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Third-Party Risk Management Companies to Reduce Risk from Vendors

Partnering with third-party vendors can expose your business to significant risks. In 2024, 15% of all data breaches will involve a supply chain compromise (including third-party software vulnerabilities). This is up from 4% in 2020.

These breaches can lead to compliance violations, operational disruptions, and reputational damage.

This is where third-party risk management companies, like FortifyData, step in. They specialize in identifying and addressing vendor-related risks through advanced tools, structured frameworks, and proactive processes.

These companies provide the expertise and solutions necessary to safeguard your organization against hidden threats while maintaining seamless operations.

Understanding their role is the first step toward building a resilient risk management strategy.

Understanding Third-Party Risk Management Companies

Third-party risk management companies (TPRM companies) specialize in protecting businesses from risks introduced by external vendors and service providers.

In recent years, organizations have increasingly recognized the importance of third-party risk management (TPRM). According to the EY 2023 Global Third-Party Risk Management Survey, 90% of respondents reported that their organizations have invested directly in their TPRM programs.

They ensure that these partnerships don’t compromise security, compliance, or operational efficiency by using advanced third-party risk management software and a structured third-party risk management process.

Key areas where TPRM companies help include:

Identifying risks

Use tools like security ratings and external attack surface management to uncover vulnerabilities in vendor systems.

Assessing risks

Leverage GRC tools to evaluate vendors’ compliance with governance and regulatory standards.

Controlling risks

Implement measures to minimize threats and continuously monitor vendor activities.

What is a Third-Party Risk Management Program?

A third-party risk management (TPRM) program is a comprehensive framework designed to manage the risks posed by external vendors and service providers. It ensures businesses maintain operational security and compliance while leveraging third-party services. At its foundation lies a third-party risk management policy, which outlines the standards, procedures, and controls required for effective vendor management. A well-executed TPRM program helps organizations:
  • Standardize vendor assessments to ensure consistent evaluation across all third parties.
  • Identify and prioritize risks based on their potential impact on business operations.
  • Enforce compliance with regulatory and governance requirements across the vendor ecosystem.
  • Monitor vendor performance regularly to detect emerging risks.
  • Strengthen organizational resilience by minimizing exposure to vendor-related disruptions.

TPRM frameworks generally fall into these categories:
Third-Party Risk Management (TPRM) or Supply Chain Risk Management (SCRM) Frameworks: These foundational frameworks help develop robust TPRM programs. Notable examples include:
  • Shared Assessments TPRM Framework: Widely used for benchmarking and creating program maturity models.
  • NIST 800-161: A government-standardized framework for supply chain risk management.
  • Digital Operational Resilience Act (DORA): A European law that takes effect January 17, 2025 compels European financial institutions to include their ICT vendors as part of their cybersecurity risk management processes. Driving a focus on third-party risk management to strengthen the EU financial operational risk.

Ancillary Information Security Frameworks: These frameworks support TPRM efforts or enhance vendor risk assessment questionnaires:
  • NIST CSF v2.0: Focuses on building cybersecurity programs.
  • ISO 27001 and ISO 27036: International standards for managing information security risks in third-party relationships.

Non-IT & ESG Frameworks: These address non-cyber risks and environmental, social, and governance (ESG) concerns:
  • Corporate Sustainability Reporting Directive (CSRD): Covers sustainability reporting requirements.
  • Carbon Disclosure Project (CDP): Helps track and report carbon emissions from supply chains.

Industry and Regulatory Compliance Requirements: Many compliance requirements address the need for a vendor/third-party risk management program. They include, but not limited to:
  • AICPA SOC: CC2.3, CC9.2
  • CMMC: AU.2.044-0 , RM.4.148-1
  • FedRAMP: – AC-17(2), SI-4, SA-9, PS-7
  • FFIEC: – 6.31, A.6.32(a), A.6.35
  • GDPR: Article 32(4)
  • HIPAA: – 164.308(a)(1), 164.308(a)(8), 164.314(a)
  • HITRUST: 05.I , 09.ab , 09.E , 05.k
  • ISO 27001: 8.1 , 15.1.2 , 15.2.1
  • PCI DSS: – 12.8.1, 12.8.2, 12.8.3, 12.8.4, 12.8.5
  • SOX: APO 10.10/APO 10.02, APO 10.03, APO 10.04
  • NIST: SR-2 , SR-3 , SI-4(9)[S]{0} , SR-6 , SA-9(5)[S]{0} , PS-6a
  • NY DFS: 23 CRR-NY 500.11, 23 CRR-NY 500.11(a)(2) , 23 CRR-NY 500.11(a)(4)

What is an Example of a Third-Party Risk Management Framework?

