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In the previous post, we introduced the concept of Third-Party Risk Management (TPRM) and its importance in today’s interconnected world. Now, let us have a look at the practical aspects of building a solid TPRM program and why it is important for your company.

1. Start with a Third-Party Inventory

The first step in building a strong Third-Party Risk Management (TPRM) program is to identify and understand exactly who your third-parties are. This requires achieving full visibility over all vendors, suppliers, and service providers involved in your operations.

Prioritizing and integrating third-party relationships in this way aligns TPRM with other management processes, ensuring a cohesive and consistent approach across the organization.

Why is this Important?

Without a comprehensive inventory of third-parties, an organization is essentially flying blind when it comes to managing risks. A complete inventory acts as the foundation for any Third-Party Risk Management (TPRM) program. If you do not know which third-parties you are working with, you can not assess their potential risks or mitigate their impact on your operations, data security, and compliance obligations.

Key Questions to Ask:

• Do I have a clear and up-to-date list of all vendors, suppliers, and service providers my organization is working with?
• Who is responsible for managing contracts and SLAs? Have I engaged with Procurement, Legal, and other relevant teams to gather this information?
• Is there a centralized repository for all third-party contracts and agreements, and is it regularly updated?
• Which vendors have access to sensitive data, internal systems, or perform critical services?
• Do I know when contracts were signed, when they are due for renewal, or if relationships have ended?

Let’s break down the key reasons why this is critical:

Incident Response: In case of a security incident or breach, knowing your third-parties allows you to quickly assess whether the breach was caused by a vendor and what data or systems were impacted. Without a clear vendor list, the response process becomes delayed and disorganized.

Risk Identification: You can not protect against risks you do not know exist. A comprehensive inventory allows you to identify vendors who may have access to sensitive data, internal systems, or operational controls, helping you understand potential exposure.

Compliance Monitoring: Many regulations require you to maintain oversight of third-parties who process or have access to sensitive data. Without knowing who those parties are, compliance with legal obligations becomes impossible, exposing your organization to fines and penalties.

Implementation Tips:

• Use a centralized inventory system e.g. using a dedicated database to record and manage all third-party relationships, ensuring information on vendors, suppliers, and service providers is easily accessible and regularly updated. This can be a dedicated TPRM tool or integrated into existing platforms like your CMDB or ERP system.

2. Determine Inherent Risks

Once you have an inventory, the next step is identifying the inherent risks associated with each third-party. This is where tiering comes into play. Not all vendors pose the same level of risk, so you need to categorize them based on the services they provide, their access to sensitive data, and how critical they are to your operations.

Beyond simply listing third-parties, it is important to prioritize them based on their criticality. By conducting a Business Impact Analysis (BIA), you can map third-parties according to their role and contribution to critical business processes. Integration with tools like Configuration Management Databases (CMDB) or asset management systems also helps link third-parties to key assets, reflecting the importance of these relationships within your infrastructure.

Key Questions to Ask:

• Does this vendor handle sensitive customer or business data?
• Is this third-party integrated into core business systems?
• How would a failure or breach impact your organization?
• Does it affect my operations, reputation, data disclosure or compliance aspects?

Implementation Tips:

• Implement a tiering process based on BIA results to classify third-parties by their criticality to business operations. High-priority vendors can then be given additional oversight and security requirements.

3. Set Security Standards and Requirements

Establishing a baseline of security standards for third-parties is essential for effective Third-Party Risk Management (TPRM). These standards should align with your organization’s internal security policies as well as any applicable regulatory requirements, creating a consistent approach to safeguarding data and reducing risk exposure from third-party relationships. To test adherence to this baseline, various tools and methods can be employed, such as questionnaires, audits, and penetration tests, ensuring that third-parties meet the established security expectations.

Why is this Important?

Defining clear security requirements for third-parties helps ensure your organization’s data is protected and compliance obligations are met. When vendors fall short on security, they can become weak points in your supply chain, potentially leading to data breaches, disruptions, and even legal liabilities. With well-framed contractual clauses, the responses provided in TPRM assessments are contractually binding, meaning that if third-parties misrepresent their security maturity, they can be held accountable in the event of an incident caused by those false statements. This contractual accountability also allows TPRM to focus more on compliance checks rather than exhaustive audits, placing the duty on third-parties to provide accurate assessments of their security postures.

Key Questions to Ask:

• What are the minimum security standards we expect from our third-parties and how do we assess their criticality?
• How can we streamline the process and make sure third-party risk management remains manageable?
• What are the regulatory requirements that apply and the impact of the requirements on the contracts?

Implementation Tips:

• Develop distinct levels of security assessments based on the criticality of the third-party’s access to your systems or data. High-risk vendors should undergo more rigorous evaluations, such as on-site audits or penetration tests.
• Use a vendor risk management platform to automate the distribution and collection of security questionnaires and track the compliance status of third-parties over time.
• Develop a standardized set of security clauses for all vendor contracts, ensuring they include provisions for data protection, breach notification, and regulatory compliance. This simplifies contract negotiation and ensures consistency across all third-parties.

4. Continuous Monitoring and Reassessments

A strong TPRM program is not a one-time effort. The environment of both your organization and your vendors is always changing. That is why continuous monitoring and reassessments are crucial. Setting up a TPRM environment that can manage these ongoing reviews from the start is one of the more challenging aspects of a robust program. To make this manageable, the third-party inventory should be structured to support periodic reviews. Review schedules should be based on a clear set of criteria related to each third-party’s criticality, the type of assessment previously conducted, and other relevant risk factors. This approach ensures that resources are allocated effectively and that high-risk third-parties are consistently monitored.

