With the fast-paced business style, organisations nowadays heavily rely on third parties such as vendors, suppliers, logistics partners, cloud services providers, etc. These partnerships can offer great benefits but also could expose your organisation to risks. That’s where third-party risk management (TPRM) comes into play. TPRM provides a structured approach to evaluating and mitigating these potential risks.
Ready to take control and protect your business? Let’s dive into the world of TPRM!
What is TPRM really, and why is it important?
TPRM is the process of identifying, assessing, and mitigating risks that may arise from external partnerships. This includes legal, financial, operational, and reputational risks. Why is this important? Because these risks can directly negatively impact the security and stability of your business.
A comprehensive TPRM strategy ensures that your organisation is less vulnerable to third-party risks such as data leaks, breaches of legal or regulatory requirements, compliance issues, or service disruptions. How? Through a thorough due diligence process and ongoing supplier management activities.
Difference between TPRM, vendor risk management (VRM), and due diligence
When managing relationships with external partners, knowing the difference between TPRM, VRM, and due diligence is important.
- TPRM is comprehensive and deals with the overall risk management of third parties throughout their engagement lifecycle.
- VRM specifically focuses on the management of third parties, often more operational and contract-driven.
- Due diligence is the preliminary activity performed to assess the suitability of the third party across a defined set of requirements (and wants) to see how or if they meet the organisation’s needs before being procured.
Why TPRM matters
By proactively identifying potential risks, TPRM helps businesses devise ways to mitigate them.
Threats to an organisation from a third party can come in many forms, including:
- Legal, regulatory and compliance breaches – Through non-compliance with industry standards such as PCI-DSS, HIPAA, and legislation like the Privacy Act.
- Operational disruption – Such as failure of a product, hardware, or software can cause significant delays or diminished productivity.
- Financial or credit penalties – Penalties or fines due to the third party’s failure to meet its contractual obligations.
- Reputational damage – Negative media exposure arising from third-party activities could damage your organisation’s brand, trust, or credibility in the market.
- Cybersecurity weaknesses – Exploiting security weaknesses within or through third parties can have dire consequences for business information attributes of confidentiality, availability, and integrity. Such as inadequate protection from malicious code within their software supply chain, susceptibility to DDoS attacks, and service provider errors.
Axenic’s role in TPRM
Axenic offers tailored solutions to manage third-party risks effectively. We specialise in assessing and monitoring third-party relationships, ensuring potential risks are identified early on so they can be effectively controlled. One tool used to build our customers’ capability in this area is the Axenic Cybersecurity Portal, which automates and streamlines the TPRM process. Contact us to find out more.
Key takeaways for effective TRPM
The key takeaways for TPRM can be summarised as follows:
- Establish the context and scope – A well-defined TPRM program should align with business goals and focus on managing the most important potential risks third parties may expose your organisation to.
- A solid due diligence checklist is important – A thorough vetting process of potential third parties before contracting their products or services is essential to avoid unnecessary risk exposure.
- Continuous monitoring is the key to successful TPRM – Risk profiles for businesses change over time. So, ongoing monitoring is the key to identifying and mitigating third-party risk before it can negatively affect your business.
Contact Axenic if you are interested in exploring how this can benefit your business.