Risk Intelligence: Making Your Risk Management Smarter

According to PwC’s 2022 Global Risk Survey, businesses that embrace their strategic risk management capabilities are five times more confident in their team’s ability to deliver on their expected business outcomes.

But, to get your strategic priorities in order, you need the right data — otherwise known as risk intelligence — to back up your decisions. Risk intelligence is vital for your third-party risk management strategy, as it allows your team to better understand and respond to potential risks.

In this article, we'll explore the fundamentals of risk intelligence, how it's used in third-party risk management and mitigation, and strategies for maximizing its effectiveness so your team can stay ready to handle any budding third-party risks.

Defining Risk Intelligence

In its pure essence, risk intelligence refers to information that helps your company identify, assess, and steer clear of the risks associated with its third-party relationships.

For example, collecting actionable intelligence about your service providers' cybersecurity protocols and general operational integrity can help you identify potential vulnerabilities that might harm the rest of your operations.

It's a critical tool for any successful enterprise risk management program, as it gives your team the clarity for better decision-making about your supplier relationship management. Used proactively, risk intelligence will give you the context needed to identify and avoid potential risks that might otherwise go undetected before they cause roadblocks in your supply chain.

The impact of this type of business intelligence is far-reaching, as it can help you avoid a full spectrum of risks and put more effective initiatives in place across all your third-party relationships.

How Does Risk Intelligence Help Your Operations?

With the state of global competition, it's no surprise that organizations like yours lean on a network of third parties scattered around the world to help you achieve your goals faster. But risk professionals know how difficult it can be to keep track of these vendor and supplier relationships.

Having the right risk intelligence in place helps your team to:

• Identify the current risks that are (and could be) associated with your third-party relationships
• Assess the likelihood of those risks happening and the impact they would have on the organization if you couldn’t stop them in time

But it’s not all doom and gloom. On top of protecting your company from unnecessary legal, financial, and reputational damage, you can also use risk intelligence to identify potential opportunities in your third-party relationships that align with your company's strategic goals.

What Counts as Risk Intelligence?

Your team needs to be able to understand the common risks associated with all of your third parties so that the business has sufficient policies and procedures in place to reduce your risk exposure.

Given that it’s a collection of meaningful data, risk intelligence includes:

• External information: This refers to publicly available information about your third parties' activities, including social media chatter, legal rulings, and enforcement actions by government agencies or regulators. This provides context into third parties' past performance so you can make informed decisions about their future behavior.
• Market research: This is data gathered through surveys and interviews of third parties' customers or partners to learn more about their ways of doing business. This information helps paint a clearer picture of your service providers’ strengths and weaknesses.
• Industry benchmarks: These benchmarks help identify and compare third parties' performance against industry standards so you can make informed decisions about your relationships.
• Internal information: This refers to operational information your organization collects for its third-party relationships — for example, contracts and supplier demographics. This will help you understand which third parties pose the biggest threat to your operations, so you can focus your risk management efforts where they're needed most.
• Reporting tools: These tools allow you to organize and analyze information about your third-party relationships according to your pre-defined metrics so you can highlight key trends or patterns in their behavior.
• Risk assessments: These assessments provide your team with a holistic view of the different vendor risks you’ve already captured so you can prioritize your mitigation efforts.

As risk management is multifaceted, and constantly evolving as new technologies develop (and new risks emerge), your success will depend on your team having a comprehensive approach to risk intelligence. This means understanding the risk landscape, being aware of the threats and vulnerabilities that exist, and being able to make better decisions based on the data gathered.

How to Maximize Your Risk Intelligence

The effectiveness of your risk intelligence program depends on your ability to collect and analyze the information contained within it. The key to maximizing your risk intelligence is collecting the right data at the right time, using appropriate data collection methods.

Here are some strategies for collecting useful risk intelligence:

• Decide on the relevant information: Your organization's risk intelligence program is only as good as the information contained within it. Before you conduct any research or collect information, it's important to determine what your collection efforts should specifically focus on. This will help you streamline your data collection process.
• Create a comprehensive data inventory: This inventory should include information about your organization's third-party relationships, including the type of relationship, location, and scope. This will make it easier for you to identify which stakeholders pose the biggest threat to your operations and identify potential opportunities that are aligned with your organization's strategic goals.
• Use technology to collect, analyze, and share information: Technology is a powerful tool for speeding up the collection and analysis of your data inventory. Combined with automation, the right technology will give you a bird's eye view of your third parties so you can take action before any damage is done.
• Automate manual processes: Manual processes are time-consuming and prone to human error. Automating these processes using the right technology, like Certa, will help your team save time and resources so they can focus on other important tasks.
• Conduct regular due diligence: Due diligence is the cornerstone of an effective third-party risk management program. It ensures that your organization has appropriate policies and procedures in place to manage its third-party relationships effectively and identify potential risks before any damage is done.

When you leverage risk intelligence as a powerful tool in your third-party risk management strategy, your team can quickly collect the right data points from multiple sources to track vendor performance and identify potential issues before they become critical, allowing you to take quick action to reduce any potential risks.