The global vendor risk management market size was valued at USD 7.26 billion in 2021 and is projected to reach USD 25.96 billion by 2030, registering a CAGR of 15.21% from 2022 to 2030. The market for vendor risk management is a process that involves controlling, recognizing, monitoring, and accessing a wide variety of potential risks. These hazards included operational risk, compliance risk, strategic risk, information security risk, and a great deal of other potential dangers. All of these dangers are potentially brought about by the relationships that organizations have with outside parties.
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Need for the efficient management of complex vendor ecosystems
Organizations spend considerable time and effort evaluating the vendors who provide products and services as per their business requirements. Vendor risk management solutions reduce the efforts for identifying the key parameters of vendor performance and scoring based on the vendors’ product or service delivery, time accuracy, and quality of the product. When an organization is dependent on multiple vendors, the use of vendor risk management solutions assists in figuring out and identifying the critical issues in sourcing products and services from third-party vendors. The management of multiple vendors is a tedious activity for any organization, and significant risk assessment through a vendor risk management solution eases the enterprise’s task of evaluating the risks associated with different vendors.
Dependence on non-formal and manual processes by many organizations
A sizeable section of the global market continues to rely on processes that are carried out manually in order to analyze and estimate the dangers associated with reliance on a certain provider. There are still many companies who are not aware of the necessity of using vendor risk management systems to evaluate the efficiency of their suppliers. These firms are hesitant to include technologies for managing vendor risk into their existing systems. A great number of companies rely on manual methods to identify hazards and are ignorant of the significance of vendor risk management solutions and services in the process of reducing the severity of risks posed by vendors.
Streamline the vendor risk assessment process
Large companies sometimes rely on a large number of suppliers both for the continuity of their businesses and for help throughout the entirety of the supply chain process to guarantee the punctual delivery of their goods and services to their clients. To find a solution to such pressing problems, it is necessary to analyze the numerous dangers and hazards provided by suppliers. The solutions for vendor risk management focus on each risk and streamline the operations within businesses that are geared toward risk resolution. These solutions also make it easier for enterprises to streamline their efforts to minimize risks while analyzing and selecting a vendor for particular tasks to complete.
BFSI is expected to witness significant growth during the forecasted period.
Due to constantly expanding third-party integration, an increase in linked devices, online banking, and the need for speedier transactions, the banking industry is by its very nature a highly interconnected industry. As there are too many things to secure and monitor, an increase in interconnectedness increases the likelihood of cyberattacks. The associated entities are likely connected to new entities, which may likewise pose a cybersecurity threat.
Third-party contractors frequently provide outsourcing banks with significant cybersecurity risks, including financial/reputational harm, regulatory issues, operational disruptions, etc. For example, Australian P&N Bank recently sent a letter to its customers informing them of a data breach that put their personal and sensitive account information at risk. The bank reported that the breach occurred on its customer relationship management (CRM) platform, which was hosted by a third-party company. Name, address, and contact information such as email, phone number, customer number, age, account number, and account balance were disclosed.
According to a survey done by the Opus and Ponemon institutes, firms exchange sensitive and confidential information with an average of 583 third parties, which introduces a significant number of new risks. Moreover, only 34% of firms in the research reported maintaining an exhaustive inventory of these third parties, and only 35% regarded their TPRM program as highly successful.
The requirement for vendor risk management for compliance management, vendor information management, and financial control is escalating rapidly in the BFSI sector as a result of increased regulatory exposure and constant change. The guidance issued by the Office of the Comptroller of the Currency (OCC) in May 2020, for instance, addresses specific types of third parties, such as cloud service providers, data aggregators, fintech companies, and subcontractors, as well as the regulations to follow when conducting business with these providers.
The market is split by region into North America, Europe, Asia-Pacific, and LAMEA.
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During the forecast period, North America is anticipated to hold the largest share of the worldwide vendor risk management market.
The vendor risk management market in the area is expanding as a result of technological advancements in the fields of AI, machine learning, the cloud, and IoT, the rise of end-user sectors such as BFSI, healthcare, and others, rising investment levels, and a growing emphasis on data security.
In January 2019, numerous banks and financial institutions in the United States had a data breach due to the negligence of a third-party vendor; the data breach was triggered by the incorrect configuration of a server on which Ascension kept digital copies of paper financial documents. Thus, access to a database containing over 24 million credit reports including sensitive client information is possible.
The 2019 Annual Default Review, Supply Chain Risk Edition, published in August 2019 by Rapid Ratings International Inc., a provider of vendor risk management solutions, rated 284 United States industrial firms that defaulted or filed for bankruptcy between 2014 and 2018 and found that suppliers with poor financial health have a greater likelihood of poor performance and bankruptcy. 95% of the 37 U.S. industrial enterprises that defaulted in 2018 began the year with a "High Risk" or "Very High Risk" FHR.
Moreover, the region is home to numerous multinational corporations with global supply networks, including Walmart and Amazon, among others. Thus, the companies in vendor risk management have the possibility to expand their presence in the region by providing enhanced functions using AI and machine learning.
In February 2020, RSA, a provider of Business-Driven Security solutions that assist enterprises in managing digital risk, announced that it would offer RSA Archer SaaS (software as a service) to customers that wish to use the RSA Archer Suite in the cloud. The RSA Archer Suite enables enterprises of any risk management maturity level to manage risk more effectively and efficiently.
In August 2019, IBM announced the debut of a new blockchain-based supply chain risk mitigation solution. The blockchain network enables organizations to validate and onboard their vendors more rapidly while preserving a secure audit trail of buyer-supplier interactions across the supply chain.
In July 2017, Keylight 4.7 is an improved version of LockPath's Keylight platform package. The revised version included the Health and Safety Manager (HSM) program as well as improved reporting and calculating capabilities.
In May 2017, RSA, a division of Dell Technologies, announced several enhancements to its RSA SecurID Access product. The upgrade added a cloud-based authentication-as-a-service option, facilitating secure access to both on-premises and cloud-based resources and systems from anywhere, at any time, for any user.