Who are Third Parties?

Third-party vendors are the people, businesses, and organizations you work with to provide goods and services. They can be your payroll providers, marketing partners, and anything else that may cause financial, regulatory, or reputational damage in the event of a breach.

What is TPRM?

Third-party risk management (TPRM) also known as Vendor Risk Management means identifying, assessing, and controlling all the various risks that may develop throughout your relationship with a third party. According to the regulator suppliers, customers, distributors, joint ventures and subsidiaries of a company, all of which are potential third parties are sources of risk to the company.

Major Risks/Challenges dealing with Third-Party Risk Management

The Challenges that a company face in managing third-party risk are:

• Supplier systems are becoming more complex.
• A monitoring process that is not structured by a third party.
• Insufficient policy awareness and training.
• Increased regulation pressure.

Lifecycle of TPRM

Understanding your organization's TPRM lifecycle is key to identifying and mitigating vendor risks. Below are the key steps in the third-party life cycle which include:

• Sourcing and Selection
• Receive and Onboard.
• Assessment of inherent risk.
• Supplier evaluation and risk mitigation.
• Continuous Monitoring
• Continuous Performance & SLA Management.
• Termination and Offboarding

TPRM Framework

A Third-Party Risk Management framework helps your organization to manage the financial and reputational risks and develop standardized methods for making decisions about potential third-party risks and reducing the time it takes to manage them. Following are the several frameworks which include:

• Make an inventory of all the third parties with which your organization has a relationship.
• Identify the cybersecurity risks your organization may be exposed to through third-party vendors.
• Identify and categorize third parties according to the risk and focus on all core activities.
• Design a due diligence testing model to stay focused on third parties with the highest cyber security risk.
• Establish a strong team of decision-makers for governance and framework decisions.
• Review crucial activities to set a benchmark for the third-party risk management framework.
• The three main lines of defense against fraud and corruption are owners, third-party oversight, and an internal audit team.
• Create contingency plans in the event of a data breach or when a third party is judged to be of poor quality.

Conclusion

Managing vendors and other third parties may seem like a daunting task however, implementing a robust Third-Party Risk Management process can help improve the overall efficiency and introduce stringent controls for monitoring third parties. Whether Third-Party Risk Management is done manually or with the help of a TPRM tool, Third-Party Risk Management will always play a crucial role in any organization.