Hernan Huwyler Managing Third Pary Risks - Internal Audit Europe Conference
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Recommendations to test controls performed by third-parties presented in the European Internal Audit Summit 2020 . Third-party management is the hottest topic in reducing business continuity, compliance, IT and commercial risks during the coronavirus crisis.
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Hernan Huwyler Managing Third Pary Risks - Internal Audit Europe Conference
- 1. Prof. Hernan Huwyler, MBA CPA Madrid, May 14th 2020 Managing Third Party Risks 2020 European Internal Audit Conference
- 2. Does the business need a global pandemic to realize the importance of third party risks?
- 3. Researches shown that many corruption , business interruption, data breach and compliance risks are triggered by third parties
- 4. Start from a definition 3P = any entity that a company does business with
- 5. 3P Sales channel > Clients, dealers Supply channel > Suppliers and subcos > Agents acting on behalf Partners > JVs, consortums
- 6. Who is the owner of the 3P risks framework in your organization? 1. Procurement 2. Legal 3. Compliance 4. Risk Management 5. IT 5. Unclear
- 7. Suggest a centralized 3P management to avoid conflicts of interests and inconsistent requirements
- 10. • Sourcing risk assessment • Due diligence • SLA and contract, sub-cos approval • Onboarding training • Performance monitoring • Ongoing due diligence • Certification • Exit plan • Transition • Customer complain handling • Contingency plan
- 11. The improvisation during COVID19 shown that colorful bubbles in a map provide zero value to business and decision-making
- 12. Charlatanism • Risk maps • Risk matrices • Risk registries • Rating systems • Scoring models
- 13. Science Monte Carlo Simulations Decision trees Scenario planning Reserve calculations Risk financing
- 14. Internal audit Assess the effectiveness of the 3P program Test the performance of controls on 3Ps against policies
- 15. Operational delivery controls 3Ps should identify and operate controls to comply with the organization policies and contractual requirements if exceed local regulatory requirements
- 16. Review the 3P inventory • Compile payment and contract data • Cleanse the data • Segment 3Ps • Match against 3P inventory and approvals
- 17. Review the risk asssessment • Data protection • Instruction • Confidentiality • Incident management & backups • Event escalation and reporting • Sub-processors • Return and erasure • Inventory • Policies & organization • Asset management • Access & cryptographic • Operations • Communication • Vendor
- 18. Review the risk asssessment • H&A risk assessment • Training & awareness • Hazard prevention • Identity, certificate and career verifications • Sanction, credit and criminal checks • Legal rights to work • Inspections • Sub-contractors • Accident reporting • Access control • Security risk assessment • Security officers • Transport
- 19. Review the risk asssessment • Availability of a complaints process • Investigation & feedback mechanisms • Retention rules and protection • Document inventory, retrieval and disposal • Disposal hold notification • Validation of recovery time objectives • Testing of service components
- 20. Review the risk asssessment • Litigation, media & ethical investigation • Potential conflicts of interests • Labor practices • Licenses and permits • Sanction screening • Guarantees and sureties • Financial stability • Insurance • Legal registry • Intellectual property • Subcontracting
- 21. Assess the contractual clauses Starting from • 3P inventory • Risk assessment Unequivocal requirements to make each 3P accountable Obligation to maintain records Contract management • Approval of templates and deviations • Nature and scope Performance standards • Requirements in SLAs • Dispute resolution & termination
- 23. Review the 3P metrics Contractual and SLA KPIs • Target, minimum and actual Incident statistics • Contract breach log • Quality rejections • Customer complains • Satisfaction surveys Update of exit plan • Root-cause analysis Traceability • Validated sources of data Improvement • Incentives and penalties • Discussion meetings and plans
- 24. Resources Internal Audit Institute Practice Guide for Auditing Third-Party Risk Management
- 25. Resources International Standard on Assurance Engagements (ISAE) No. 3402 Assurance Reports on Controls at a Service Organization