Risk Rating Third Parties: Optimizing Risk Management Outcomes
The objectivity of a risk rating process that follows best practices informs more effective evaluation and comparison of third party control postures.
This white paper discusses:
- What third party risk rating is;
- Why risk rating is needed; and
- How an organization can apply risk rating best practices as part of their risk management program.
A formal risk rating process will determine assessment cadence and enables and prioritizes the assessment depth and specific actions for those assessments. To be effective, risk rating must be based on documented parameters, which include scoring against the defined risk tolerance and risk appetite statement of the outsourcer. It is essential that a pre-engagement risk rating is performed on every potential third party to determine appropriate levels of due diligence oversight and set relevant expectations for ongoing assessments.