What Is Third-Party Risk Management (TPRM) and What Are Its Objectives?

Third-party risk management involves managing risks associated with external entities like suppliers, vendors, and service providers. Its objectives include ensuring compliance, protecting confidential information, and maintaining supply chain security. Learn more about third party risk management.

What Is a Third-Party Risk Assessment?

A third-party risk assessment evaluates the potential risks introduced by external suppliers and service providers. This process is crucial for identifying, assessing, and controlling risks to maintain security and compliance standards.

Examples of Third-Party Security Risks

• Cybersecurity Risk: Data exposure or loss due to compromised third parties.
• Operational Risk: Disruptions in business operations caused by third parties.
• Compliance Risk: Impact on regulatory compliance, including GDPR.
• Reputational Risk: Negative public opinion due to third-party actions.
• Financial Risk: Negative impact on financial success from poor supply chain management.
• Strategic Risk: Failure to meet business objectives due to third-party risks.

What Does a Third-Party Risk Management Program Entail?

An effective TPRM program includes vendor evaluation, engagement, risk remediation, and continuous monitoring to ensure third-party vendors do not pose unacceptable risks to the organization.

TPRM Best Practices

1. Define Organizational Goals: Align TPRM with the organization’s overall risk management strategy.
2. Get Stakeholder Buy-In: Ensure cooperation across all parties involved in TPRM.
3. Build Partnerships with Business Units: Collaborate to identify, track, and assess vendors.
4. Risk Tiering: Classify vendors based on their level of risk and criticality.
5. Work with Procurement: Integrate TPRM in the procurement process to evaluate and reduce risks.
6. Execute the Program with Continuous Monitoring: Continuously assess risks and monitor third-party vendors for any changes in their security posture.