Market Trends of Vendor Risk Management Industry
BFSI is Expected to Witness Significant Growth
- The Banking sector is, by the nature of its business, a highly interconnected sector owing to rapidly growing third-party integration, increasing connected devices, online banking, and the need for faster transactions. Greater interconnectivity introduces higher cybersecurity risks, given that there are too many things to secure and monitor. The interconnected entities are likely connected to new entities, which could also be the source of cybersecurity risk.
- Third-party vendors can often pose some serious cybersecurity risks to outsourcing banks, such as financial/reputational damage, regulatory problems, operational disruptions, etc. For instance, Australian P&N Bank recently sent its customers a notification letter about a data breach that put the personal and sensitive account information of customers at risk. The bank stated that the breach occurred through its customer relationship management (CRM) platform operated by a third-party hosting firm. The information exposed included name, address, and contact details, e.g., email, phone number, customer number, age, account number, and account balance.
- In November 2023, True Digital Group strategically collaborated with FiscalNote Holdings, Inc., an AI-driven enterprise SaaS technology provider of policy and global intelligence, to map 3rd and 4th party vendors and monitor critical risks, presenting an opportunity for financial institutions to understand and monitor risks within their expansive supplier networks and elevate transparency throughout the vendor ecosystem.
- The IT department, data protection concerns, and the dangers of exchanging data with third parties may be the emphasis in the banking industry. Risks to product quality and safety may be the emphasis in the consumer products industry, with a goal of protecting both end consumers and the brand's reputation. Although organizations have been right to be proactive in managing risks to specific functions or aspects of the business, many haven't stepped back from this focused perspective to examine the broader business exposure, the holistic view that's essential to understanding overall risk exposure resulting from third parties and managing it enterprise-wide.
- The need for vendor risk management for compliance management, vendor information management, and financial control is rapidly increasing in the BFSI industry due to greater exposure and continuously changing regulations. For instance, the guidance provided by the Office of the Comptroller of the Currency (OCC) addresses specific types of third parties, such as cloud service providers, data aggregators, fintech companies, and subcontractors, and how regulations to follow while conducting business with these providers.
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North America is Expected to Hold Major Share
- The vendor risk management market in the region is proliferating owing to advanced technological developments in the field of AI, machine learning, cloud, and IoT, growth of end-user industries such as BFSI, healthcare, and others, increasing levels of investments, and a growing emphasis on data security.
- In North America, extended enterprise risk management is a primary concern for companies as they work to reduce their exposure to third-party incidents and safeguard their brand in the market due to rising regulatory demands, compliance-related punishments, and heightened scrutiny regarding third parties. By creating an integrated enterprise technology infrastructure and following well-defined procedures, businesses are improving risk management and making use of their partnerships with third parties to generate value throughout the entire organization.
- Further, in June 2023, The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency, the major regulating agencies in the United States, issued final guidelines to help banks manage risks associated with their third-party relationships. The guidance provides principles for effective third-party risk management for all types of relationships, regardless of how they may be structured.
- Moreover, the region is home to numerous major business players who have supply chains spread on an international level, such as Amazon and Walmart, among others. Thus, the vendor risk management players have the opportunity to penetrate further in the region by offering advanced functionalities with the help of AI and machine learning.
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