Managing relationships with vendors, suppliers, and other external partners is critical to running a business. However, these third-party relationships also come with risks, especially regarding regulatory compliance. “The cost of a third-party cyber breach is typically 40% higher than the cost to remediate an internal cybersecurity breach”, according to Gartner.
This is where third-party risk management tools, or a third-party compliance tool, come into play. These tools help companies to monitor, manage, and ensure compliance of third parties with an organization’s vendor management program across their network of third-party vendors.
What Is a Third-Party Risk Compliance Tool?
A third-party risk compliance tool is software that enables businesses to perform third-party monitoring so they can assess and manage the compliance of their vendors or partners. It simplifies the complex process of evaluating third-party risks and ensures alignment with regulatory requirements. This can be for due diligence related to bringing on a new vendor, benchmarking against your peers or competitors or for analyzing the risk associated with a proposed merger or acquisition of another company.
Key Features of a Compliance Tool:
- Risk Assessments: These tools help identify risks associated with third-party relationships, such as cybersecurity threats and compliance gaps.
- Monitoring: Continuous monitoring ensures that vendors adhere to contractual obligations and regulatory requirements.
- Benchmarking: Evaluate a vendor’s risk against an industry or set of other providers to see how they compare and identify which is least risky.
- Automation: Automated risk assessments (technical and questionnaire based) and workflows reduce the time and effort needed to manage compliance processes.
Third parties or vendors continue to be a growing attack vector that can provide access to your networks or services, or also breach your client or proprietary data. See our Major third-party breaches in 2024. Third-party compliance is important because businesses are often held accountable for the actions of their partners. According to research by Ernst & Young, “90% of organization’s are making investments to improve their TPRM program’s effectiveness.”
Difference Between TPRM and GRC
Third-Party Risk Management (TPRM) focuses specifically on identifying and reducing risks related to external partners. On the other hand, Governance, Risk, and Compliance (GRC) is a broader framework encompassing an organization’s overall governance, risk management, and compliance efforts including legal, financial, operational, geo-political and third-party.
| Aspect | TPRM | GRC |
| Scope | Focuses on risks from external third-party relationships. | Encompasses all governance, risk management, and compliance within an organization. |
| Function | Manages vendor risks, ensuring third parties meet regulatory and organizational standards. | Aligns internal processes, technologies, and people for overall risk-based decision-making. |
| Relation | Serves as a specialized component within the broader GRC framework. | It provides an overarching structure that includes various risk management activities, including TPRM. |
Role of Third-Party Monitoring
Third-party monitoring involves tracking vendors continuously to ensure compliance with evolving regulations and organizational standards. This helps organizations:
- Detect and mitigate risks proactively.
- Maintain trust with stakeholders.
- Avoid penalties for non-compliance.
How Do You Automate Vendor Risk Management?
Automating vendor risk management involves using technology, like third-party risk management tools, to streamline and optimize risk assessment, monitoring, and reporting. Manual processes, such as using spreadsheets, are prone to errors and inefficiencies.
Automating your vendor risk management program with tools provides:
Centralized Vendor Data
Vendor risk management platforms consolidate vendor data in one place, making it easy to track compliance statuses, contract terms, and risk levels.
Automated Risk Assessments
These tools use algorithms to evaluate vendors based on predefined criteria, such as cybersecurity posture, financial stability, and compliance with standards like GDPR or ISO 27001.
Workflow Automation
Automation tools eliminate manual tasks, such as sending follow-up emails for compliance documents. This reduces delays and ensures consistency.
Alerts and Notifications
Automated systems provide real-time alerts when a vendor’s compliance status changes, allowing organizations to take immediate action.
By automating vendor risk management, organizations can save time, reduce costs, and improve the accuracy of their compliance processes.
Continuous Monitoring of Third Parties
Continuous monitoring is an integral part of third-party risk management. It involves assessing vendors on an ongoing basis to identify risks and ensure compliance.
Compliance Requirements
Regulations such as the Gramm-Leach-Bliley Act (GLBA) and others require organizations to continuously monitor their third-party relationships. This is particularly important for industries like finance, healthcare, and technology.
Tools for Questionnaire Management and Security Documentation
- Questionnaire Management: These tools allow organizations to create and manage vendor questionnaires to assess compliance with specific requirements.