An excellent example of a third-party risk management (TPRM) framework is the Shared Assessments Standardized Information Gathering (SIG) questionnaire.

Table of risk domain map

This comprehensive framework is widely used to assess, manage, and mitigate third-party risks efficiently.

Designed to provide a structured and consistent approach, the SIG framework helps organizations evaluate vendors across a range of risk categories, including cybersecurity, privacy, compliance, and operational risks.

The FortifyData platform has the SIG questionnaire embedded, along with all other standard questionnaires (PCI DSS, NIST based, DORA), which can be assigned to vendors/third parties for completion. The FortifyData platform can monitor the completion progress AND map technical findings from our external attack surface assessments to the applicable questionnaire, known as auto-validation. No more spreadsheets. No more concern if the vendor is answering truthfully, data will validate or contradict their answer and flag it for follow up. Trust AND verify.

What is the TPRM Audit Process?

The Third-Party Risk Management (TPRM) audit process is a systematic approach to evaluating and mitigating risks associated with vendors and service providers. It ensures that third parties comply with an organization’s security, regulatory, and operational requirements while addressing potential vulnerabilities. The TPRM audit process involves several key steps like:  

Vendor Identification and Categorization

Begin by identifying all third-party vendors and categorizing them based on the level of risk they pose. High-risk vendors, such as those handling sensitive data or critical services, require deeper scrutiny.  

Risk Assessment

Assess vendors using a structured TPRM process. This typically involves:
  • Completing risk assessment questionnaires.
  • Reviewing vendor policies and certifications (e.g., ISO 27001).
  • Evaluating cybersecurity measures, including encryption and access controls.

Use of TPRM Tools

There are many TPRM tools on the market. Each should be explored to understand their methodologies for determining vendor risks, cadence for updates on the vendors and native vs. integrated tools needed for third-party risk management.   Capabilities can include:
  • External Attack Surface Assessments (passively and/or actively scan collected)
  • Security Risk Rating
  • Financial Risk
  • Reputation Risk
  • Questionnaire capabilities
  • Political/Environmental Risk

Some tools include:
  • Arava Solutions
  • Bitsight
  • Black Kite
  • FortifyData
  • OneTrust
  • Panorays
  • Prevalent
  • ProcessUnity
  • RiskRecon
  • RSA Archer
  • SecurityScorecard
  • UpGuard
  • Venminder

TPRM tools streamline the audit process by automating data collection, analysis, and reporting. Popular tools include:
  • Automated Questionnaires: Simplify gathering vendor responses on compliance and security standards.
  • Real-Time Monitoring: Tools that monitor vendor activities to detect potential breaches or anomalies.
  • Analytics Dashboards: Provide actionable insights to prioritize risks effectively.

Gap Analysis

Identify areas where vendors fall short of required standards. Highlight gaps in compliance, operational safeguards, or cybersecurity measures.

Remediation Planning

Collaborate with vendors to address identified risks. Develop a remediation plan with clear deadlines and responsibilities for corrective actions.

 

Ongoing Monitoring and Reassessments

Regularly monitor vendors for emerging risks and conduct periodic reassessments to ensure continued compliance and performance.

How to Build a Third-Party Risk Management (TPRM) Program

Developing a robust TPRM program is essential for identifying, assessing, and mitigating risks associated with external vendors and service providers. A well-structured program not only safeguards your organization but also ensures compliance with regulatory standards.

1. Establish Clear Objectives and Policies

Begin by defining the goals of your TPRM program. Develop comprehensive policies that outline the standards and procedures for engaging with third parties, ensuring alignment with your organization’s risk appetite and regulatory requirements.

2. Identify and Categorize Third Parties

Compile a detailed inventory of all third-party relationships. Categorize them based on factors such as the nature of services provided, access to sensitive data, and potential impact on operations. This classification helps prioritize risk assessments and resource allocation.

