Strengthen risk mitigation with third-party data

Modern businesses face an array of risks, both known and unknown. Third-party data can significantly strengthen risk management practices by providing organizations with a more accurate and comprehensive view of their exposure to risk. In this article, we’ll explore the growing importance of third-party data in risk mitigation with concrete examples that illustrate how businesses are using third-party data to reduce and mitigate risk across a variety of industries.

The role of third-party data in risk mitigation

Falling under the broader umbrella of risk management, risk mitigation focuses on minimizing or eliminating the impacts of risk. As the number and diversity of risks increase, relying solely on internal data sources for risk management creates dangerous blind spots. Organizations supplement their data with third-party data, which may include data sets from public, governmental, nonprofit or academic sources. This data is commonly shared or bought and sold on data marketplaces or exchanges. Here are two primary ways third-party data helps to enhance risk mitigation strategies. 

Enhance risk assessment and analysis

Third-party data enhances the effectiveness of risk mitigation by significantly expanding the volume and diversity of available data. Especially for businesses with complex risk models and scenarios, enriching in-house data with data from third-party providers allows them to conduct more thorough risk assessments and perform more accurate risk analyses. 

Third-party data helps businesses build context, providing the data sets required for a more comprehensive view than would be possible with only internal data. This data may include market trends, economic indicators, geopolitical information or industry-specific data. 

Real-time monitoring and early warning systems

Real-time data serves as an early warning system, allowing organizations to detect, monitor and react to emerging risks swiftly. Many third-party data providers offer real-time or near real-time data feeds, enabling a quick response to fast-evolving conditions such as adverse weather patterns, fluctuations in financial markets or news events that may impact the business.

How businesses are using data to mitigate risk

Businesses across many industries use third-party data to mitigate risk. Here are several examples that illustrate the innovative ways businesses are leveraging third-party data.

Cybersecurity threat intelligence

Cybersecurity is a never-ending cat-and-mouse game between organizations trying to protect their sensitive data and systems and threat actors seeking to compromise it. Third-party threat intelligence feeds are an essential source of information about emerging cyber threats, malware and other vulnerabilities. Combining these feeds with internal data such as logs, network traffic data and user authentication data allows organizations to better understand a threat actor’s motives, potential targets and behaviors. Third-party data can significantly strengthen a business’s cybersecurity stance, reducing the likelihood of a successful attack. 

Evaluating supplier risks

Vendors and service providers represent numerous financial, operational, reputational and cybersecurity risks. Because much of the data that can indicate the presence of supplier-related risk originates outside the organization, third-party data is crucial. Examples may include using external data to assess a supplier’s overall stability and creditworthiness or identifying geopolitical risks that may negatively impact a critical supplier's operations. 

Supply chain risk mitigation

As the complexity of supply chains grows, so do the risks that may cause them to fail. Market intelligence from third-party sources allows companies to proactively identify potential disruptors that could have a negative impact on their supply chains, such as natural disasters, labor strikes, transportation bottlenecks or political turmoil. This information enables better inventory management and risk preparedness. 

Fraud detection and prevention

Fraudulent transactions and insurance claims present significant risks for financial institutions. Third-party data helps banks and insurance companies combat fraud by supporting more accurate risk scoring, spotting fraudulent behavior quickly and creating more robust identity verification processes. 

Economic forecasting

Accurate economic forecasts empower businesses to plan for the future, identifying both the risks and the opportunities that lie ahead. By supplementing economic indicators with data from third-party sources, businesses can enhance the accuracy and granularity of their predictions. Examples of third-party data used in economic forecasting include consumer sentiment, online sales, search engine queries, social media trends and alternative data such as satellite imagery, weather and shipping data. 

Eliminate your data blind spots with Snowflake

Snowflake Marketplace helps organizations eliminate the data blind spots that can leave them exposed to risk. With access to live, ready-to-use data, businesses can strengthen their risk mitigation programs. In the Snowflake Data Cloud, teams can store, process, and analyze data in one place, seamlessly combining internal and third-party data for use in risk mitigation activities. Clearly identify possible risks by using Snowflake.