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Why Third-Party Risk Management Tools are Needed

As businesses increasingly rely on third-party vendors for essential services, the risks associated with these partnerships increase. Statistics show that the average company shares confidential information with 583 third-party vendors  — and 82% of companies provide those third parties with access to their sensitive data.

These statistics show the urgent need for strong Third-Party Risk Management (TPRM) tools to safeguard sensitive data and maintain operational integrity. In 2024, companies are more interconnected than ever. This growing dependency creates vulnerabilities, as many vendors may not adhere to stringent security protocols. Hence, a single misstep can lead to data breaches, compliance issues, and financial losses. Many recent high-profile data breaches are attributed to originate at a third-party like the U.S. Treasury Department, AT&T and others in 2024.

Let’s explore how these tools work and how they can protect your company from potential threats.

Understanding Third-Party Risks

Third-party risks come from the external vendors, contractors, and partners that your business works with. These risks can vary widely and may include:

  • Operational Risks: When a third party fails to deliver services as promised, it can disrupt your operations. For example, delays in supply chain deliveries can cause production downtime.
  • Cybersecurity Risks: Third parties often have access to your data or systems. A security breach on their end could expose your company to hacking, data theft, or cyberattacks. In fact, In the first half of 2023, nearly 50% of the 40 million healthcare records exposed were the result of attacks targeting third-party business associates of healthcare providers.
  • Compliance and Regulatory Risks: Vendors who don’t follow the required legal standards could put your business at risk. Non-compliance with regulations like GDPR, GLBA or HIPAA can lead to hefty fines and legal consequences.
  • Geo-political Risks: the potential for political, economic, military, and social risks that can arise from a country’s involvement in international affairs. This can affect suppliers, offshore resources or finances that your company works with.
  • Financial Risks: If a third party faces financial difficulties or insolvency, it will impact your business. This could include loss of access to critical services or a need to find a replacement vendor quickly.

 

These risks are real and can have serious consequences. Understanding them is the first step in protecting your business from the harm of relying on external partners.

What are Third-Party Risk Management Tools?

Third-party risk management tools are software solutions that help businesses assess and manage the risks associated with their third-party vendors. These tools enable organizations to identify potential threats, evaluate the level of risk, and take steps to reduce or eliminate those risks.

What is a third-party risk management software? These tools can track various types of risks, such as financial, operational, cybersecurity, and compliance risks, all of which can have a significant impact on a business. For example, a third-party vendor might experience a data breach that could expose sensitive customer information, or they might fail to meet required compliance standards, leading to legal issues for your business.

Third-party risk management tools also possess several key features that help businesses identify, assess, and manage risks. These features are designed to make risk management easier, more efficient, and more accurate. Here are some of the most important ones:

• Risk Identification:

These tools help businesses identify potential risks in their third-party relationships. They gather data from different sources, such as vendor reports, security audits, and financial records, to detect risks like security vulnerabilities or compliance failures.

• Risk Assessment:

After identifying risks, these tools assess how severe each risk is. This helps businesses understand which risks need immediate attention and which can be monitored over time. This can be a controls or risk assessment, direct attack surface vulnerability scan, reviewing independent reports (SOC 2, pentest and others). Tools often use scoring systems to rate risks based on their impact and likelihood.

• Risk Mitigation:

Once risks are identified and assessed, these tools help businesses take steps to reduce or eliminate those risks. This could include sending alerts to decision-makers, creating action plans, or working directly with vendors to address vulnerabilities.

• Monitoring and Reporting:

Continuous monitoring is another important feature. These tools track third-party vendors in real-time (using direct assessment methodology), checking for new risks or changes in existing risks. They also provide regular reports, helping businesses stay current on their risk management efforts.

• Security Ratings:

Many third-party risk management software gartner tools include security ratings that measure a vendor’s cybersecurity posture. These ratings are based on factors like network security, data protection, and previous security incidents, helping businesses evaluate their vendors' security. Not all security rating vendor methodologies are the same however, and the data you make decisions with can lead you to the wrong conclusion. Check if the data is largely passively acquired data and how old it is, versus directly sourced data like an external vulnerability scan of a vendor.

These features work together to give businesses a comprehensive view of the risks their third-party vendors pose, helping them make informed decisions and take necessary actions to protect their company.