3. Conduct Thorough Risk Assessments

Evaluate each third party’s risk profile by assessing their financial stability, compliance history, cybersecurity measures, and operational resilience. Utilize standardized questionnaires and assessment tools to ensure consistency and comprehensiveness.

4. Implement Third-Party Risk Management Software

Leverage specialized software solutions to streamline the TPRM process. These platforms facilitate efficient data collection, risk analysis, and continuous monitoring. Notable examples include:

  • FortifyData: Offers continuous external attack surface analysis of vendors, integrated questionnaire capability, questionnaire exchange, document repository and task management with vendors native to the platform.
  • OneTrust Third-Party Risk Management: Offers privacy impact assessments, data inventory mapping, and recurring audits to ensure compliance with global regulations.
    eSecurity Planet
  • BitSight Security Ratings: Provides a solution for third-party risk management by combining vendor validation, cyber risk governance, and continuous monitoring.
    Expert Insights

5. Develop Risk Mitigation Strategies

Based on assessment outcomes, formulate action plans to address identified risks. This may involve implementing additional controls, renegotiating contract terms, or, in extreme cases, discontinuing the partnership.

6. Establish Continuous Monitoring Mechanisms

Regularly monitor third-party activities and performance to detect emerging risks or changes in their risk profile. Continuous monitoring enables proactive risk management and timely intervention.

7. Document and Report Findings

Maintain detailed records of all assessments, decisions, and actions taken. Regular reporting to stakeholders ensures transparency and facilitates informed decision-making.

8. Provide Training and Awareness

Educate internal teams and third parties about TPRM policies, procedures, and the importance of compliance. Regular training sessions help embed a risk-aware culture within the organization.

What is an Example of a Third-Party Risk?

Third-party risk refers to the potential for harm to an organization caused by its external vendors or service providers.

These risks often arise from vulnerabilities in third-party systems, non-compliance with regulations, or operational failures. Managing these risks is essential to safeguarding an organization’s security, compliance, and reputation.

Here are two third-party risk examples that emphasize the critical role of proactive risk management and vendor oversight in mitigating third-party risks. Addressing such vulnerabilities early can help prevent widespread disruptions and financial losses.

 

Log4J Vulnerability

In late 2021, a critical vulnerability was discovered in Log4J, a widely used Java-based logging utility. This flaw, officially named CVE-2021-44228, allowed attackers to execute remote code on affected systems, granting them unauthorized access.

Due to Log4J’s widespread use across industries, the vulnerability impacted numerous organizations globally, exposing sensitive data and critical systems to cyberattacks. The Log4J incident highlighted the need for rigorous third-party risk assessments, especially for open-source software components.

 

MOVEit Vulnerability

In mid-2023, a significant security breach was reported in MOVEit, a file transfer software used by many organizations to securely exchange sensitive data. The vulnerability allowed hackers to exploit the software, leading to unauthorized data access and theft.

The breach impacted several high-profile organizations, underscoring the risks associated with relying on third-party software for critical business functions. MOVEit’s case demonstrated the importance of continuous monitoring and patch management in third-party risk management programs.

What is the Difference Between Vendor Risk Management (VRM) and Third-Party Risk Management (TPRM)?

Both Vendor Risk Management (VRM) and Third-Party Risk Management (TPRM) focus on assessing and mitigating risks, but they differ in scope and application.

Here’s a detailed comparison:

AspectVendor Risk Management (VRM)Third-Party Risk Management (TPRM)
DefinitionFocuses specifically on direct vendors that supply goods or services.Broader scope, including all third parties impacting the organization, such as affiliates, subcontractors, and partners.
ScopeLimited to direct vendors with formal contracts.Includes vendors, service providers, subcontractors, and other external entities.
ObjectiveEnsures vendors comply with contractual obligations and risk standards.Manages risks arising from all third-party relationships, including non-contractual ones.
Risk Types ManagedPrimarily operational, financial, and compliance risks.Includes cybersecurity, compliance, financial, reputational, and ESG risks.
Focus AreasVendor evaluation during onboarding and periodic reviews.Continuous monitoring and risk assessment throughout the third-party lifecycle.
Key Tools and ProcessesContract reviews; Vendor performance monitoring; Compliance checks;Third-party risk management software; Continuous monitoring; Security ratings and external attack surface management;
Applicable FrameworksOften follows operational and compliance-focused frameworks.Aligns with broader frameworks such as NIST, ISO 27001, and ESG standards.
ExamplesAssessing a supplier’s ability to deliver goods.Managing risks from a cloud provider, subcontractor, or software dependency.

