Third-Party Risk Management
Third-party risk management (TPRM) is the process of identifying, assessing, and mitigating risks from vendors, suppliers, and service providers.
Third-party risk management ensures that external vendors don't introduce unacceptable risk to your organization.
TPRM lifecycle: 1. Identification: Inventory all third parties 2. Risk Tiering: Categorize by data access and criticality 3. Due Diligence: Assess before contracting 4. Contracting: Include security requirements 5. Ongoing Monitoring: Continuous oversight 6. Termination: Secure offboarding
Assessment methods: - Security questionnaires (SIG, CAIQ) - SOC 2/ISO 27001 report review - Penetration test reports - Security ratings (SecurityScorecard, BitSight) - On-site assessments for critical vendors
Key risk areas: - Data security and privacy - Business continuity - Regulatory compliance - Financial stability - Reputational risk
Why It Matters
Supply chain attacks—like SolarWinds and MOVEit—demonstrate that your security is only as strong as your weakest vendor. Third-party risk management ensures that vendors with access to your data or systems meet your security standards. SOC 2 auditors will ask for your vendor management policy, risk tiering methodology, and evidence of ongoing vendor oversight. Without TPRM, a vendor breach becomes your breach.
Key Points
Applicable Compliance Frameworks
Related Terms
Vendor risk management (VRM) ensures that third-party vendors don't create unacceptable risk for business disruption or security.
SOC 2 is an auditing framework developed by AICPA that evaluates how service organizations manage customer data based on five Trust Service Criteria.
A risk assessment is a systematic process of identifying, analyzing, and evaluating potential threats to an organization's information assets.
Frequently Asked Questions
How do I tier vendors?
Based on data access (none, indirect, direct, critical), system access, and business criticality. High-tier vendors get more rigorous assessment.
What should be in a vendor security questionnaire?
Data handling, encryption, access controls, incident response, employee security, BC/DR, and compliance certifications.
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