In today’s economy, many organisations rely on external vendors, suppliers, and partners to maintain operations, streamline services, and drive innovation. While this reliance unlocks agility, it also introduces increasing complexity in associated risks.
These third-party risk exposures — from supply chain disruptions and costly data breaches to regulatory non-compliance — can jeopardise an organisation’s financial stability and reputation. And traditional vendor vetting, often relying on simple checklist-based vendor screening and single-instance due diligence checks, is fundamentally inadequate for managing these dynamic threats.
A truly effective third-party risk management (TPRM) framework requires a proactive, continuous monitoring approach. In this blog post, we will explain how Handshakes can provide the data and tools to help enable this dynamic framework for procurement, risk management, and compliance teams.
The Limitations of Reactive Risk Management
To understand what third-party risk management (TPRM) is, one must first recognise the limitations of a reactive approach. Traditional due diligence provides only a single point-in-time assessment. This snapshot approach is flawed because a partner that appears low-risk today could face litigation, adverse media, or a complete ownership change tomorrow, leaving the contracting organisation completely exposed to evolving third-party risk.
Conducting thorough corporate background checks also requires manually sifting through large volumes of data, including multiple country registries, court records, and global sanctions lists. This tedious process is prone to human error and rapidly consumes valuable resources.
At the same time, standard checklists often fail to uncover complex, indirect relationships, such as shared beneficial owners between a current vendor and an employee, which can pose significant challenges for risk mitigation.
Ultimately, relying on a reactive, manual approach creates critical time lags and blind spots, which can lead directly to unforeseen compliance failures, regulatory penalties, and reputational damage.
Elements of a Proactive TPRM Framework
Moving beyond the pitfalls of reactive vetting requires embedding continuous intelligence into the process. The foundation of a robust, proactive third-party risk management framework rests on key, interconnected elements that ensure perpetual awareness:
- Continuous monitoring: This is the core principle. It stresses the importance of ongoing, automated surveillance of all third parties throughout their entire engagement cycle, moving far beyond mere initial due diligence checks.
- Integrated data view: A proactive framework necessitates combining diverse data sets, including corporate registries, litigation records, adverse media, and internal transaction records. The ability to see all this information in one place is vital.
- Relationship mapping: Visualising complex relationships (ownership, directorships, etc.) helps identify hidden third-party risks and potential conflicts of interest that manual checks cannot detect.
- Automated alerting: Automated systems must be in place to instantly flag changes or new risks, such as regulatory filings, changes in ownership, or negative news, ensuring risks are addressed as they emerge, thereby enabling immediate risk mitigation.
This shift in philosophy ensures your risk assessment remains current and dynamic, adapting instantly to changes in the third-party risk landscape.
Handshakes: Enabling Dynamic Third-Party Risk Management
Handshakes offers the technology to move beyond the limitations of basic vendor screening services and establish a truly dynamic TPRM system. Our solutions integrate unparalleled data access with the following proprietary visualisation tools:
- Handshakes APP: This due diligence software is the engine of proactive vetting. It visualises connections between individuals and companies through its mapping capabilities, essential to uncover complex relationships and identify hidden Conflicts-of-Interest exposure across a vendor’s network. The Handshakes APP’s mapping capabilities can also visualise a company’s ultimate beneficial ownership and identify the primary stakeholders. Additionally, users can generate financial reports from its datasets. This feature allows risk management teams to quickly assess the current financial stability and health of third-party risk entities, providing a vital layer of continuous intelligence.
- Handshakes XPERT: For high-risk entities, complex investigations, or when internal resources are stretched, Handshakes XPERT serves as a scalable extension of the internal due diligence team. Beyond customised, expert-driven reports that provide deep insights into complex structures, Handshakes XPERT provides a comprehensive Active Monitoring capability, an important element in TPRM. At the user’s request, the team can actively track and escalate critical changes regarding shareholders and directorships, capital information, and entity status.
This dual approach, combining powerful self-service tools with expert analysis, ensures comprehensive coverage across the entire spectrum of third-party risk management.
The Benefits of a Proactive TPRM Approach
That said, implementing a proactive TPRM system yields benefits that far outweigh the costs associated with reactive crisis management. For instance:
- Enhanced compliance and early detection: By continuously monitoring, organisations gain crucial lead time. This early detection prevents costly issues and significantly strengthens compliance with global and local regulations, preventing minor issues from escalating into major regulatory failures.
- Operational efficiency: Automation and integrated data reduce manual effort for due diligence checks and vendor screening, accelerating vetting processes and freeing up highly skilled analysts to focus on complex, high-value tasks.
- Holistic decision-making: Gaining a holistic view of financial health, ownership, and regulatory history leads to more informed choices about partners and suppliers, improving overall business outcomes.
- Reputation protection: Proactive risk management shields the organisation from association with non-compliant, fraudulent, or reputationally compromised entities, thereby fostering trust and strengthening corporate standing.
Build a Resilient Future with Handshakes
The era of managing third-party risk with static spreadsheets and manual checks is over. The future of corporate integrity lies in leveraging interconnected data and intelligent technology to create an adaptive TPRM framework.
Handshakes, a data analytics company in Singapore, provides the essential components for this transition: our due diligence software (Handshakes APP) offers the speed and clarity of relationship mapping and financial reports, while Handshakes XPERT provides the depth of expert analysis and the capability to actively monitor entities for high-risk cases. This dual solution empowers your procurement and risk teams to move beyond guesswork, ensuring your extended enterprise operates with full transparency and minimal exposure.
Explore Handshakes’ solutions today to build a more robust, dynamic, and resilient third-party risk management framework by design.
