Third-party risk management (TPRM), also called vendor risk management, is the practice of evaluating and mitigating risks introduced by vendors (suppliers, third parties, or other business professionals) before establishing and throughout a business relationship.
In today’s complex market, companies often turn to specialized contractors and third-party service providers to focus on core activities. However, many organizations have learned this practice comes with a certain measure of risk. Whether a professional service provider makes an honest mistake or a technology service provider encounters a cyberattack seizing operations, companies must address the introduction of various levels of risk.
Organizations encounter many different types of third-party risks, and while each of the following are not applicable to every third-party relationship, the risks increase as more complex significant systems become involved. Common risks include:
The risk that adverse business decisions are made or the failure to implement appropriate business decisions in a manner that is consistent with strategic goals
The risk arising from negative public opinion such as third-party relationships that result in dissatisfied customers, security breaches resulting in the disclosure of customer information, or violations of laws and regulations.
The risk of loss resulting from inadequate or failed internal processes, people and systems or from external events made more difficult to manage given third-party processes and systems that increase overall operational complexity.
The risk arising from a third-party's failure to perform as expected due to reasons such as inadequate capacity, human error, technology failure or fraud; weak controls over third-party IT may result in threats to security and the integrity of data or could result in unauthorized transactions.
The risk arising from violations of laws, rules or regulations, or from noncompliance with internal policies or procedures.
The types of risk introduced by third parties simply cannot be fully assessed without a complete understanding of the resulting arrangement, We can help you assess these risks and complete a comprehensive strategy to better manage these risks and third-party processes.
A well-designed TPRM program allows you to manage risks efficiently and effectively. By incorporating an appropriate level of governance and oversight, aligning to a repeatable risk-based framework, and enabling technology and automation, your organization can gain operational efficiencies while simultaneously reducing residual risks.
RSM US LLP’s TPRM process focuses on key components that assist organizations in designing and executing an efficient and effective program, including:
RSM takes a holistic approach to assessing risk and developing a customized approach tailored to your unique third-party strategy and business goals. Our comprehensive methodology for managing third-party risk helps you address major sources of risk, including cyber, strategic, compliance, operational, transactional, environment social governance, and reputational.
