Third-party risk management, or TPRM, refers to the review, analysis or control of unforeseen circumstances arising from a business’s collaboration with third parties, such as vendors or suppliers. Through this process, enterprises can gain insights and establish procedures to manage potential economic loss.
Reduced Business Risk: A robust third-party risk management program reduces overall risk exposure by helping enterprises identify, assess, and mitigate risks associated with vendors, suppliers, partners, and other external parties.
Improved Compliance: Third-party risk management helps ensure vendors and partners comply with applicable laws, regulations, and contractual requirements, thereby helping an enterprise avoid regulatory infractions or penalties.
Enhanced Data Security: Assessing and monitoring third-parties helps safeguard sensitive data and intellectual property. Security practices, controls, and protocols are reviewed.
Better Performance: Ongoing monitoring and reviews of third-parties facilitates taking corrective actions to improve performance or terminate relationships when necessary. This optimizes costs and service levels.
Increased Resilience: Contingency plans for third-party failures or business disruptions improve resilience. This ensures enterprises have backup providers, exit plans, and other risk mitigation strategies ready to be implemented.
TPRM should ideally begin with an enterprise identifying any critical third-party relationships that it relies upon for supplies or sourcing. Third-party risk management as a key organizational strategy enables enterprises to optimize performance across a range of supply and demand outcomes.
Learn more about GEP’s supply chain risk management.