TPRM vs. VRM vs. SRM
Third-Party Risk Management (TPRM): Comprehensive approach to managing risks from any external party—vendors, suppliers, partners, contractors, and service providers. TPRM encompasses cybersecurity, compliance, operational, and reputational risks across all third-party relationships.
Vendor Risk Management (VRM): Subset of TPRM focused on service providers, emphasizing contractual performance and compliance evaluation.
Supplier Risk Management (SRM): Focuses on tangible goods suppliers, particularly in manufacturing contexts, emphasizing supply chain and delivery risks.
The Business Case for Strategic TPRM
Recent years have demonstrated how unmanaged vendor-related risks can cripple businesses, with alarming statistics painting a clear picture of the threat landscape:
With new regulations (e.g., SEC Cybersecurity Rules, EU’s NIS2 Directive, DORA) holding companies accountable for vendor oversight, TPRM is essential for strengthening your relationships with vendors.
TPRM Challenges
Despite its importance, organizations continue to struggle with:
Lack of centralized visibility as vendor ecosystems grow.
Manual and inefficient assessment processes that are time-consuming and error-prone.
One-size-fits-all risk assessment models that produce inaccurate vendor risk ratings.
Shadow IT introducing unsanctioned security vulnerabilities, fourth-party risk complexity that extends beyond direct vendors.
Resource constraints that limit effective ongoing monitoring of changing risk landscapes.
Benefits of a Strong TPRM Program
Understanding the need for strategic TPRM is only the first step. Organizations that successfully implement comprehensive third-party risk management programs realize substantial benefits that extend far beyond risk mitigation, transforming vendor relationships into sources of competitive advantage and better decision-making.
Enhanced Visibility and Oversight
Improved Risk Mitigation
Streamlined Compliance
Operational Efficiency
Resource Optimization
Strategic Insights for Leadership
To build an effective TPRM program that delivers these benefits, organizations must first develop an understanding of the various risk categories they face and how these risks manifest throughout the vendor relationship lifecycle.
Understanding the Risk Landscape
Types of Third-Party Risks
The Vendor Risk Management Lifecycle
Discovery & Selection
During vendor selection, risk-based criteria and due diligence ensure only secure, reliable partners are considered. This includes reviewing certifications, financial stability, and compliance posture.Onboarding & Integration
As systems and processes are connected, risks emerge from data access and technical integration. Security controls, documentation, and baseline performance expectations must be established up front.Ongoing Monitoring & Management
Vendor risk is not static. Continuous monitoring, periodic assessments, SLA tracking, and incident response planning are critical to catching issues early.Relationship Evolution
As services expand or contracts are renewed, risk profiles change. Adjusting oversight ensures controls scale with the partnership.Offboarding & Termination
When a relationship ends, proper offboarding, including data retrieval, access revocation, and system separation, prevents lingering vulnerabilities.
Prepare for the Audit
As organizations grow and rely more on vendors such as cloud platforms, payment processors, HR systems, AI tools, and marketing platforms, a structured third-party risk management program is important to protect privacy, security, and operational stability.
While every organization’s needs are different, most successful programs follow five key phases:
Discovery & Classification
The first step is understanding who your vendors are and how they interact with your business. Build a comprehensive inventory of all third parties and classify them by criticality:
Tier 1 (Critical): Vendors with access to sensitive data (e.g., PII, payment data, healthcare information) or those delivering essential services like cloud infrastructure.
Tier 2 (Moderate): Vendors supporting business operations with some data access, such as HR platforms or marketing tools.
Tier 3 (Low-Risk): Vendors with little or no access to sensitive systems or data, such as office supply or travel providers.
Evaluation & Due Diligence
Before bringing on a vendor, conduct risk-based assessments. For high-risk vendors, this may include:
Reviewing SOC 2, ISO 27001, or PCI DSS certifications
Evaluating financial stability and insurance coverage
Requesting security questionnaires (SIG, CAIQ, or industry-specific versions)
For lower-tier vendors, lighter assessments may suffice. The goal is proportional due diligence that doesn’t overburden internal teams or vendors while still addressing risk exposure.
Onboarding
Onboarding sets the tone for the entire relationship. Strong contracts should include:
Data protection obligations aligned with regulations (GDPR, HIPAA, etc.)
Incident response requirements, such as notification within 24–48 hours
Right-to-audit clauses for security validation
Termination and data return policies to ensure clean separation if the relationship ends
At this stage, technical integration also needs attention. Configure access with least-privilege principles, enable monitoring, and document workflows to avoid blind spots.
Ongoing Monitoring
Vendor risk doesn’t end after onboarding, it evolves. Ongoing monitoring should be risk-based:
Critical vendors: Reviewed semi-annually or quarterly
Moderate vendors: Reviewed annually
Low-risk vendors: Reviewed on a lighter schedule
Monitoring may include performance metrics, compliance reports, penetration test results, or automated vendor risk ratings. Establish escalation procedures for incidents or performance failures to ensure issues are addressed promptly.
Offboarding
When a vendor relationship ends, organizations often overlook offboarding, leaving security gaps. An effective offboarding process should:
Retrieve and confirm the destruction of organizational data
Revoke system and physical access immediately
Remove integrations and update documentation
Capture lessons learned to improve the next vendor engagement
Too often, residual vendor accounts remain active or sensitive data isn’t fully deleted, creating unnecessary exposure.
Leveraging Technology for TPRM
Organizations leveraging dedicated TPRM technology achieve faster vendor onboarding times, reduced risk assessment costs, and improved regulatory audit readiness. The key is moving from manual, reactive approaches to automated, strategic programs.
Technology Benefits
Automate repetitive tasks through workflows that trigger risk evaluations, assign assessments based on risk levels, and send reminders for overdue responses
Consolidate vendor data in a single platform connecting with procurement, identity management, and security systems
Facilitate risk-based decision making with standardized scoring, executive dashboards, and automated reports
Foster accountability through comprehensive tracking, approval workflows, and automated reminders
Technology Benefits
Third-party risk management reaches its full potential when integrated within a comprehensive GRC platform rather than operating as a standalone function. GRC platforms provide the unified risk framework, standardized methodologies, and enterprise-wide visibility that modern TPRM programs require.
Unlike point solutions that isolate vendor risks in departmental silos, GRC-integrated TPRM enables organizations to understand how third-party exposures compound with other enterprise risks. This holistic approach allows risk professionals to prioritize vendor issues based on true organizational impact and present leadership with a complete risk picture.
GRC Platform Advantages:
Standardized risk taxonomies for consistent vendor evaluation
Robust workflow engines for complex approval processes
Comprehensive audit trails for regulatory compliance
Risk aggregation and correlation capabilities that enable informed decisions about overall risk tolerance
Don’t stop here!
Download the full guide below for detailed insights into managing vendor risk, implementing a structured TPRM program, and delivering clear, actionable reporting.
