Third Party Risk Management (TPRM)

• Internal Outages
• Operational Capabilities Lapse
• Lack of Supplies or Needed Ingredients
• Supply Chain Issues
• Issues Accessing, Gathering, Storing, or Securing Data

• Better Security
• Improved Vendor Trust
• Preserved Reputation
• Time Savings
• Cost Savings
• Better Data Transparency
• Faster Vendor Onboarding
• Improved Productivity
• Streamlined Processes
• Avoiding Cyberattacks
• Fewer Risks
• Regulation Compliance
• Data Protection
• Stronger Supply Chain
• Fewer Operational Disruptions

• Predefined Protocols: Develop clear protocols for incident response, including communication, escalation, and mitigation strategies.
• Vendor Collaboration: Establish clear communication channels and notification procedures to share information during incidents quickly.
• Incident Response Plans: Ensure third-party vendors have their own incident response plans that fulfill your organization's requirements.
• Regular Testing: Test and update incident response plans to address new threats and ensure effectiveness before a real incident occurs.
• Offboarding Process: Develop procedures for securely removing access to systems and data when a third-party relationship ends.
• Contingency Planning: Assess the potential impact of third-party disruptions, develop backup plans and alternative solutions for critical services, and include relevant clauses in contracts. Continuously review and update plans based on lessons learned.

One of the most crucial aspects of third-party risk management is planning for the worst. When an incident occurs, what do you do about it? As part of your third-party risk management framework, include detailed steps outlining how to respond to an incident involving the responsible parties. Incident response may include addressing a data breach caused by one of your vendors. It also consists of developing effective backup strategy plans to ensure business continuity and minimize damage. Some of the key steps in an incident response and contingency plan are:

• Predefined Protocols: Develop clear protocols for incident response, including communication, escalation, and mitigation strategies.
• Vendor Collaboration: Establish clear communication channels and notification procedures to share information during incidents quickly.
• Incident Response Plans: Ensure third-party vendors have their own incident response plans that fulfill your organization's requirements.
• Regular Testing: Test and update incident response plans to address new threats and ensure effectiveness before a real incident occurs.
• Offboarding Process: Develop procedures for securely removing access to systems and data when a third-party relationship comes to an end.

During contingency planning, assess the potential impact of any third-party disruptions on your organization. Identify and categorize third parties based on their importance to your operations and potential risk exposure. Develop backup plans and alternative solutions for critical third-party services in case of disruption. Include clauses in contracts that address incident response and contingency planning requirements. Continuously review and update your contingency plans in response to lessons learned and changes in the third-party landscape.

These days, supply chain risk management and TPRM are crucial for maintaining business operations. Most companies rely heavily on technology and tools to automate routine processes, monitor ongoing relationships, and provide alerts when issues arise. To effectively manage the complex lifecycle of vendor relationships, you need to embrace a variety of different tools. Some of the ways technology can help are:

Benefits of Using TPRM Tools: TPRM tools can sift through millions of data points to streamline risk management activities. Some of the main benefits include:

• TPRM Platforms/Software: Platforms that help centralize and automate vendor management, risk assessments, and reporting.
• Artificial Intelligence (AI) and Machine Learning (ML): Enhance risk assessments and provide real-time monitoring and alerts using predictive analytics.
• Automation: Streamlines onboarding, assessments, and compliance tracking—reducing errors and increasing efficiency.
• Security Ratings Services: Provide objective evaluations of a vendor’s security posture.
• Business Background Reports: Offer deep insights into U.S. businesses using millions of data points.
• Other Tools: Includes threat intelligence platforms, DLP, IAM, SIEM systems, and vendor questionnaires.
• Enhanced Security and Compliance: Helps ensure vendor compliance with security regulations.
• Improved Operational Efficiency: Automation improves speed and reduces workload.
• Better Risk Visibility: Dashboards and reports help prioritize and visualize vendor risks.
• Strengthened Vendor Relationships: Technology fosters better communication and trust.
• Cost Optimization: Reduces manual errors and cuts operational costs through automation.