Categories of Third-Party Risk Management Tools

To effectively manage third-party risks, companies can use various tools designed for different needs and complexities. These tools can be grouped into three main categories and can have varying capabilities from enabling questionnaire assessments of third parties to providing continuous assessments and compliance monitoring of them.

 

1. Basic Tools

Basic tools include simple methods like spreadsheets and manual processes. Many small businesses start with these tools because they are easy to use and require little investment to track a limited number of vendor partners. However, while they can help track vendor information and risks, they often lack automation and advanced features. This can lead to errors and inefficiencies as the number of vendors grows and the reliance on manual updates persists.

 

2. Dedicated Software Solutions

Dedicated software solutions are designed specifically for third-party risk management. These tools offer more features than basic tools, such as automated risk assessments, compliance tracking, and reporting capabilities. They help organizations identify potential risks more efficiently and provide a clearer view of vendor performance. Examples include software that focuses on cybersecurity assessments or compliance management.

 

3. TPRM Platforms

Comprehensive TPRM platforms integrate multiple functionalities into a single solution. These platforms provide a holistic approach to managing third-party risks. They often include risk scoring, continuous monitoring, continuous controls monitoring and client/vendor collaboration tools.

 

Companies can use these platforms to manage their entire vendor portfolio effectively. Some well-known TPRM platforms also offer analytics and dashboards that help decision-makers understand risks at a glance.

FortifyData-Third-party-Risk-Management-Vendor-Portfolio-Continuous-Monitoring-Dashboard
Source: FortifyData Third-Party Risk Management Vendor Portfolio Dashboard

Questionnaire Assessments for Third-Party Risk Management

In third-party risk management (TPRM), questionnaire assessments provide a structured method for gathering essential information directly from vendors about their security, operational resilience, and compliance. These targeted assessments help organizations understand potential risks, including data breaches, operational disruptions, reputational harm, and legal issues. By analyzing the responses, organizations can evaluate the effectiveness of vendor controls and identify vulnerabilities that could impact their own operations, enabling informed decisions about vendor selection, monitoring, and risk mitigation.

A robust third-party risk management framework template emphasizes customizable questionnaire templates tailored to specific needs. This adaptability is paramount, as different industries, regulations, and business relationships introduce distinct risks. For instance, vendors handling financial data require questionnaires aligned with PCI DSS, while cloud service providers often undergo SOC 2 Type 2 assessments. Organizations using frameworks like the NIST Cybersecurity Framework can map questionnaires to its controls for better alignment and gap identification. This targeted approach ensures that assessments focus on the most relevant risks and compliance requirements, resulting in accurate and meaningful evaluations of each third party’s risk profile.

Source: FortifyData, DORA Questionnaire Management with Auto-Validation

Security Ratings for Third-Party Risk Management

With businesses increasingly relying on third-party vendors, understanding their security posture becomes crucial.

What is a security risk rating for this vendor or that vendor? How much cyber risk will they expose us to? A vendor’s vulnerability can become a direct threat to the organization.

Security ratings are a vendor risk management tool that allows organizations to see the risks and security posture associated with their third parties. Third-party risk management software gartner has reports that rate the various TPRM providers.

External Attack Surface or Scanning Tools for Third-Party Risk Management

There are several third-party risk management tools available to help businesses assess and manage their vendor risks. Here are a couple to reference:

Source: FortifyData, Third-Party Risk Management Dashboard

1. FortifyData

FortifyData is an all-in-one risk management solution that has a TPRM module that helps businesses assess, monitor, and manage third-party risks. It offers a comprehensive platform with real-time alerts, automated compliance checks, vendor performance tracking and a reporting suite.

  • Features: FortifyData provides comprehensive risk assessments, continuous monitoring, automated compliance checks, and detailed cybersecurity evaluations for third-party vendors. It offers an intuitive platform with customizable risk scoring so businesses can prioritize and manage vendor risks effectively.
  • Benefits: Real-time risk alerts, easy-to-use dashboard, and seamless integration with other business systems. What is an example of a third-party risk? FortifyData was able to identify Log4J vulnerabilities at third-parties based on the direct assessments that the platform conducts. Other ratings providers could not immediately identlfy this risk at vendor organizations.
  • Ideal Use Case: Best for businesses looking for an all-in-one, scalable solution to view and manage third-party risks across various domains – including cybersecurity, financial stability, and compliance – in the same pane with their enterprise risk.

