Third Party Risk Management: Objectives, Benefits, and Solutions

Learn about the objectives of third party risk management. Discover the solutions available to effectively manage vendor-related risks in your organization.

banner

Third Party Risk Management (TPRM) has become a crucial aspect of business operations, particularly in an era where organizations increasingly rely on external vendors to perform critical functions.

third-party risk management framework example

Third Party Risk Management involves strategies to manage risks from external vendors. Objectives include enhancing security, minimizing disruptions, protecting reputation, and ensuring compliance.

In this article
  1. Benefits of Third-Party Risk Management Software
  2. How to Build a Third-Party Risk Management Framework?
  3. Who is Responsible for the Third-Party Lifecycle Process?
  4. Tools to Make a Third-Party Risk Management Framework
  5. Conclusion

Part 1. Benefits of Third-Party Risk Management Software

Organizations should implement third-party risk management software. There are plenty of benefits of using a third-party risk management software. 

  1. Monitor Third-Party Vendors:Use third-party risk management software to actively monitor and evaluate the security posture of external vendors. 
  2. Customized Risk Management:Tailor risk management practices to specific needs with an effective Third-Party Risk Management Software. 
  3. Maximize Profits, Minimize Risk:Strike a balance between maximizing profits and minimizing risk by using third-party risk management software. 

Part 2. How to Build a Third-Party Risk Management Framework?

Building a third party risk management framework requires a systematic approach. For the framework to be effective, this is very important.

  1. Planning & Risk Measurement: Begin by defining risk appetite and identifying potential risks associated with third-party relationships. 
  2. Due Diligence & Evaluation: Establish a defined process for vendor evaluation, including financial stability, information security practices, and regulatory compliance.
  3. Contracting: Establish comprehensive contracts that outline expectations, responsibilities, and liabilities.
  4. Continuous Monitoring: Continuously monitor vendor performance and risk exposures.

Part 3. Who is Responsible for the Third-Party Lifecycle Process?

The responsibility for third party risk management lifecycle process lies within the organization's risk management function, typically overseen by the Chief Risk Officer (CRO) or equivalent personnel. The CRO collaborates with various departments, such as procurement, legal, IT, and compliance, to ensure a holistic approach to Third-Party Risk Management. Third Party Risk Management Solutions include tools and resources to effectively manage third-party risks. This includes software platforms, data analytics, and risk assessment frameworks for vendor-related risks. 

Part 4. Tools to Make a Third-Party Risk Management Framework

It’s crucial for organizations to establish a robust third-party risk management framework. Utilizing specialized tools can greatly enhance the effectiveness and efficiency of managing third-party risks.

1) Wondershare EdrawMax

Wondershare EdrawMax is a versatile diagramming tool that helps organizations create effective frameworks for managing third-party risks by providing intuitive features for designing and documenting risk management processes. The steps to create a third party risk management framework chart using the tool are as follows:

Step 1: Turn on Wondershare EdrawMax and open the program. Enter your credentials to log in.

logging in to edrawmax

Step 2: After logging in, click the "+" symbol next to the "New" option, or use the shortcut key "Ctrl+N". This will open a new document.

opening a new document in edrawmax

Step 3: Look up "third party risk management framework" in the template library. Select an appropriate template from the list of options.

searching for a template in edrawmax

Step 4: Adjust the template to suit your needs. You can customize the chart's design, colors, and other visual components to your liking.

customizing the template

Step 5: Now, enter the relevant data in the chart. Any shape can have descriptions added by double-clicking on it.

entering data in the chart

Step 6: Choose "File" and then "Save" to save your chart. Decide on a location for the file's saving.

saving the chart

Step 7: To export the chart choose "File" and then "Export". You will have plenty of exporting options to export your file.

exporting the chart

2) OneTrust

The OneTrust third party risk management software offers features such as vendor assessment, contract management, risk scoring, and ongoing monitoring to streamline the assessment and mitigation of risks associated with third-party relationships.

third-party risk management in onetrust

Features:

  • Integrated Risk Assessment:OneTrust allows users to assess and prioritize third-party risks based on factors like relationship nature, data sensitivity, and compliance requirements.
  • Vendor Compliance Monitoring:OneTrust provides a centralized platform for monitoring vendor compliance with regulatory requirements and contractual obligations.
  • Automated Workflow Management:OneTrust offers automated workflow management capabilities for tasks like vendor onboarding and contract management.
Pros
  • Customizable Risk Scoring:OneTrust allows users to customize risk scoring models to align with their organization's risk appetite.
  • Regulatory Compliance Support:OneTrust supports regulatory compliance with features like data mapping and consent management.
  • Collaboration and Communication:OneTrust offers collaboration and communication features for effective stakeholder engagement.
Cons
  • Initial Learning Curve:OneTrust's comprehensive platform may have a steep learning curve for new users.
  • Cost:OneTrust is a premium tool and can be relatively expensive, especially for small and medium-sized organizations.

3) NIST 

The NIST third party risk management framework provides a framework of guidelines, best practices, and standards for organizations to manage and mitigate third-party risks.

nist risk management template

Features:

  • Risk Assessment Methodology:The NIST framework provides a structured risk assessment methodology that can be customized.
  • Continuous Monitoring:The NIST framework emphasizes continuous monitoring of third-party risks.
  • Information Sharing:The NIST framework promotes information sharing and collaboration between organizations.
Pros
  • Flexibility and Scalability:The NIST framework can be adapted to different organizational needs and sizes.
  • Holistic Approach:The NIST framework considers cybersecurity, privacy, and compliance for comprehensive risk management.
  • Alignment with Industry Standards:The NIST framework aligns with other industry standards like ISO 27001 and COBIT.
Cons
  • Resource Intensive:Implementing the NIST framework requires significant time, effort, and resources.
  • Complexity:The NIST framework may be complex, especially for organizations new to risk management frameworks.

Conclusion

The third-party risk management process has emerged as an integral aspect of modern business operations. By implementing robust TPRM practices, organizations can protect themselves from potential vulnerabilities arising from third-party relationships.

edrawmax logoEdrawMax Desktop
Simple alternative to Visio
210+ types of diagrams
10K+ free templates & 26k+ symbols
10+ AI diagram generators
10+ export formats
edrawmax logoEdrawMax Online
Edit diagrams anywhere, anytime
Personal cloud & Dropbox integration
Enterprise-level data security
Team management and collaboration

Edraw Team
Edraw Team Apr 03, 24
Share article:
advertise