Managing Third-Party AI Risk

Artificial Intelligence presents third-party risk management (TPRM) professionals with a serious challenge and a profound opportunity. On the one hand, third-party risk managers are already beginning to integrate this powerful new technology into their processes, resulting in faster, more consistent operations and helping teams do much more with the resources they’re given. At the same time, AI presents risk managers with a newfound challenge: as their vendors adopt this technology, it becomes even harder to verify the accuracy of their questionnaire responses and introduces new avenues for cybersecurity risk. Third-party AI risk is a serious, mounting challenge, but the solution isn’t to avoid this new technology—it’s to harness it. 

The Spread of AI in the Vendor Ecosystem 

While AI offers myriad opportunities for TPRM teams to operate more efficiently and effectively, third parties are turning to AI to ease the burden of due diligence requests, including using AI to complete TPRM assessments faster. AI can automate the tedious task of filling out questionnaires, remembering past responses, ensuring consistency across multiple questionnaires and saving time on repetitive questions. Moreover, machine learning capabilities enable these systems to improve their accuracy and efficiency as they process more data over time. 

AI isn’t just impacting questionnaire responses, it’s also transforming the way third parties generate their policies and procedures. AI-driven systems can analyze vast amounts of data, identify relevant information, and use it to generate policies. These systems can also adapt to regulatory changes, potentially ensuring that policies remain compliant over time. The time-saving benefits of AI in this context are enormous, allowing humans to focus on higher-order work while leaving repetitive and data-heavy tasks to machines. 

Still, though AI has myriad applications for both increasing efficiency in due diligence and generating policies, these applications pose their own challenges to risk professionals. Despite the enormous potential of AI in making it easier to complete questionnaires, third parties who use of this technology to complete assessments run the risk of handing TPRM professionals low-quality responses. AI systems are only as good as the data they’re trained on, meaning that inaccurate, outdated, or biased data can lead to flawed responses. Furthermore, reliance on AI tools could lead to complacency and less than full effort from third parties, potentially undermining the thoroughness of due diligence. Over-reliance on AI could also create an environment where humans are less equipped to respond to due diligence requests without these tools. 

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Additionally, the use of AI in policy and procedure generation is not without its drawbacks. Despite AI’s impressive capabilities, it’s still a tool that requires careful management. AI-driven policies can still be produced based on bad data and imprecise algorithms. If the input data is biased or flawed, the resulting policies could perpetuate those biases or errors, leading to noncompliant teams that don’t know there’s an issue. AI also lacks the ability to apply moral and ethical judgment when creating policies, and even good policies generated by technology must be executed by humans, meaning organizations must still collect evidence that their policies are implemented well. Thus, it’s necessary both to validate the ethical sufficiency of AI-generated policies and to track how they work once they’re introduced to the realm of human behavior.  

Another challenge posed by AI technology is the way it expands the amount of sensitive data present in the vendor ecosystem. AI applications themselves are yet another third party to vet for cybersecurity risk, primarily due to the vast amount of information fed into them, both in the form of training data and over the course of regular use. A breach at an AI vendor could become a goldmine of information for cyber criminals, providing them with a thorough understanding of an organization’s operations, vulnerabilities, and even future plans, so teams looking to use AI technology should be prepared to vet potential vendors for strong information security practices. 

Conclusion 

To overcome the potential negative impacts of AI, today’s third-party risk, infosec and procurement teams need to fight fire with fire by adding artificial intelligence capabilities to their arsenals. AI introduces a host of powerful tools that can significantly enhance the effectiveness and efficiency of TPRM teams. AI-driven analytics tools can sift through vast amounts of data, identifying patterns and correlations that would be impossible for humans to detect manually. This analysis can help identify potential risks in real-time, allowing organizations to mitigate them before they materialize into significant threats.  

However, it’s crucial to remember that AI is a tool and not a solution. Successful implementation of AI in TPRM requires careful planning, management, and oversight to ensure it’s used appropriately and effectively. With the right approach, AI can serve as a powerful ally in navigating the complex world of third-party risk management. For instance, one study showed that the use of AI technology made it easier and faster for new employees to achieve the same proficiency as more seasoned employees, increasing productivity and employee retention in the process. 

Remember, the critical role of human oversight cannot be overstated. Humans ensure that the AI is functioning correctly, interpret its output and make informed decisions based on those interpretations. In this symbiotic relationship, AI is the tool that amplifies human capabilities, and humans are the intelligent agents who wield it responsibly and strategically, thereby creating a formidable front in the face of third-party risks. This is why, according to Pew Research, analytical skills like critical thinking, writing, science and mathematics are more important in jobs that work closely with AI. Far from negating human input, smart implementations of AI technology should highlight the places where employees’ skills are the most useful.  

For more information on the way AI will transform TPRM, read our white paper, Third-Party Risk Management: AI-Powered Teams Elevate Human Performance.