5. Invest in the right tools.
Automation tools can help firms organize data more effectively, identify failures and breaks, analyze trends and patterns, and help them implement consistent and efficient work routines, state Mabey and Kaposztas. Examples include:
- An information management system that allows monitoring of relationships and the aggregation of risks, and enables deep dives into individual relationships with third parties.
- A tool that achieves end-to-end workflows to minimize breaks and duplication between teams while leveraging digitalization to improve process efficiencies.
- A robust analytics capability that includes data visualization tools to help monitor behaviors and enable more proactive approaches.
- A tool that automates insurance verification. TrustLayer, for example, manages
COIs and other vendor requirements such as contracts and W9s using AI and RPA technologies.
Third-party risk management must be improved by the industry as a whole, as well as by individual firms. Ideally, industry standards and best practices should be agreed upon. An agreement with a third party benefits both sides when there are clearly defined requirements and limitations, such as access to data, reporting measures, and contract terms, the authors add.
Also, firms should examine their data management and cybersecurity processes, which are rightly attracting significant attention after numerous cyberattacks. The standards should be met by (re)insurers and investment firms in order to protect customers, themselves as well as regulators.