When Spreadsheets Stop Working for Third-Party Risk Management

When Spreadsheets Stop Working for Third-Party Risk Management

For many growing companies, third-party risk management starts simply.

There is a vendor list. Questionnaires and supporting documents are collected. Someone records review dates in a spreadsheet. Issues are followed up through email.

At first, that may be enough.

Then the number of vendors grows. More of them become critical to operations, technology or data. Customers ask how third parties are assessed. Auditors or regulators want evidence of oversight. Identified issues need to be followed through to resolution.

The spreadsheet has not necessarily failed. The job has outgrown it.

When does vendor management become third-party risk management?

Maintaining a list of vendors and managing third-party risk are not the same thing.

The distinction becomes important as a company becomes more dependent on outside providers. A payroll provider, cloud platform, payment processor or outsourced service provider can affect operations very differently from an office-supply vendor.

The company now needs to understand which relationships create meaningful risk, whether that risk has been assessed, what issues require attention and whether those issues have actually been addressed.

That is an ongoing management problem, not simply a recordkeeping exercise.

Why do spreadsheets become difficult as vendor risk grows?

Spreadsheets are good at storing information. Third-party risk management requires more than storage.

An assessment may identify a problem, but the problem then needs to be addressed. Evidence may expire. A vendor relationship may change. A new service may increase the company's dependency on a provider. A review date may pass without anyone noticing.

As those activities multiply, information begins to spread across spreadsheets, inboxes, shared drives and individual employees.

The result is often less visibility at exactly the point when the company needs more.

Leadership may know that vendors are being reviewed without having a current view of which relationships present the greatest concern. Compliance teams may know that assessments exist without immediately knowing whether findings remain unresolved. The person responsible for vendor risk may spend increasing amounts of time reconstructing that picture.

Why does proving vendor oversight become harder?

Growing companies are increasingly asked to demonstrate how they manage third parties.

The request might come from an enterprise customer, an auditor, a board, a regulator or another stakeholder. In regulated environments, the expectation can be explicit. For example, the SEC's amended Regulation S-P includes requirements related to oversight of service providers handling customer information, which we discuss in our article on Regulation S-P vendor oversight.

The challenge is not simply saying that vendor reviews occur.

The organization may need to show that risk has been assessed, identified concerns are being addressed and oversight remains current.

When that information is scattered across multiple files and systems, demonstrating oversight becomes a separate project every time someone asks.

Do smaller companies need enterprise TPRM software?

Not necessarily.

A company can outgrow spreadsheets long before it needs the complexity of a third-party risk platform designed for a global enterprise with a large dedicated risk team.

That creates an uncomfortable middle ground.

Manual tools no longer provide enough visibility, but enterprise TPRM platforms may introduce more cost, complexity and implementation burden than the organization requires.

The better question is not whether a company is large enough for enterprise TPRM. It is whether its third-party relationships have become too important to manage through disconnected manual processes.

What should change when vendor risk outgrows spreadsheets?

The objective is not simply to replace a spreadsheet with another place to store vendor information.

Technology should make the risk easier to manage.

That means connecting assessment with what happens afterward: identified gaps, remediation, ongoing oversight and reporting. The company should be able to maintain a current view of its vendor risk rather than rebuilding that view whenever a customer, auditor or executive asks for it.

Continuity Strength provides third-party risk management technology for startups and small to mid-sized companies that need more than spreadsheets without implementing an oversized enterprise TPRM platform.

Vendor relationships will continue to grow. The effort required to manage their risk does not have to grow at the same rate.

Explore Third-Party Risk Management with Continuity Strength