DORA & NIS2 Directive
Risky Business: The High Stakes of Ignoring Third-Party Risk Management
Failing to Screen Your Business Partners Can Lead to Disaster
Third Party Risk Management is a requirement for DORA & NIS2 compliance.
Through Third-Party Risk Management (TPRM), companies can proactively identify, assess, and mitigate risks associated with their vendors, ensuring business continuity and safeguarding sensitive data.
But what is exactly Third Party Risk Management?
Imagine you’re organizing a big community event, like your neighborhood fair.
You’ve hired various vendors for food, entertainment, and equipment. You didn’t check them thoroughly because you were in a rush. But anyway, what can go wrong?
Well, let’s see what happens.
First, picture the food stalls. You hired a food vendor who promised delicious snacks but didn’t bother to check their hygiene standards. Who has time for that?
On the day of the fair, some visitors get food poisoning from their undercooked food. People start feeling sick, and soon, word spreads. Attendance drops, and your event gains a bad reputation. In business terms, this is like a company facing a public relations crisis due to a vendor’s poor performance. Very unexpected, right?
Next, we have the entertainment. You booked a band without checking their reviews. They have to be good, you thought.
They arrive late and their equipment is faulty. The music is terrible, and many guests leave early, disappointed.
This is similar to a company losing customers because a vendor didn’t deliver quality services, damaging the company’s reputation and customer trust.
And we also still have the equipment. You rented tents and sound systems from a company that offered a great deal, you couldn’t resist, but you didn’t check their reliability.
During the event, the tents collapse and the sound system fails. You’re left scrambling to fix things, and the fair is a disaster.
For a business, this is akin to operational disruptions caused by unreliable vendors, leading to financial losses and a chaotic work environment.
And as a cherry on top, imagine you had no backup plan.
Positive thinking.
The power goes out, and you didn’t think to rent generators from a reputable supplier. The event comes to a halt, and everyone is frustrated.
So, not having contingency plans with your vendors can mean being unprepared for potential multiple crises, resulting in severe downtime and loss of productivity.
So, what’s the takeaway?
Just like a poorly managed fair can ruin a fun day and tarnish your reputation in the community, bad third-party risk management can severely harm a company. It can lead to financial losses, damaged reputation, loss of customers, and operational chaos.
Ensuring you thoroughly vet and manage your vendors is essential for smooth operations and maintaining your business’s good name.
Stay tuned for more articles on the topic.