2. BitSight

BitSight provides security ratings based on a vendor’s security posture. It’s designed for businesses that want an easy way to assess the security risk of third-party vendors.

  • Features: BitSight offers security ratings and continuous monitoring to evaluate third-party vendor security.
  • Benefits: Ideal for quick, actionable insights into vendor security.
  • Ideal Use Case: Best for companies that need quick insights into the security posture of their vendors.

Popular Third-Party Risk Management Tools

Here are some popular third-party risk management tool options:

 

3. Prevalent

Prevalent is a comprehensive platform for third-party risk management, offering customizable risk assessments and detailed vendor questionnaires.

  • Features: Prevalent provides detailed risk assessments, questionnaires, and continuous monitoring tools for managing vendor risk.
  • Benefits: Helps automate and customize the risk management process.
  • Ideal Use Case: Suitable for businesses that require detailed vendor risk management with custom configurations.

 

4. Aravo

Aravo is a vendor management solution that helps organizations assess, monitor, and manage risks related to third-party vendors.

  • Features: Aravo includes vendor risk assessments, compliance management, and performance tracking tools.
  • Benefits: Robust features for managing vendor relationships, though it may require more time to learn.
  • Ideal Use Case: Best for larger enterprises with complex vendor ecosystems.

 

Here is a comparison table that highlights the key strengths, integration capabilities, and customization options of each tool to help businesses make an informed decision based on their specific needs:

Tool NameKey StrengthIntegration CapabilitiesCustomization Options
FortifyData Comprehensive all-in-one solutionSeamlessly integrates with other security tools for business contextHighly customizable risk scoring and reporting
BitSightFocused on cybersecurity ratingsCheck their website for integration optionsBasic customization for security ratings
PrevalentDetailed vendor risk managementIntegrates with multiple third-party toolsHighly customizable questionnaires and assessments
AravoStrong vendor performance trackingWorks with enterprise systemsCustomizable vendor performance metrics and compliance checks

How GRC Platforms and Tools Conduct Third-Party Risk Management

What is the difference between TPRM and GRC?

GRC (Governance, Risk, and Compliance) platforms are essential for effectively managing third-party risk. While TPRM specifically addresses risks posed by vendors and partners, GRC provides the overarching framework for managing risk and compliance across the entire organization, encompassing TPRM as a key component.

GRC platforms streamline TPRM processes by offering centralized vendor repositories, facilitating risk assessments, automating questionnaire distribution and tracking, and providing comprehensive reporting. These tools can map questionnaire responses to industry standards, regulatory requirements, and internal policies—like DORA, GLBA, NIST Vendor Risk Management Framework or ISO 27001—allowing organizations to efficiently evaluate vendor compliance and identify potential vulnerabilities. Integrating TPRM within a broader GRC strategy offers a holistic view of the organization’s risk landscape and ensures consistent risk management practices.

The core distinction between TPRM and GRC is scope. TPRM is a focused subset of GRC, dealing solely with third-party related risks. GRC, conversely, covers a wider spectrum, including enterprise risk management, internal controls, regulatory compliance, and IT governance. GRC tools empower TPRM by providing the infrastructure and automation necessary to implement TPRM policies effectively.

For instance, these platforms automate questionnaire distribution based on vendor risk profiles, track responses, and generate reports highlighting non-compliance with standards such as DORA or GLBA. This automation significantly reduces manual effort and enhances TPRM efficiency. Moreover, GRC platforms offer standardized reporting and dashboards that provide insights into overall third-party risk exposure, enabling organizations to prioritize remediation and make informed vendor relationship decisions. This integration allows for a more robust and scalable TPRM program aligned with broader organizational risk and compliance objectives.

How to Choose the Right Third-Party Risk Management Tool

Choosing the right third-party risk management tool is crucial to effectively managing vendor risks. Here are some key factors to consider:

• Assess Your Business Needs:

Start by identifying your business's specific risks. Are you most concerned about cybersecurity, compliance, or financial risks? This will help you choose a tool that focuses on the areas that matter most to your business.

