What Is Third-Party Risk Management (TPRM)?
Third-party risk management (TPRM) is the process of mitigating threats stemming from external parties: vendors, suppliers, software supply chains, service providers, and more.
As companies expand their digital webs, supply chains and reliance on third parties is nearly ubiquitous, if not for one reason than for another. Startups rely on the quick and easy setup brought by drag-and-drop code, international manufacturers lean on vast physical supply chains, and service providers hold clientele worldwide.
However, with so much convenience comes great risk.
According to Fortra’s 2025 State of Cybersecurity Survey results, a full 50% of security professionals now put third-party exposure in the top 5 risks of this year.
Understanding TPRM for Vendor Risk Management
Impact of third-party risks on business continuity
When third parties get hit, it is nearly always with the intention of reaching their big-game partners upstream. The “it could never happen to me” mentality of many smaller partners is obliterated in light of the fact that they provide easy, and often less protected, access to larger corporations, or to many different companies.
These outside attacks affect business continuity as much as any internal strike, and yet they are even more dangerous because they are often the last anyone sees coming. Vendors have trusted access into corporate networks (which attackers love to exploit), so these entry points are not often as guarded as they should be. Ultimately, an attack on your external partner is an attack on you—or soon will be—so vendor risk management is critical for batting down these threats.
Regulatory requirements and compliance
Many regulatory requirements and compliance mandates reflect this “your threat is my threat” approach, putting the onus squarely on the shoulders of the host company for any external risk factors. Companies are held to a higher standard now, as are their executive boards, for vetting third parties before they contract.
Reputation management and trustworthiness
Seeing around corners where partners are concerned also plays into reputation management, or your company’s image of trustworthiness, as attacks on “them” quickly reflect negatively on “you.” In today’s digital threat climate, more organizations are starting to understand that vendor risk management is as integral to their company’s security posture as internal risk management, and worth the same amount of investment.
Risk Management Frameworks
The following risk management frameworks exist to get companies headed in the right direction when it comes to systematically evaluating and improving their third-party risk.
The NIST Risk Management Framework (RMF) is seven-step process that organizations can take to manage privacy and information risks. While intended “internally,” it can be applied successfully to third parties as well, and should, when corporate accountability is on the line. Third parties should be considered one of the risk-inducing factors when working through the RMF, and included in step one, Prepare, as companies lay out their valuable (and risk-inducing) assets.
The Defense Cyber Protection Partnership (UK) imposes risk-based controls for protecting supply chains across the UK’s Ministry of Defense (MOD). DCPP compliance requires agencies to secure data across the entire information supply chain, and ensure it is secured. This often requires tracking it beyond organizational boundaries.
ISO 31000 Risk Management Framework. ISO 31000 is an international standard for risk management that provides general guidelines and is not industry specific. It emphasizes the importance of ongoing review, as third-party threats are anything but static, and it offers a detailed process that companies of any size, sector, or industry can apply to identify, analyze, evaluate, treat, and monitor risks.
Other frameworks with guidelines around TPRM include SOC2, PMBOK risk framework, FAIR, and OCTAVE, among others. When choosing a vendor risk management framework that is right for you, consider something that is industry-specific if your organization is heavily regulated, or start with a more general framework if your goal is primarily security or you are early in your cybersecurity maturity journey. General frameworks are more widely known, and help is easily available.
If you are overwhelmed with the entire process, consider an MSSP that can walk you through your compliance journey.
Common Third-Party Risks and Challenges
Third parties can be a boon to business, but they naturally bring with them all of the threats that typically hound an organization, and then some. These include:
Cybersecurity threats: Smaller partners and more obscure supply chain vendors are popular targets for attackers. They know that the little guys have big upstream partners and that they likely don’t have the people power or the resources to defend adequately against a barrage of attacks. Lack of visibility due to staffing and solution shortages can lead to cyberattacks that infiltrate third parties and pivot into host organizations.
Operational Risks and Supply Chain Vulnerabilities: Unnecessary supply chain risk can affect operations and bring production to a halt. These suppliers play an integral part in the chain. For example, the recent cyberattack on a UK grocery supplier caused order processing to come to a standstill. As cybersecurity expert Dray Agha stated, “Cyber criminals are deliberately targeting parts of the supply chain that create maximum chaos. When chilled food distributors go offline, products spoil and shelves go empty fast.”
Legal and Compliance Risks: Gone are the days of placing supply chain exposure on the supply chain. The prevailing policy of today says that if your supplier is compromised, resulting in compromise to you or your customers, it is ultimately your responsibility to vet, prevent, or allay those risks in the first place. Legally, it will always be the ultimate responsibility of the host organization to make sure third-party threats are discovered and mitigated. Things like vendor questionnaires, ongoing vulnerability scans, and even offensive security tactics like pen testing are recommended for finding and diminishing these risks.
TPRM Process: Phases and Best Practices
How does a company go about batting down third-party risk? The following phases of the third-party risk management lifecycle can be followed to streamline the process.
Planning and Risk Assessment: Identify the services you need contracted, key stakeholders, and key risks. Perform a risk assessment using dedicated security assessment software like vulnerability management, penetration testing, red teaming, and more.
Due Diligence: Audit other risk factors before you sign on the dotted line: financial history, consumer complaints, and an OFAC check to make sure the vendor isn’t blocked per any sanctions lists.
Negotiations and Contracting: Identify any service level agreements (SLAs) and essential security controls in your contract upfront. Also, define consequences in cases of non-compliance.
Ongoing Monitoring: Reassess your vendors on a regular basis (as often as resources permit, but at least yearly) to ensure policies are being followed and proper security protocols are still firmly in place. Track the progress of SLAs and report performance of KPIs (especially security KPIs) to key stakeholders in charge of renewal.
Termination or Renewal: Based on the performance and cooperation of your external third parties, qualify them for renewal—or terminate the relationship if an undue amount of risk is introduced with no significant changes during the course of the contract. Remember to be thorough in offboarding and decommission any vendor accounts—lingering access is a major source of third-party risk in itself.
For best practices on how to secure data within government agencies, read Five Ways to Secure Data Within the Defense Supply Chain.
How to Implement TPRM
Third-party risk management is far from an outlier in today’s cybersecurity strategies. TPRM needs to be an integral part of any security foundation for organizations that invest in external partnerships in any way—via physical supply chains, service providers, software supply chains, or any other vendor relationship.
Implementing TPRM needs to start with consideration, the realization that a dedicated program, complete with processes, point people, and policies in place. Then, those in charge of contracting with third parties need to be aware of the new security requirements and abide before them before bringing vendors onboard. Teams in charge of TPRM need top-down support as they periodically take time from internal security tasks to monitor the third parties, and third parties need to be aware from the outset of the security expectations of your organizations—and the consequences of not meeting them.
Ultimately, third-party risk management should facilitate working relationships, not delay or prevent them. The point is to engage in a healthy ecosystem of outsourced tools and talent to advance business and exponentiate results. When done right, putting a robust TPRM program in place will only ensure that this happens—but happens safely.
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