Third Party Risk Management - FAQs
Want to know more about TPRM? Check out some frequently asked questions below.
What is TPRM?
TPRM stands for third-party risk management. It’s a form of managing risk by identifying and reducing risk from third-party suppliers, partners, vendors and contractors. It covers items from assessing safeguards they have in place, to reasonably limiting the access they have to your data.
Why is Third Party Risk Management Important?
Failing to acknowledge and address third-party risk means you're unnecessarily and preventably exposed to data breaches, reputation damage and other things detrimental to your business. When you have TPRM in place, however, you can better protect yourself against such risks and act before it’s too late.
How to Choose Third Party Risk Management?
Choose your Third Party Risk Management partner with your organization's regulatory needs and an acceptable level of risk in mind. Choose procedures and software that are intuitive and easy to use. Complex systems can fail due to reluctance in using them. Aim for streamlined, clear and consistent procedures that are practical and workable.
What is a TPRM Framework?
A TPRM framework refers to the overall procedures and practices you have in place to mitigate third party risk. Within this framework, you support effective risk management across your operation. Different risk levels could apply to different vendors or partners, but it all exists within one overall organization-wide structure that everyone understands.
What are the Benefits of TPRM?
The major benefit of TPRM is risk mitigation and the reduction of the high costs that come with a security breach or system failure. Additionally, TPRM protocols help you standardize the onboarding process for vendors, suppliers and other third parties. This makes it possible to work more efficiently, quicker, and with greater focus on your core business.
Is TPRM Necessary?
Yes, TPRM is necessary for all businesses, even small ones. It helps manage risk and costs from using third-party suppliers, vendors and others. Strong TPRM policies help ward off negative impacts on your business decisions and financial solvency through streamlining risk management.
What is a third-party relationship?
A third party relationship refers to any other business that has a relationship with yours. It could be ad hoc or on contract. Think contractors, suppliers, vendors and partners. These are people who do work on your behalf or who enable you to do work. They may, in turn, have third parties who work with them which is why TPRM management matters.
Why is managing third-party risk important?
Managing third-party risk is important because without understanding the third party risks in your organization, they can easily be exploited. Anything from chain attacks to reputation loss and data breaches are easy to enact against you if you haven’t taken steps to plug those holes. With TPRM in place, you can protect yourself against the risks before they hit.
Who should be involved in the third-party contracting process?
The only people involved in your third-party contracting process are the actual stakeholders. This means only people in your organization who manage departments using third parties, as well as your overall company heads and procurement departments. While you should work with the potential specialist, they don’t need to be privy to all procedures.
How do you conduct TPRM?
TPRM should be conducted and revisited on an annual basis. You will involve stakeholders in your organization, determining what level of risk each relevant third party carries. The solutions you create should be streamlined and simple, otherwise you risk human error bypassing them and reintroducing risk in the organization.
What is a third-party vendor?
Third party vendors are the business entities and companies who provide either services or products to your customers, on your behalf. This means that they have access to a fair amount of important data from your company, which is why risk management is so important in these relationships.
What is the purpose of TPRM?
TPRM’s purpose is to set up standards and guidelines for employing any third party entity you need to work with. This means you have a set of standardized business processes everyone adheres to, you can always evaluate the risk management you have in place, and you make it easy for the people who work together day-to-day to keep your organization safe and working efficiently.
What is TPRM in banking?
Robust TPRM is essential for banking. TPRM helps you manage the risk that using third party entities presents to your business. The banking industry holds a lot of sensitive data about its customers, making the process of controlling what can be accessed by which third party entities essential to safe banking.
What is third-party cyber risk?
Third-party cyber risk management specifically refers to the management of online and cloud risks. This includes mitigating the risk of cyber crime, data breaches, password leaks, and other similar, IT-based risks. TPRM for cyber risk is becoming critically important as we work from home and buy more online.
How do you identify third-party risks?
To identify third-party risks, you will need to conduct an audit of what third party vendors you have. Then, you need to identify how much of your organization's data they can currently access, and how much of it they really need. Loopholes will need to be closed. You will then need to put in place measures to mitigate the risk. Third parties should have controlled access to what they need, whilst also ensuring the data, trade secrets, and processes they do need access to is safe.
What's the difference between a third & fourth party?
Third party logistics focus on the outside parties who help you in your daily operations. Fourth party is a newer term focusing on outside parties you use to integrate and optimize your business. In logistics, fourth party providers would own assets like warehouses and trucks where third parties would not.