identify potential vulnerabilities in third-party relationships.
2. Develop Comprehensive Policies: Establish clear procedures for onboarding, monitoring, and offboarding third parties.
3. Implement Continuous Monitoring: Move beyond initial due diligence to ongoing risk assessments and audits.
4. Invest in Training: Equip teams with the knowledge and tools needed to recognize and mitigate third-party risks.
5. Leverage External Resources: Partner with external experts and utilize industry benchmarks to enhance TPRM effectiveness.

Conclusion: Turning TPRM into a Strategic Asset

Effective third-party risk management is about more than compliance—it’s a driver of business resilience and growth. By adopting centralized governance, educating stakeholders, and leveraging technology, organizations can transform their TPRM programs into strategic assets. For CCEOs, the challenge lies not only in managing risks but also in unlocking the opportunities that third-party partnerships can bring.

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For deeper insights and actionable strategies, download Gartner’s “5 Key Insights for Third-Party Risk Management Design and Governance” to enhance your organization’s approach to third-party risk management.