How Third-Party Risk Management Can Help
The pharmaceutical supply chain is complex, with numerous suppliers and vendors involved in the process of bringing a drug to market. With the rising costs and regulatory challenges, the industry is outsourcing more and more, expanding the supply chain’s risk and complexity.
According to a 2020 Deloitte survey, 84% of companies reported experiencing a third-party incident in the past three years. This makes third-party risk management (TPRM) a critical aspect of ensuring the quality and safety of finished products. In fact, the first half of 2022 saw 337 data breaches affecting over 19 million individuals, highlighting the pressing need for robust third-party risk management strategies.
In this blog, we will explore how third-party risk management can help ensure the continuity of the pharmaceutical supply chain and prevent risks posed by third party vendors.
Importance Of Third-Party Risk Management 3PRM™
The 3PRM™ assessment is designed to help organizations ensure they have the proper policies and procedures in place to address all potential risks related to management, operations, and finance. It stimulates the likelihood of those risks occurring and evaluates key factors like internal auditing procedures, compliance guidelines, performance criteria, internal controls, reporting processes, and contractual requirements. By assessing these factors, organizations can foster a positive long-term relationship with their third-party providers and evaluate the cost-benefit of the relationship. Here’s why pharma companies need a third party risk management system.
Third-party Risks are Increasing
The number of third-party vendors that businesses rely on has been increasing over the years, leading to a higher likelihood of encountering risks. Third-party vendors can include suppliers, contractors, service providers, and more. These vendors may not have the same level of security measures in place as your organization, which could lead to data breaches, cyber-attacks, and other security incidents. Therefore, businesses need to implement a comprehensive third-party risk management (3PRM) program to mitigate these risks.
Regulations Require 3PRM™
Many industries, including healthcare, finance, and government, have regulations in place that require businesses to implement a 3PRM™ program. Non-compliance with these regulations can result in hefty fines and damage to the company’s reputation. Therefore, implementing a 3PRM™ program is not only necessary to comply with regulations but also to protect your business.
Protect Your Reputation and Brand
A single incident involving a third-party vendor can damage a business’s reputation and brand. The public often holds the company responsible for any security incidents involving third-party vendors. Therefore, implementing a 3PRM™ program can help businesses maintain their reputation and brand by ensuring that their vendors are properly vetted and managed.
Financial Impacts of Third-party Risks
Third-party risks can have significant financial impacts on businesses, such as loss of revenue, legal fees, and penalties. A data breach or cyber-attack involving a third-party vendor can result in financial loss and damage to the company’s financial stability. Therefore, implementing a 3PRM™ program can help mitigate these financial risks and protect the company’s bottom line.
Improve Supply Chain Continuity
Third-party vendors are an essential part of a business’s supply chain. If a third-party vendor is unable to deliver products or services, it can result in supply chain disruptions and affect the business’s operations. Therefore, implementing a 3PRM™ program can help improve supply chain continuity by identifying and managing risks associated with third-party vendors.
Implementing a 3PRM program can be a cost-effective solution for businesses. The costs associated with managing third-party risks are typically lower than those associated with a security incident involving a third-party vendor. Therefore, investing in a 3PRM™ program can help businesses save money in the long run.
Holistic Approach to Risk Management
A 3PRM™ program takes a holistic approach to risk management by addressing risks associated with third-party vendors comprehensively. The program includes identifying and prioritizing high-risk vendors, conducting due diligence, monitoring and reporting on vendor performance, and more. By taking a holistic approach to risk management, businesses can ensure that they adequately address third-party risks and protect their organization.
Risks Posed by Third Party Vendors in the Pharma Industry
The pharmaceutical industry is heavily reliant on third-party vendors for the supply of raw materials, manufacturing, packaging, and distribution. These vendors can be both national and international, and their inability to deliver can result in severe consequences. The following are some of the challenges that pharmaceutical companies face:
Complex Supply Chains
The pharmaceutical industry is renowned for having one of the world’s most complex supply chains. With multiple linkages, including raw material suppliers, contract manufacturers, and distributors, it can be quite challenging to keep track of all the parties involved. But the greatest challenge lies in mitigating the risks posed by third-party vendors. Any problem that arises along the various links of the chain has the potential to cause far-reaching consequences, not just for pharmaceutical companies but also for patients and healthcare professionals.
The pharmaceutical industry is no stranger to strict regulations and for good reason. The industry is responsible for producing and distributing drugs that can have a direct impact on people’s health and well-being. Adhering to regulations is not only essential for the sake of legality, but it is also crucial for protecting the public. This is precisely why companies in the industry take regulatory compliance with the utmost seriousness, especially when it comes to their third-party vendors. Non-compliance with vendor regulations can lead to devastating consequences, such as hefty fines or even irreparable damage to the industry’s reputation.
