March 03, 2023 | Risk Management Blogs
Third-party risk management (TPRM) is a comprehensive approach that involves identifying, assessing, and monitoring any risks posed by the relationships between the organization and its third-party vendors. It includes evaluating the third-party’s capabilities, assessing the risks associated with the relationship, and monitoring the vendor's performance over time. By putting a TPRM program in place, organizations can better protect their data, operations, and supply chain from disruptions and fraud.
TPRM can help organizations maintain compliance with regulatory requirements. Many regulations require organizations to have a TPRM program in place. TPRM can also help organizations reduce costs. Organizations can identify and manage risks associated with third-party vendors, which can help manage costs associated with these relationships.
Third-party vendors are often responsible for managing large parts of an organization’s operations and supply chain, and without a TPRM program in place, organizations may not be aware of any potential risks associated with these vendors.
Also read: Decoding The Best Practices In Third-Party Risk Management
Once the organization has developed its TPRM program, it is important to develop a comprehensive checklist for ensuring that the program is effectively implemented and monitored. This checklist should include the following steps:
The organization should establish metrics for measuring the performance of its TPRM program and should regularly review these metrics to ensure that the program is functioning as intended. It should also conduct regular reviews of its TPRM program to ensure that the program is up-to-date and effective. The organization should also review any changes to its third-party vendors in order to ensure that its TPRM program is able to effectively manage and monitor the risks associated with these vendors.
Also read: Third-Party Risk Management — A Take-Charge Approach
Technology can be used to automate TPRM processes, such as assessing the performance of third-party vendors and responding to risks or disruptions. Technology can also be used to enhance data security measures and to monitor and measure the performance of the TPRM program on a regular basis.