Managing risk efficiently and effectively can be a determining factor in the overall success of any organization. Most of the companies try to develop a risk management plan on their own and some outsource this function. Third-party risk management is increasingly important for businesses. Outsourcing is helping firms become more efficient, but it is also leading to new challenges. For this reason, organisations should adopt strategies that reflect a systematic
approach to outsourcing. McKinsey (2017) suggests four actions to ensure success in outsourcing risks:
• Design an explicit third-party and/or supplier risk management framework, including a definition of ownership, governance and articulation of risk appetite that will lead to alignment among internal stakeholders.
• Extend the scope to all third parties and apply risk-based segmentation to determine the level of control required.
• Apply a proactive and comprehensive approach to third-party risk management, including ongoing monitoring and escalation processes.
• Invest in IT tools, like data management systems, end-to-end workflow tools and analytics to increase efficiency of and ensure consistency in the process