As the world continues to move towards digitalization, it is no surprise that the supply chain has followed suit. However, this increasing reliance on technology has also opened up a new avenue of risk for businesses: cyber-attacks. It is now more important than ever to safeguard sensitive information from hackers who can disrupt supply chains and damage operations. Third-party vendors pose a significant risk to businesses, as they often handle critical data and may have less robust cybersecurity measures in place.
Pharmaceutical companies play a critical role in the health and well-being of millions of people around the world. With this important responsibility comes the need to ensure that high ethical standards are maintained, and that environmental and social harm is avoided at all costs. However, this can be easier said than done, as many companies rely heavily on vendors to provide vital services and products. These vendors, while essential to the day-to-day operations of the company, can also pose significant risks if they fail to uphold ethical and environmental standards.
Lack of Control Over Third-Party Vendors
The role of third-party vendors in the pharmaceutical industry is crucial, but it also poses a significant challenge – lack of control. This lack of control means that pharmaceutical companies have a difficult time implementing and enforcing risk management protocols, as they have limited oversight of these vendors. The risk posed by third-party vendors can include anything from data breaches, supply chain disruptions, regulatory violations, or even product recalls. The importance of managing the risk posed by third-party vendors cannot be overstated, as it can have far-reaching consequences for a pharmaceutical company’s reputation, financial performance, and, ultimately, patients’ safety.
With the consolidation of suppliers, companies are increasingly relying on a smaller pool of vendors to provide the necessary components and ingredients for their products. While this approach has its benefits, such as driving down costs, it also poses significant risks. In particular, the dependence on a limited number of third-party vendors increases the risk of disruptions in the supply chain. Whether due to natural disasters or unforeseen circumstances, any interruption in the availability of key ingredients or components can lead to significant problems for pharmaceutical companies.
One of the biggest challenges that pharmaceutical companies face is financial risk, most notably when it comes to third-party vendors. These vendors can make or break a company’s success, and when they fail to deliver or when the supply chain is disrupted, it can have serious consequences. From delays in getting products to market to financial losses, the impact of these risks can be significant. It’s important for these companies to have a solid understanding of the risks involved and to have a plan in place to mitigate them.
How To Mitigate Third Party Vendor Risks In Pharma Supply Chain?
As the pharmaceutical industry increasingly relies on third-party vendors for the supply of raw materials, it only takes one incident of a faulty product, delayed shipment, or shortage of critical ingredients to impact a company’s bottom line and reputation.
To help mitigate these risks, CRI Group™ is launching a new third-party compliance verification and certification program, called 3PRM-Certified™.
With this program, pharmaceutical companies across the Middle East, Europe, and Asia regions can establish the legal compliance, financial viability, and integrity levels of outside partners, suppliers, and customers seeking to affiliate with their businesses. By thoroughly vetting potential partners and vendors, companies can better manage third-party risk in their supply chain, ensuring continuity and safeguarding their reputation.
Implementing a strong third-party risk management program that includes 3PRM-Certified™ can help pharmaceutical companies avoid potential supply chain disruptions, regulatory non-compliance, financial loss, and damage to their reputation. By taking proactive measures to assess and manage third-party risks, companies can improve supply chain continuity and ensure the integrity of their operations.
CRI Group’s 3PRM™ Solution: A Comprehensive Approach to Avoid Third-Party Vendor Risks
When it comes to third-party risk management, it’s important to have a comprehensive approach to mitigate potential risks. That’s where CRI Group’s 3PRM™ solution comes in. Our solution streamlines the entire third-party risk management process with scalability and efficiency, from risk identification to assessment.
Here are some ways that our 3PRM™ solution can help your business:
We conduct thorough due diligence to verify the legal compliance, financial viability, and integrity levels of potential third-party partners, suppliers, and customers.
Screening & Background Checks:
Our screening and background checks ensure that third-party entities have a clean track record and do not pose any potential risks to your business.
We ensure that all third-party entities comply with relevant regulations and laws, including industry-specific regulations and global compliance standards.
Information Management: Our business intelligence services provide critical information and insights about third-party entities, including their reputation, financial status, and potential risks.
Our investigations service includes IP investigations, fraud investigations, conflict of interest investigations, and more, to help you uncover potential risks and protect your business.
Anti-bribery & Anti-Corruption (ABAC) Compliance:
We help businesses comply with anti-bribery and anti-corruption regulations, including the Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act.
Employee Auditing, Training & Education:
We provide employee auditing, training, and education services to ensure that your team is knowledgeable about third-party risks and compliant with relevant regulations.
Monitoring & Reporting:
We offer ongoing monitoring and reporting services to ensure that third-party entities continue to comply with regulations and that their risk level remains acceptable.
By utilizing CRI Group’s 3PRM™ solution, your business can mitigate potential risks from third-party vendors and protect your reputation, financial stability, and compliance. Don’t let third-party vendor risks compromise your pharma supply chain. Contact CRI Group™ today to learn more about our comprehensive 3PRM™ solution and how we can help your organization mitigate risks and ensure compliance.