Why is this important?

Continuous monitoring and reassessments are essential because the risks posed by third-parties evolve over time. Vendors may change their services, expand their access to your systems, or introduce innovative technologies that could increase security risks. Moreover, the threat landscape is constantly shifting, with new vulnerabilities and cyberattacks emerging. Even if a third-party had a strong security posture during initial assessments, that posture can degrade due to changes in their infrastructure, resources, or focus on security.

Without ongoing monitoring and regular reassessments, your organization could be exposed to unforeseen risks, such as outdated security controls, unaddressed vulnerabilities, or even undetected breaches. Maintaining a proactive stance helps ensure that third-parties remain compliant with your security standards and regulatory requirements over time, preventing potential disruptions and minimizing the chances of costly incidents.

Key Questions to Ask:

• How often do we reassess high-risk third-parties to ensure their security controls are up-to-date?
• Are there processes in place to track changes in the services or access levels provided by third-parties?
• How do we monitor the ongoing security posture of third-parties to identify new vulnerabilities or risks?

Implementation Tips:

• Define review frequencies based on the third-party’s criticality and the type of assessment conducted, ensuring high-risk vendors are regularly reassessed while reducing unnecessary audits for lower-risk vendors.
• Wse a TPRM tool or risk management platform that can automatically schedule reviews based on defined criteria, track compliance status, and flag vendors for reassessment when necessary.
• Implement key performance indicators (KPIs) and key risk indicators (KRIs) to track third-party compliance and risk exposure.
• Design the third-party inventory to support these periodic reviews, with fields for criticality level, last assessment type, and upcoming review dates to keep monitoring and reassessment organized and actionable.

5. Collaboration with Internal Stakeholders

Building an effective TPRM program requires alignment across multiple departments: procurement, legal, IT, and business units. Ensuring collaboration is critical for making the program efficient and accepted within the organization.

Why is this important?

Collaboration across departments is key to a successful Third-Party Risk Management (TPRM) program because each team—procurement, legal, IT, and business units—plays a critical role in managing vendors and minimizing risk. Procurement handles contracts, legal ensures regulatory compliance, IT manages system connections, and business units depend on third-party services to keep operations running. If these teams are not working together, important risks can be missed, leaving the organization exposed.

Key Questions to Ask:

• Does the vendor onboarding process include a risk assessment process from the start?
• How does IT work with other departments to identify and address risks related to technical integrations with third-parties?
• Do business units understand their role in managing third-party risks, especially when relying on critical services?

Implementation Tips:

• Work with procurement to ensure that risk assessments are part of the onboarding process.
• Ensure that legal teams participate in reviewing security clauses and compliance requirements.
• Collaborate with IT to identify any risks posed by technical integrations with third-party systems.

TPRM as a Marketing Advantage

A strong Third-Party Risk Management (TPRM) program does not just protect your organization from risks—it can also be a valuable marketing tool. By showcasing your commitment to security and compliance, you can enhance your reputation and build trust with customers, partners, and stakeholders.

Why is this important?

A mature TPRM program signals to customers and partners that your organization takes security seriously and has strong controls in place. In today’s market, where data protection and security are top priorities, companies that can demonstrate robust risk management practices have a clear competitive advantage. It reassures stakeholders that your organization is not only safe to work with but also fully compliant with industry regulations.

Key Questions to Ask:

• How can we use our TPRM efforts to build trust and confidence with customers?
• Are we effectively communicating our compliance with industry regulations through our marketing and stakeholder engagements?
• How can we leverage our TPRM program to strengthen relationships with partners and investors?

Implementation Tips:

• Use case studies, white papers, or website content to highlight your organization’s TPRM efforts and how they protect customers and partners.
• Publicly emphasize your compliance with industry regulations by sharing certifications or audit results that prove your organization meets or exceeds standards.
• Communicate your TPRM program’s value to partners and stakeholders through regular updates, security briefings, or newsletters that highlight your ongoing commitment to risk management.

Conclusion and Final Thoughts

In this post, we have explored the foundational steps to building an effective Third-Party Risk Management (TPRM) program. From creating an inventory of all third-party relationships to setting clear security standards, continuously monitoring vendor compliance, and fostering collaboration among internal stakeholders, each step plays a crucial role in minimizing third-party risks. When approached with a structured and integrated strategy, TPRM not only enhances security but also positions your organization as a trustworthy partner in the eyes of customers and stakeholders. This proactive approach to managing third-party risks becomes a valuable marketing advantage, strengthening both your reputation and your compliance posture.

Thanks for reading our blog post!
Feel free to reach out to NVISO, and especially to the Enterprise GRC team, to discuss this topic in more detail, share your feedback, or explore potential collaboration opportunities. If you have specific topics you would like us to cover in future posts, please let us know—we would love to hear from you!

About the author:

Maurice Striek
is a Consultant in the Cyber Security & Architecture Team (CSA) at NVISO. He is an expert in Governance, Risk, and Compliance (GRC) with knowledge of regulatory requirements and frameworks such as IT-Grundschutz, NIST, and ISO standards. His expertise includes aligning organizational and technical best practices with these frameworks to ensure compliance and robust security management.