The Hidden Threat in Supply Chains: Addressing Indirect 4th Party Risks
by Kyle Stroombergen – General Manager of NGA
In today’s increasingly interconnected global economy, the age-old adage, “you are who you associate with” takes on a new significance, particularly for businesses. If you believe that only third-party associations can lead to risks for companies, think again. More than ever, indirect 4th party association and supply chain risks are becoming increasingly troublesome, with potential fallout affecting reputations, profit margins, and customer trust.
According to a recent report by Gartner, 60% of organizations are now dependent on more than 1,000 third parties. The intricate web these associations create means businesses could unknowingly be tied to fourth parties, fifth parties, and even beyond. This is a link that no company can afford to overlook.
Delving Deep: The Challenge of 4th Party Risks
Most organizations have a fairly good grasp on their third-party associations, but the layers beyond can blur, with risks becoming harder to pinpoint. Notably, if a third party your company contracts with is in an area with political unrest or environmental concerns, it’s not just their direct risks you need to worry about, but those of their suppliers and partners as well. This is where 4th party location risks come into play, stretching the concept of association risks even further.
Consider the hypothetical: A third-party vendor uses a cloud storage solution, which then suffers a data breach. Even if your direct association had strong cybersecurity measures in place, your data, by extension, is still at risk due to the vulnerabilities of the 4th party.
In another example, your company partners with a top-tier construction firm for a housing project. The firm delegates material procurement to a third-party agency, which becomes the 4th party. This agency, exploiting its position, engages in tender fraud by colluding with suppliers to inflate prices for kickbacks. When costs rise and materials prove subpar, investigations reveal the agency’s misconduct. Despite being removed from the direct fraud, your company faces project delays, added expenses, and reputational damage due to this 4th party’s actions.
The RiskSecure Solution: Decoding the Complex Web
Enter RiskSecure, our pioneering software that is reshaping how businesses identify these elusive threats. Using AI, RiskSecure sifts through over 15,000 online adverse media and watchlist data sources, equipping companies to thoroughly vet their suppliers.
Beyond mere detection, RiskSecure has the ability to calculate an “association” risk score for every third party, offering businesses a holistic perspective of potential vulnerabilities. By quantifying these potential threats, companies can make more informed decisions on which associations may need closer scrutiny or reconsideration.
The nature of association risks means that they are ever-evolving, with new vulnerabilities arising often without warning. RiskSecure addresses this by offering ongoing monitoring, ensuring that businesses remain updated about their risk profile, and can act promptly when a potential threat emerges.
The Road Ahead
The business landscape is intricate and constantly shifting, with new partnerships, technologies, and challenges emerging regularly. While businesses cannot entirely eliminate risks, they can make informed choices about the associations they keep.
In a world where every association counts, and where reputational risks can make or break a brand overnight, tools like RiskSecure are not just an added luxury, but an essential armor in a company’s risk management toolkit. The question isn’t if your company will encounter these indirect 4th party risks, but when – and more crucially, will you be prepared when it does?