Imagine your organization has just partnered with a new vendor with the perfect solution at a competitive price that fits your budget. Everything appears to be on track for a successful collaboration. However, a few months later, you find out that the third-party vendor had suffered from a major data breach. Now, instead of smooth sailing, your company is facing regulatory scrutiny, shaken customer confidence, and financial fallout. This is a position that nobody wants to be in, and it makes you wonder what could have been done differently so this would never happen.

So in an environment where a single vendor vulnerability could ruin your reputation and cost you millions, a lack of understanding or deployment indeed threatens the future of your business – which is why third-party risk management needs to be on top.

What is Third-Party Risk Management?

Third-party risk management is the process of detecting, assessing, and mitigating the risks arising from an organization’s relationships with third parties. These third parties may be vendors, suppliers, service providers, or even contractors, basically any external entity that offers goods or services to an organization or interacts with an organization’s information (data), systems, or operations, making them potential sources of risk.

As organizations rely more and more on third parties for various services, like cloud computing, IT support, and supply chain management, it has become ever-more critical that they manage the risks brought by these external partnerships.