5 Implications Of Third Party Risk To Look Out For

Business choose to outsource for various reasons and within multiple departments. For instance, business owners opt for outsourcing software development often. Unfortunately, outsourcing in your company can come with a lot of concerns. As a business owner, it is important that you are comfortable with your third party. It is also important to understand that giving an outsourcer a certain part of your company can come with the possibility of risk. Here are five implications of third party risk your company should look out for.

Product/Service Deficiency

Product or service deficiency is the first thing to look out for with third party risk. Some companies have an outsourcer manufacturing their product or regulating their delivery. Other companies hire a third party to perform their services. However, if the third party fails to do it right, your company could lose business. There are several risk factors associated with this, such as inadequacy, faulty technology, or human error. Your company is built off of your product or service, so make sure that your third party is handling it correctly. Ensure that your third party supplier is doing right by your company and it’s products or services to avoid third party risk.

Operational Issues

Third parties that are responsible for your company’s operation need to make sure that they are keeping it a priority. For example, say that your company uses a server. If this server shuts down, you lose business. In this case, you won’t have control over what to do next, because you already gave those rights to the third party. This can be frustrating for the business, because you will need to depend on the third party to fix the problem that they created. When choosing a third party, or analyzing your current outsourcer, look for signs that they have a solution for any circumstance. If they don’t, your company may experience operational issues, and be vulnerable to third party risk.

Dissatisfied Customers

Another factor to look out for concerning third party risk is dissatisfied customers. Many business owners deal with this issue when they begin outsourcing sales consulting. Your business needs customers to survive, and their experience with your company matters. Some outsourcers that handle customer relations may have inconsistent interactions with your customers. Others many not understand company policy fully and could end up giving your customers the wrong advice. Additionally, this third party will have access to customer data, so you will need to make sure that there is no disclosure of this private information. Take the time to make sure your customers are satisfied. If not, your company may be subject to third party risk.

Compliance Complications

One of the major risks associated with third parties is compliance complications. This is when your third party doesn’t abide by laws or regulations in association with your company. If your third party is found guilty of this, the responsibility will fall onto your company as well. Make sure that your third party understands all of your company policies. Additionally, make sure they are aware of any law or regulation associated with your business together. If you are unsure of whether or not they are following these policies, take the time to check in with them. Avoid third party risk by ensuring that your outsourcer is following the policies and regulations.

Unhappy Employees

Businesses that outsource management processes may end up with unhappy employees. As an employee, it is important to have direct contact with a source that will be able to help you with any job-related concerns. This means that this contact will have to know the answer to every question about the company. They will also have to provide solutions and potential advice to the employee about their position in the company. This is a lot to put on a third party, and if they don’t have the full knowledge to help out your employees, it could result in HR-related issues. Even if your company outsources management tasks, make an effort to check in with your employees to make sure that they are satisfied to avoid third party risk.

There are many factors to look out for concerning third party risk. Business owners define outsource for cost advantages. They, then, move forward with outsourcing employees. If you choose to outsource, keep track of your outsourcers to make sure there is no product or service deficiency. Take the time to ensure that your third party understands your company policies and to see that they have a solution for any circumstance. Additionally, check in with your customers and employees to make sure that they are satisfied. Keep all of this in mind when looking out for third party risk in your company.