• Scalability and Integration:

As your business grows, your vendor base may expand. Make sure the tool you choose can scale with your business. Additionally, check if it can integrate with your existing systems, such as your XDR, CRM, SIEM, or ERP software. This ensures smooth data flow and efficiency.

• Ease of Use and Reporting Capabilities:

The tool should be easy for your team to use and navigate. Look for features like customizable dashboards and automated reporting. These features make it easier to assess risks and take action quickly.

• Cost-Effectiveness:

Third-party risk management tools can vary in price. Consider your budget and weigh the tool’s features against its cost. The right tool should provide good value for the investment, especially when it helps prevent costly risks.

Best Practices for Implementing Third-Party Risk Management Tools

Once you have chosen the right third-party risk management tool, it’s important to implement it effectively. Here are some best practices to follow:

Start with a Comprehensive Vendor Risk Assessment

Before using the tool, assess all your current third-party vendors. Identify which vendors pose the highest risk and focus on them first. This will help you prioritize your efforts and address the most critical risks early.

 

Regular Risk Reviews and Updates

Risks can change over time, so it’s important to continuously monitor vendors. Schedule regular reviews to assess whether any new risks have emerged or if your existing risk ratings need updating.

 

Engage Key Stakeholders

Involve key departments in the implementation process. Compliance, IT, legal, and procurement teams should be part of the decision-making process. This ensures the tool meets the needs of all departments and is used effectively.

 

Train Your Team

Make sure your team understands how to use the tool properly. Provide training to ensure everyone knows how to assess risks, generate reports, and take action when necessary. This will help maximize the tool’s effectiveness.

 

Following these best practices ensures that your third-party risk management tool is implemented successfully and that your business remains protected from external risks.

Challenges in Third-Party Risk Management

While third-party risk management tools can help businesses assess and manage vendor risks, companies still face challenges when using these tools. Here are some common difficulties:

  1. Data Overload: With continuous monitoring, these tools can generate much data. Without proper filters or clear insights, businesses can become overwhelmed by the volume of information and struggle to prioritize the most critical risks.
  2. Vendor Cooperation: Some vendors may not be willing to share the necessary data for risk assessments. This can make it harder to get a full picture of the risks associated with that vendor and may delay the assessment process. This is why TPRM tools with attack surface vulnerability assessments can provide visibility to the vendor’s external security posture (which threat actors can obtain themselves, too).
  3. Complex Vendor Ecosystems: Large businesses often work with hundreds or thousands of vendors, making managing and tracking risks difficult. Identifying high-risk vendors in such a complex network can be time-consuming and challenging.
  4. Changing Regulations: Compliance requirements are constantly evolving. Keeping up with regulation changes like GDPR or SOC 2 can be challenging, primarily when vendors are based in different countries with different laws.
  5. Cost: Third-party risk management tools can be expensive, especially for small businesses. The cost of these tools must be weighed against the potential risks and their value in preventing costly security breaches or compliance violations.

How platforms and tools can automate third-party risk management process

Managing third-party risk management process is important for interconnected businesses. Companies face increasing threats from vendors and partners. This makes it important to have a strong risk management strategy in place. Automation is where FortifyData comes into play.

FortifyData offers a reliable Cyber Risk Management and Cyber GRC platform designed to help companies identify, assess, and mitigate risks associated with third-party vendors in an automated fashion. Here are some of the key features that set FortifyData apart:

 

  • Attack Surface Assessments: FortifyData continuously monitors the external assets of your vendors, providing real-time insights into their security posture. This proactive approach helps you identify vulnerabilities before they can be exploited.
  • Auto-Validated Questionnaires: The platform simplifies compliance using technology assessment data to automatically validate vendor responses for applicable technology control questions. This reduces the manual effort required for vendor assessments and ensures accuracy.
  • 360-Degree Risk View: With detailed dashboards and reporting capabilities, FortifyData gives you a comprehensive view of all risks associated with your third-party relationships. This visibility allows you to make informed decisions and prioritize actions based on risk severity.
  • Cyber Risk Security Rating Scoring: FortifyData uses patented technology to provide a clear scoring system for cyber risks and is the only Security Ratings provider to offer customizable security rating risk models. This helps organizations understand their exposure and appropriately mitigate potential threats.

 

Request a demo to take control of your vendor risk management and set your business up for success!

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