Third-Party Risk Management Automation

Third-Party Risk Management Automation Why❓

Literature

In 2019, Gartner conducted a cross-functional third-party risk management survey of 11 functions. These were compliance, enterprise risk management, finance and accounting, IS, IT, internal audit, legal, privacy, purchasing and procurement, supply chain/distribution and logistics, and dedicated third-party risk management functions or offices. They studied the changing nature of third-party profiles and the impact of a broad range of third-party risk management activities, from due diligence to monitoring. Here, they report on aggregate, observed findings on the 11 functions.

State of the Third-Party Network Third parties continue to expand into an extensive fourth and “nth” party network. According to Gartner, 76% of organizations anticipate an increase in the number of third parties within their network over the next three years. Third parties continue to perform new-in-kind services and services outside the core business model, suggesting they are key to future growth. At the same time, the third-party network continues to expand to include a number of fourth and fifth or “nth” parties. Sixty-six percent of organizations anticipate an increase in the number of fourth and fifth parties in their third-party networks over the next three years (see Figure 1).

Figure 1. Forecast Changes for the Third-Party Network

Figure 1. Forecast Changes for the Third-Party Network.

Conclusion

Yes, Conclusion Gartner research demonstrates thid-party networks continue to expand and what are you doing?

Here is what I have done before

Assumptions

  1. There is already a contractual relationship between the parties and they have agreed to the exchange of data and to be subject of external audit.

  2. You have access to the relevant data from your organization (ERP Invoice Records, Authorized Sales Territories, Promotions Periods, etc.)

  3. Additional data may be required to enable other audit features; in the case of sales to Parent or Subsidiaries the auditor will required to research such metadata.

Audit Overview

First lets understand the Audit Scope; we want to validate that our Third-Party is in alligment with your company policies, ethics and that they are following up contractual obligations.

Data Gathering

To start working we will need to get some data, such can come from several sources.

Audit Metadata

Field Name Field Data Type
v_AP_Start_Date date, datetime
v_AP_End_Date date, datetime
Region text

Sales Data ERP Invoice Records (Local Clients, External Third-Party Vendor and/or Supply Chain Management Solutions)

Field Reference Field Name Field Data Type  
R.1 Client (Parent or Subsidiaries) text  
R.2 Transaction Type (examples: sale, credite note, return, debit memo) text,number with table reference.  
R.3* Invoice Date date, datetime  
R.4 Invoice Number or Credit Note Number number, text, unique  
R.5 For Returns: Original Invoice Number number, text, unique  
R.6 For Returns: Reason for Return (return code, etc.) number, text, unique  
R.7 Transaction Number if different from Invoice Number number, text, unique  
R.8 Sales Order Id number, text, unique  
R.9 Ship Date date, datetime  
R.10* Customer Purchase Order PO NUmber number, text, unique  
R.11* Customer Bill To Name text  
R.12 Customer Bill To Address Street text  
R.13 Customer Bill To Address State text  
R.14 Customer Bill To Address Zip number  
R.15 Customer Bill To Address Country text  
R.16 Customer Ship To Name text  
R.17 Customer Ship To Address Street text  
R.18 Customer Ship To Address State text  
R.19 Customer Ship To Address Zip text  
R.20 Customer Ship To Address Country text  
R.21* End User Name text  
R.22* End User Address Street text  
R.23* End User Address State text  
R.24* End User Address Zip text  
R.25* End User Address Country text  
R.26* Quantity Ordered number  
R.27* Quantity Invoiced number  
R.28* Distributor Sku Code number, text ,unique
R.29 Distributor Sku Description text  
R.30 Client Sku Code number, text ,unique
R.31 Brand Product Desciption text  
R.32 Serial Number number  

Bold * are mandatory fields to perform initial analysis.

We have perpare the following test cases that will help you to start your audit:

  • Be subject to audit (this need to be clear as this is the key to data request)

2021

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