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Bridging the gap: Harnessing data integrations in third-party risk management

By Volkov Law

Regulatory requirements are becoming increasingly complex, demanding meticulous attention to detail and a dynamic approach to third-party risk management (“TPRM”). At the same time, compliance departments are forced to sift through massive amounts of data that grow exponentially each year. Manual monitoring processes are ill-suited to handle the sheer volume and variety of data that compliance professionals are expected to digest, and an inability to effectively process this data means that risks are bound to slip through the cracks. These issues are compounded by the lack of communication that too often exists across corporate departments, which creates “blind spots” where risks known to one department remain invisible to others.

To keep up in this challenging environment, forward-thinking organizations are turning to technological solutions to streamline their monitoring processes and avoid regulatory or sanctions issues. Effective TPRM solutions enable organizations to integrate risk data from separate sources into a single platform, and create a composite, 360° view of third parties’ risk profiles. This technology can serve as the risk nexus for an entire organization, promoting inter-departmental cooperation and information sharing on risk management issues.

In this article, we'll explore the power of TPRM data integrations and how they can turn risk data into an asset by exposing unmanaged risks and reducing an organization’s dependence on error-prone manual monitoring procedures.

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Information Overload

Many compliance teams find themselves buried beneath mountains of data. Information arrives in bulk, in a multitude of different formats and languages. Compliance departments struggle to aggregate this data into a single, easily communicated format, meaning that compliance data is shared in fragments from the start. This obscures the “big picture,” allowing avoidable risks to fester and grow unabated.

In theory, compliance data should be a valuable asset. Sustainable growth is only possible if an organization can effectively manage risks and make objective, data-driven decisions. But data is just the raw material; for those without the capacity to timely process and distribute this information, compliance data quickly becomes a liability.

Dynamic organizations are modernizing their compliance programs with technological solutions that leverage data to integrate compliance into every aspect of the business. These businesses recognize that they cannot remain competitive without remaining compliant, and equip their teams with the requisite tools to make informed decisions about risk management. An effective TPRM solution integrates compliance data from many sources into a secure, centralized location, while ensuring that this data can be easily understood and rapidly shared with all relevant actors.

Ongoing Monitoring

While much focus is rightly placed on due diligence when onboarding new business partners, third parties too often face minimal scrutiny once they have been onboarded. This falls short of the Department of Justice’s expectations for corporate compliance programs, which call for ongoing monitoring of all third-party relationships. Risks can initially go overlooked, or arise later on. Regulators expect corporations to remain up-to-date on and abreast of these risks throughout the life of the third-party relationship.

In other words, while thoroughly screening third-parties during onboarding is necessary, alone it is insufficient. Staying compliant requires continuous monitoring, which can be overwhelming without the right tools. Organizations can automate much of the routine monitoring process with advanced TPRM software, allowing compliance teams to focus their limited human resources on issues of greater substance and urgency.

Data Integrations: Finding Signals in the Noise

Data integrations serve as a bridge between the compliance team and the rest of an organization. They allow organizations to connect, consolidate, and analyze data streams from different departments, providing compliance professionals with the big-picture insights that they need to make fully informed decisions. The data integration features of cutting-edge TPRM programs enable:

  1. Frictionless Data Aggregation: Data integrations enable the gathering of information from multiple sources in real-time. This means that compliance teams can monitor and visualize compliance data like financial records, counterparty details, and market information, all in one place.
  2. Enhanced Risk Management: Compliance is all about mitigating risks. With data integrations, organizations can identify and address potential compliance violations early on, reducing the odds of regulatory penalties and reputational damage.
  3. Improved Efficiency: Manual data entry and siloed systems can be time-consuming and error-prone. Data integrations automate data collection and processing, saving time and reducing the risk of human error.
  4. Better Reporting: Compliance requires detailed reporting to regulatory bodies. Data integrations make it easier to generate accurate and comprehensive reports, reducing the administrative burden and improving transparency.
  5. Real-time Monitoring: The compliance landscape is constantly evolving. Data integrations allow organizations to monitor changes in regulations and adjust their strategies in real-time, ensuring ongoing compliance.
  6. Proactive Alerts: Data integration tools can be set up to trigger alerts when potential compliance issues are detected. This allows compliance teams to take immediate action, minimizing potential risks.

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Building Bridges with Data Integrations

To effectively leverage data integrations and build inter-departmental risk sharing bridges, here are some key steps that organizations can take:

  1. Assess Your Compliance Needs: Understand your organization's unique compliance requirements, and identify the data sources that are crucial for maintaining compliance.
  2. Choose the Right Integration Tools: Select data integration solutions that match your organization's needs and capabilities. Consider factors such as ease of use, scalability, and integration with existing systems.
  3. Train Your Team: Invest in training for your compliance team to ensure they can use data integration tools effectively.
  4. Establish Data Governance: Implement data governance policies to ensure data accuracy, security, and privacy.
  5. Continuously Monitor and Adapt: The compliance landscape is always evolving, so stay vigilant. Continuously monitor regulatory changes and adapt your data integration strategy accordingly.

Robust data integrations are not just a technological advantage; they are a necessity. These integrations allow organizations to securely centralize compliance concerns, bridging gaps in risk management by connecting compliance with the rest of the business. If you would like to learn more about harnessing the power of data integrations, discover the Integrity Platform, a technology that provides organizations with the tools necessary to streamline their compliance efforts, reduce risks, and lay a foundation for long-term success in the face of regulatory headwinds.

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