The most crucial aspect of third party risk management is analyzing vendors and partners before committing to any official relationship. A comprehensive evaluation makes it easier to identify any weak areas or vulnerabilities that a vendor might pose to your organization, limiting your risk exposure. Follow the steps below to thoroughly assess third parties before signing any contracts.

• Risk Intelligence Reports: These reports evaluate each vendor in terms of financial stability, security posture, regulatory compliance, and reputation. They aggregate data from multiple sources to help guide better decisions.
• Security and Financial Ratings: Check business credit, payment history, and security protocols. Red flags here may indicate future issues.
• Questionnaires: Use structured questionnaires to get detailed insights on third-party security practices, certifications, and risk controls.
• Negative News and Sanctions Lists: Search for bad press and check international sanction lists to identify reputational risks or legal red flags.
• Penetration Testing: Hire independent testers to simulate attacks and uncover potential security flaws in vendor systems and processes.
• Virtual Evaluations: Use video calls and screen shares to evaluate vendor systems remotely. Ideal for early-stage due diligence.
• On-Site Evaluations: Visit vendor locations to assess their security, compliance, and operational procedures firsthand.

Organizations that want to optimize their third-party risk management programs should consider the best practices. These strategic steps help to mitigate many of the issues that limit a TPRM program’s effectiveness.

• Prioritize Your Vendor Inventory: Categorize vendors into risk tiers (Low, Medium, High) based on their access to sensitive data, potential disruption impact, and the importance of services provided.
• Don’t Limit Risk Management: Consider more than just cybersecurity. Assess legal, operational, reputational, and compliance risks across departments.
• Utilize Automation for Enhanced Efficiency: Use tools to automate onboarding, assessments, monitoring, alerts, and performance reviews to reduce errors and save time.
• Define Your Organizational Goals: Set TPRM goals that align with your broader risk strategy, defining acceptable risk levels for each type of third-party engagement.
• Stakeholder Buy-In: Engage departments like legal, procurement, compliance, IT, and operations to ensure cross-functional alignment and support.
• Ongoing Monitoring: Continuously monitor vendor performance and risk posture using real-time alerts and integrated tracking tools.

Future Trends to Watch:

Business is changing rapidly due to many factors. Along with it, your third-party risk management process needs to evolve. The challenges and complexity are constantly moving targets. Reliance on third parties is increasing, which means everyone needs to have a TPRM program and address the upcoming trends and challenges.

• Increased Third Party Dependency: Companies are relying more on third parties, increasing attack surfaces and risk exposure.
• AI and Automation: TPRM will benefit from AI/ML tools for automation, predictive analytics, cloud risk evaluation, and data accountability using blockchain.
• Growing Cybersecurity Risks: Third parties are increasingly targeted in cyberattacks, making strong cybersecurity a top priority.
• ESG Integration: ESG factors are being integrated into vendor assessments, requiring companies to manage environmental and social risks.
• Regulatory Scrutiny: Regulatory bodies are heightening enforcement around data privacy, security, and third-party compliance.

Ongoing Challenges:

• Vendor Network Complexity: A large number of vendors can overwhelm assessment and monitoring efforts.
• Inadequate Due Diligence: Skipping due diligence during onboarding increases hidden risk exposure.
• Risk Assessment and Monitoring: Ongoing evaluations are resource-intensive and often neglected or underperformed.
• Data Privacy and Security: Many organizations lack the tools or know-how to protect sensitive data shared with vendors.
• Geopolitical Risks and Disruptions: Global instability, pandemics, and natural disasters can severely impact third-party operations.
• Limited Resources: Smaller organizations may lack the funding or staff for robust TPRM programs.
• Lack of Visibility: Many companies struggle to gain full transparency into vendor activities or risk posture.
• Fragmented TPRM: Disconnected efforts across departments lead to inefficient and inconsistent third-party risk management.

EntityCheck reports include data in the following categories:

• Secretary of State Filings
• UCC Filings
• Bankruptcy Filings
• Judgments & Liens
• Lawsuits
• Employees
• Agents & Officers
• Business Owners
• Trademarks
• Patents
• Professional Licenses
• And More