Building an Enterprise Third-Party Risk Management Program That Actually Works

Authors: Tahmina Day and Vinod Sreedharan

Third-party relationships have evolved, making suppliers integral to core business functions. This deep integration introduces complex risks that demand a strategic approach to third-party risk management (TPRM). Beyond being a compliance task, a well-designed TPRM program becomes a business enabler. It supports confident growth, strengthens partnerships, and offers a competitive advantage through superior risk intelligence.

This shift in culture transforms TPRM from a distracting necessity into a significant asset for the organization.

Gartner: Organizations are increasingly relying on third parties, including vendors, partners, and service providers, to achieve business objectives, deliver products and services, and boost operational efficiency. Despite the growing risks, many organizations struggle to manage third-party risks effectively. Only 16% of organizations, according to Gartner, believe they effectively manage third-party risks. Source: https://www.gartner.com/en/legal-compliance/trends/third-party-risk-governance-and-technology

Why TPRM Has Become Essential for Business Success

Business leaders today face a delicate balancing act: harnessing external partners for growth while protecting the organization from inherent risks. Every new vendor introduces potential vulnerabilities across cybersecurity, compliance, and brand reputation. The real challenge is finding a risk management approach that enables business agility, not one that constrains it.

Organizations that succeed in this balance realize that thoughtful risk management strengthens vendor relationships. When suppliers understand your risk priorities as shared objectives, partnerships become more productive, and trust deepens naturally, making TPRM essential for success.

Establishing a Centralized Risk-Based TPRM Program

Today, TPRM responsibilities are often scattered across departments, such as Procurement, Legal, and IT, which work in isolation using different criteria. This fragmentation leads to critical information falling through the cracks, preventing a complete view of vendor risk. This becomes dangerous when issues arise, as a cybersecurity incident or financial trouble at a supplier may not be discovered until it's too late to prevent disruption.

Smart organizations solve this by centralizing TPRM, creating unified processes that give everyone access to the same information. They also tailor evaluation requirements to a vendor’s actual risk level—a critical cloud provider gets a thorough review, while a low-risk office supplier gets basic verification.

This proportional approach allocates resources effectively, avoiding unnecessary overhead. The key is maintaining a single, authoritative record for each vendor relationship so that decisions are faster and more consistent across the organization.

Verdantix: The market for third-party risk management is undergoing a period of accelerated innovation, driven by a greater focus on business resilience, incoming mandatory regulations, pressure to meet ESG expectations, and unprecedented levels of scrutiny over data quality and reporting. Source: https://www.verdantix.com/client-portal/report/buyer-s-guide-third-party-risk-management-software-2024

Implementing Continuous Risk Monitoring

Vendor risk profiles can change overnight due to cybersecurity incidents, financial deterioration, or market disruptions. This requires monitoring that provides early warning signals, not just post-incident notifications.

Continuous monitoring integrates real-time data feeds from cyber threat intelligence and regulatory watchlists, creating dynamic risk profiles that reflect current conditions. Smart alert configurations flag significant deviations and trend analytics identify patterns to enable proactive management. This allows organizations to intervene early, addressing emerging issues before they escalate into business disruption.

Forrester: Third-party risk management (TPRM) is not keeping up with business reality. As organizations expand their ecosystem of third-party relationships, so must they evolve their strategies to mitigate the risks arising from the interconnectedness of these relationships.  Source: https://www.forrester.com/blogs/the-state-of-third-party-risk-management-2024-dire-hopeful-but-mostly-noseblind/

Integrating TPRM with Enterprise Governance

TPRM programs achieve strategic value when they become integral to enterprise decision-making, moving beyond isolated compliance functions. Risk insights should directly inform sourcing, investment, and strategic partnerships. Successful integration requires seamless workflows that connect TPRM with procurement, legal, and enterprise risk management processes. All departments must work from consistent data and shared risk frameworks to ensure coordinated responses to vendor-related challenges. Executive reporting is crucial, providing clear, contextualized vendor risk information that links third-party exposures to business impact metrics.

This helps senior leaders understand how risks might affect customer satisfaction, revenue, and brand reputation, enabling more informed decisions. Prioritization should also be based on business impact, ensuring that resources are allocated proportionally to potential consequences.

IDC: As risks presented by third-party providers expand to include areas of cybersecurity, operational resiliency, and ethics management, organizations are seeking robust third-party risk management solutions to help automate and improve upon vendor risk management programs. Source: https://my.idc.com/getdoc.jsp?containerId=US48295522

Building a Partnership-Focused Culture

While technology is essential for modern TPRM, sustainable success requires a cultural shift toward collaboration. The most effective programs treat vendors as strategic partners who share responsibility for risk outcomes. Open communication a

bout risk priorities enables proactive issue resolution, a more effective approach than compliance enforcement. Measuring success through business outcomes, like partnership strengthening and incident reduction, demonstrates clear value to leadership beyond traditional compliance metrics.

The Path Forward

Third-party risk management is a critical capability for modern organizations. The challenge for leaders is transforming existing processes into strategic advantages. Success requires integrated thinking, continuous improvement, and collaborative partnerships. Organizations that navigate this transformation build resilient operations and position themselves for sustainable growth. Investing in mature TPRM capabilities pays dividends through improved decision-making, stronger vendor relationships, and enhanced competitive advantage in dynamic markets.

Ready to transform your TPRM program from compliance burden to strategic advantage? Discover how Archer's third-party governance solutions can centralize your risk management, strengthen vendor partnerships, and drive measurable business value. Learn more about Archer's TPRM capabilities and contact us for a demo today.