Definition
Third-party risk management (TPRM) is a process of reducing business risks associated with third parties, including partners, vendors, and contractors.
How Does Third-party Risk Management Work?
- Detect third-party associations, including suppliers, vendors, contractors, and partners.
- Examine the risks associated with each relationship by assessing factors such as the third party’s level of access, the type of data being shared, and the third party’s security controls.
- Design incident response with third parties to ensure they can respond to security incidents effectively.
- Implement adequate controls to minimize risks.
- Track and review third-party relationships regularly.
Challenges of Third-party Risk Management
The biggest challenge with TPRM is the complex and expanding systems that require constant attention. For example, most organizations depend on various third-party partners and vendors, each with their own independent policies and practices.
While detecting and addressing potential risks is hard, companies must monitor third-party vendors to ensure they comply with the company’s security requirements.