- Questionnaire Exchanges: Vendors can complete assessments online and store them in a shared repository for other potential clients to review, streamlining the process of collecting and reviewing compliance data.
- Trust Centers: Trust centers are also becoming a derivative tool that a company owns to help reduce time with requesting and reviewing cybersecurity program documentation.
Continuous monitoring provides real-time visibility into third-party risks, enabling organizations to respond quickly to emerging threats.
Free vs. Automated Third-Party Compliance Tools
While some organizations rely on third-party risk management compliance tools free like spreadsheets to manage third-party compliance, these solutions often fall short in terms of efficiency and accuracy. However, many third-party risk management programs (and cyber risk management programs for that matter) do start with a spreadsheet to track progress.
Problems with Spreadsheet-Based Tools
- Error-Prone: Manual data entry increases the likelihood of mistakes, if the data entry is maintained on a schedule or deprioritized for other project(s).
- Time-Consuming: Tracking multiple vendors manually is labor-intensive and they generally move at different paces and the process is difficult to scale.
- Limited Scalability: Spreadsheets are not suitable for managing large volumes of data and keeping it up to date.
- Lack of Automation: Free tools do not offer features like real-time alerts or automated workflows.
Benefits of Automated Compliance Platforms
- Efficiency: Automated tools streamline the compliance process, saving time and resources.
- Accuracy: Built-in algorithms reduce errors and improve data quality.
- Scalability: These platforms can handle thousands of vendors, making them ideal for large organizations.
- Real-Time Insights: Automated tools provide up-to-date information on vendor compliance statuses.
Choosing an automated third-party compliance tool over free alternatives is a wise investment for organizations looking to improve efficiency and minimize risks.
Popular Third-Party Compliance Tools
Several third-party risk management tools to monitor vendor compliance are available in the market. Here are a few popular ones:
1. FortifyData
FortifyData stands out as a leading third-party risk management compliance tool. It provides comprehensive risk management features, including real-time monitoring, automated reporting, questionnaire management with technical control auto-validation, and customizable dashboards.
- The tool emphasizes ease of use and integration, making it suitable for businesses of all sizes.
- Focus on proactive risk identification through regular external attack surface scans supplemented with questionnaire management helps organizations stay ahead of risks from vendors and compliance with your program.
- Enables collaboration with vendors within the platform to evaluate the same date – no more finger pointing on ‘tool of truth’. Invite your vendors at no extra cost.
2. Aravo
- Focuses on risk and performance management.
- Integrations to include additional sources of third-party risk information.
- Offers features like automated workflows and customizable dashboards.
3. ProcessUnity
- Known for its vendor risk management capabilities.
- Includes tools for questionnaire based risk assessment and continuous monitoring.
4. Navex Global
- Provides solutions for ethics and compliance management.
- Offers training modules and real-time reporting features.
5. MetricStream
- A robust tool for governance, risk, and compliance (GRC) with a TPRM module.
- Includes AI-powered analytics for better decision-making.
Enhance Your Cybersecurity Posture Today!
Improve your company’s cybersecurity by implementing FortifyData’s Third-Party Risk Management (TPRM) solution. FortifyData provides a comprehensive third-party risk management module as part of it’s automated cyber risk management and cyber GRC platform that helps organizations identify, assess, and mitigate risks in real time. Clients continue to state they love our experience in third-party risk management due to the regular assessments and the increased volume AND accuracy of the risk data on them.
FortifyData’s platform offers:
- Threat Exposure Management: FortifyData identifies and manages threat exposures across the entire attack surface. This includes internal networks, cloud environments, and third-party vendors. Organizations can prioritize their response efforts effectively by providing real-time insights into vulnerabilities.
- Cyber Risk Scoring: The platform offers an industry-leading cyber risk scoring system that tracks performance against key risk indicators.
- Compliance Monitoring: The Questionnaire Management with technical control auto-validation feature allows organizations to monitor their compliance with various industry standards such as PCI, HIPAA, SOC 2, ISO 27001, and NIST.
- Holistic Risk Analysis: FortifyData evaluates three critical pillars of cybersecurity—people, processes, and technology—for a better view of risk exposure. This approach makes sure a company can identify weaknesses across all areas of its operations.
Don’t leave your company vulnerable to third-party risks. Schedule a demo to see third-party risks!