How Can Third-Party Risk Management Companies Help My Risk Program?

Third-party risk management (TPRM) companies play a crucial role in helping organizations identify, assess, and mitigate risks associated with vendors and service providers. As third-party ecosystems grow more complex, these companies provide expertise, tools, and processes to enhance risk management programs effectively.

Comprehensive Risk Assessments

TPRM companies use advanced methodologies and tools to conduct thorough risk assessments. They evaluate vendors across multiple dimensions, including cybersecurity, compliance, and financial stability. By providing a complete picture of vendor risks, they enable organizations to prioritize remediation efforts.

Third-Party Risk Management Company Scanning

Advanced scanning tools offered by TPRM companies are designed to monitor the external attack surfaces of vendors. Vendor methodologies for the gathering of that data vary, so inquire as to their process- some rely on passive data acquisition only, some directly scan. These tools identify vulnerabilities in real time, such as exposed data or outdated security protocols. Regular scans ensure that organizations remain aware of potential risks and can respond proactively.

Standardized Questionnaires for Consistency

One of the most significant contributions of TPRM companies is their use of third-party risk management questionnaires. These questionnaires are standardized and tailored to specific industries or regulatory requirements. They streamline the data collection process, ensuring consistency while reducing the workload for both the organization and its vendors. Common areas covered in these questionnaires include:

  • Cybersecurity practices.
  • Regulatory compliance.
  • Business continuity plans.
  • Privacy policies and data protection measures.

Automation and Efficiency

TPRM companies often implement automated platforms to manage large-scale vendor ecosystems. Automation helps organizations collect, analyze, and monitor vendor data efficiently, reducing manual errors and saving time. These platforms also provide dashboards and reports, enabling decision-makers to track risks at a glance.

Continuous Monitoring

Risk management isn’t a one-time activity. TPRM companies offer continuous monitoring solutions that provide real-time updates on vendors’ risk profiles. This includes tracking regulatory changes, monitoring cybersecurity threats, and detecting operational disruptions.

Mitigation and Remediation Support

When risks are identified, TPRM companies assist in formulating action plans to address vulnerabilities. This includes negotiating with vendors, implementing additional controls, or replacing high-risk third parties.

How FortifyData Simplifies Third-Party Risk Management

FortifyData offers a powerful Third-Party Risk Management (TPRM) solution designed to help organizations identify, monitor, and manage cybersecurity risks with precision. Its suite of features ensures better visibility into third-party risks, compliance with security standards, and stronger vendor partnerships.

DSS requirement

FortifyData empowers businesses to take a proactive approach to managing third-party risks, ensuring security, compliance, and operational resilience in their vendor ecosystems.

  • Continuous Attack Surface Assessments
    Conducts real-time evaluations of third-party external assets to identify and prioritize vulnerabilities, enabling proactive risk mitigation.
  • Auto-Validated Questionnaires
    Integrates live assessment data with standardized questionnaires, providing a detailed view of third-party risks while streamlining compliance verification.
  • Customizable Risk Scoring
    Allows organizations to tailor risk scoring criteria to specific vendors, ensuring assessments align with business priorities and contexts.
  • Collaborative Remediation
    Facilitates efficient collaboration with third parties to address identified vulnerabilities, ensuring timely and effective risk reduction.
  • Comprehensive Dashboard
    Offers a centralized view of security ratings, attack surface monitoring, and compliance status, enabling organizations to assess vendor relationships at a glance.

Final Words: Future-Proof Your Business Against Third-Party Threats

As businesses depend more on external vendors, have you considered the unseen risks that could impact your operations? Tackling these vulnerabilities requires more than just awareness—it demands the right tools and a proactive strategy.

Ready to secure your organization with confidence?

FortifyData offers solutions that go beyond identification, empowering you to mitigate risks effectively and build a resilient future. FortifyData offers solutions that go beyond identification, empowering you to mitigate risks effectively and build a resilient future.

Take the first step toward smarter third-party risk management today!

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