Download this eBook to learn how to better manage vendor risk with an effective Third-Party Risk Management Program.
Download NowAny organization that relies on third-party vendors for critical business functions should develop and maintain an effective third-party risk management (TPRM) policy.
A TPRM policy is the first document an organization should create when establishing its TPRM program. TPRM policies allow organizations to document internal roles and responsibilities, develop regulatory practices, and appropriately communicate guidelines to navigate third-party risks throughout the vendor lifecycle.
Furthermore, a standardized TPRM policy is vital because it provides an organization with a roadmap to maintain healthy cybersecurity hygiene, even as it enters third-party relationships with new vendors and expands its supply chain.
One report estimates that 98% of organizations worldwide have integrations with at least one third-party service provider that has experienced a breach in the last two years. While this alarming statistic will frighten most organizations, your organization can find peace of mind by developing a TPRM policy to guide and manage its overall TPRM program.
The most effective TPRM policies include standardized practices that regulate every stage in the vendor lifecycle, from onboarding to offboarding. Designing your organization’s comprehensive TPRM policy may seem daunting, primarily if you already work with many third-party vendors.
If you’re having trouble getting started, consult stakeholders throughout your organization. Communicating with relevant stakeholders is the best way to ensure your organization’s TPRM policy prioritizes the needs and challenges of all departments.
You should also consider industry-specific challenges, such as compliance regulations (NIST, GDPR, CCPA, HIPAA, etc.) and specific risk categories (cybersecurity risk, operational risk, compliance risk, reputational risk, etc.) that may affect your organization and its TPRM program.
While all effective TPRM policies are composed of many essential elements, the best policies will have guidelines in place to standardize how an organization:
Organizing internal TPRM roles and responsibilities is one of the most critical functions of an effective TPRM policy. Most TPRM policies will outline the roles and responsibilities of the board of directors, senior management, vendor owners, independent reviewers, legal, and other groups associated with the organization’s TPRM program.
When drafting your TPRM policy, carefully outline all responsibilities your team is accountable for while consulting stakeholders from each group.
Outlining all your organization's TPRM duties in one place will allow individuals to reference the policy in the future when they are unsure of who is responsible for a specific task. This clarity will speed up internal communications, improve workflows, and allow your organization to quickly onboard new team members as your internal TPRM team expands or changes.
All effective TPRM policies establish an organization's overall risk tolerance threshold and document the minimum security requirements a vendor must possess to be eligible to enter a third-party partnership with the organization.
Setting these guidelines early will allow your organization to easily compare vendors and make informed decisions based on the value and risk exposure individual vendors present to the organization.
Overall, there are three levels of risk tolerance:
Your organization’s TPRM policy should outline the level of risk your organization is comfortable with. When describing your organization’s risk tolerance, your TPRM policy should also identify the specific metrics, such as a minimum security rating, risk scores, and industry compliance standards, the organization will use to determine if it is wise to partner with a particular vendor.
Even organizations that maintain a low-risk threshold will experience some level of risk with every third-party partnership. Therefore, after documenting your organization’s risk appetite, your TPRM policy should demonstrate how it will identify the risks individual vendors present to the organization.
When documenting how your organization identifies third-party risks, ask yourself what tools it uses to screen vendors and evaluate their security posture. Your organization’s TPRM policy should outline these tools and processes so that future personnel follow the same protocol when assessing the impact of every new third-party opportunity.
The best TPRM programs utilize several tools to ensure an organization identifies all risks and vulnerabilities. The best TPRM tool belts include:
While drafting your organization’s TPRM policy, you should also point out areas of your organization's TPRM program that could use improvement. It's common for organizations to face resource-related struggles when trying to implement various tools into their TPRM program, but this doesn’t mean your organization should expose itself to unnecessary risks.
UpGuard Vendor Risk allows organizations to evaluate vendor risks and vulnerabilities quickly by utilizing a powerful arsenal of TPRM tools, including automation, custom risk assessments, up-to-date security ratings, security questionnaires, and more.
Finally, your TPRM policy should outline the tools your organization uses to determine inherent risk and monitor ongoing risk. When drafting this section of the TPRM policy, ask yourself if your organization utilizes an objective rating tool, vendor management software, or some other TPRM tool to calculate vendor risk.
Unfortunately, not every third-party partnership an organization enters is as successful as the organization hopes. An organization’s TPRM policy should outline details surrounding vendor contracts and termination protocols to protect the organization in the event a partnership becomes harmful.
To protect your organization, you should include explicit terms related to contract execution, management, and termination in your organization’s TPRM policy.
In addition to outlining the procedures the organization will follow when terminating a contract, your TPRM policy should include a separate section outlining your organization's rights to deem a contract eligible for termination.
Organizations rely on various TPRM tools to manage cyber risks and carry out all risk management strategies included in their TPRM policy. The most effective TPRM programs utilize everything from vendor dashboards to remediation workflows to manage vendor relationships and the risk they present
UpGuard Vendor Risk allows organizations to identify, assess, and mitigate risks all in one intuitive platform. You can optimize your organization's TPRM program and follow your third-party risk management framework using UpGuard Vendor Risk to manage your entire supply chain.
Outsourcing to any third-party vendor presents risks to your organization. UpGuard Vendor Risk can help your organization with risk mitigation, prevent data breaches, and improve the efficiency of your overall TPRM team.
