Third-Party Risk Management - Archer IRM
In every organization, it is inevitable that at one point, you will rely on third party products and services for some business functions. Whether they are part of the physical supply chain or the digital support infrastructure, vendors, service providers, and external parties have become woven into the fabric of the business.
During these organizational operations, highly classified data and information are exchanged, exploited, and misused if they get into the wrong hands. This scenario is where third-party risk management comes in.
Third-party risk management is managing the entire third-party governance lifecycle. This includes addressing risks inherited from third parties to the extended enterprise and supply chain, prioritizing risk factors and associated action according to importance, and monitoring performance of vendors and suppliers.
Simply put, TPRM is the process of managing risks or disasters posed by any organization you do business with. Any organization that performs or requires any services from yours exposes yours to risks.
Why is Third-Party Risk Management Important in Businesses?
Every organization has to perform third-party risk management because, in addition to protecting critical data and boosting operational resiliency, these are some of the other benefits:
TPRM allows you to save costs. Costs that you would spend to remedy some disaster could be kept because the TPRM has eliminated the chance of that disaster.
TPRM enables you to identify all the possible risks on time with fewer organizational resources.
It helps improve the quality of your services and makes your business more reliable.
It permits you to focus more on the essential business functions, knowing that most risks that could come up have been sorted out.
It helps provide documentation and context for your organization and your vendors.
It helps protect stockholders and shareholders from risks that might suffice.
The central importance of TPRM is to help mitigate threats and excess costs linked with third-party cyber risks.
Steps to Third-Party Risk Management
Every effective third-party risk management process should have the following steps:
This is the first step to an effective TPRM. Here, you have to determine the organizations you are doing business with that could bring any risk. All the possible types of threats are also identified and cataloged.
Here, you classify and segment how much risk every third-party organization you do business with poses. These classifications are done based on the services rendered, access to systems, and data released.
The security posture of the third-party organizations you do business (or want to do business) with must be assessed. To get the best result, a real-time security inspection must be carried out.
This step deals with putting plans, policies, and processes in place. Here, you decide how the risks should be handled. Documentation and implementation processes are high in this step.
This step deals with checking up on the third-parties at intervals to make sure that they meet up with all their obligations on their contracts and to make sure their security posture is not breached.
Some Challenges that might be Associated with TPRM
Some challenges that could hinder the implementation of an effective third-party risk management process and they are:
Lack of resources and funds.
Lack of staff organization in the workplace.
Working with a lot of third-party organizations.
Not having an accurate picture of your third-party ecosystem
Having a lot of processes to test and evaluate.
Lack of communication amongst organization personnel.
Constantly changing compliance requirements.
Inevitable changes that might occur in the organization.
Third-Party Risk Management Framework
Organizations need to be cautious of all kinds of risks and business activities like performance, delivery rates, compliance, etc., and this is where a third-party risk management framework comes in. TPRM Framework helps you secure your business in every aspect. This framework is an essential aspect of internal audit management, and it helps reduce risk exposure. The framework used by any organization should be based on the organization's size, risk profiles, and structures. A standard TPRM framework should safeguard:
The organization’s clients and workers.
The strength and level at which an organization operates.
Owning a business in this century, especially seeing how global the world is becoming, is quite tricky. There are many risks attached to running a business, regardless of how small the company is. You don’t have to deal with all your organization's problems because we at Archer are here to help you manage all your risks, build your business resilience and improve your finances.
For excellent third-party risk management, Archer has professionals that are ready to provide a perfect picture of third-party risks while providing solutions (compliance solution, saas grc solution, etc.) for monitoring performances of third-party relationships.
What is TPRM?
TPRM stands for Third-Party Risk Management, which is the process of managing risks or disasters posed by any third-party organization in business with you.
Is third-party risk management the same as vendor risk management?
No. Vendor risk management is classified under third-party risk management. Vendor risk management is specific to vendors only, while third-party risk management is specific to third parties like vendors, consultants, contractors, engineers, etc.