Third Party Management by Design Workshop, Chicago

Organizations are no longer a self-contained entity defined by brick and mortar walls and traditional employees. The modern organisation is comprised of a mixture of third party relationships that often nest themselves in complexity such as with deep supply chains. Organizations are a mixture of contractors, consultants, temporary workers, agents, brokers, intermediaries, suppliers, vendors, outsourcers, service providers and more. The extended enterprise of third party relationships brings on a range of risks that the organisation has to be concerned about. Managing third party risk has risen to be a significant regulatory, contractual, and board level governance mandate. Organizations need to be fully aware of the risks in third party relationships and manage this risk throughout the lifecycle of the relationship, from on-boarding to off-boarding of a third party.

Managing third party activities in disconnected silos leads the organization to inevitable failure. Without a coordinated third party management strategy the organization and its various departments never see the big picture and fail to put third party management in the context of business strategy, objectives, and performance, resulting in complexity, redundancy, and failure. The organization is not thinking about how processes can be designed to meet a range of third party needs. An ad hoc approach to third party management results in poor visibility across the organization, because there is no framework or architecture for managing risk and compliance as an integrated part of business. When the organization approaches third party management in scattered silos that do not collaborate with each other, there is no possibility to be intelligent about third party performance, risk management, and compliance and understand its impact on the organization.

A haphazard department and document centric approach for third party management compounds the problem and does not solve it. It is time for organizations to step back and define a cross-functional and coordinated strategy and team to define and govern third party relationships. Organizations need to wipe the slate clean and approach third party management by design with an integrated strategy, process, and architecture to manage the ecosystem of third party relationships with real-time information about third party performance, risk, and compliance and how it impacts the organization.