Empowering your business: 10 steps to effective third party risk management

2024, and moving into 2025, will be significant for Third Party Risk Management (TPRM). The business landscape is changing rapidly, driven by external factors including regulations and wider market movements. Organizations are now increasingly reliant on third parties and their subcontractors to deliver critical services, meaning there’s more risk to consider than ever before.

Traditional TPRM methods just aren’t up to the challenge anymore, and it’s clear that a new approach is needed.

But in this complex new landscape, how do you begin designing and developing a robust TPRM capability for your organization?

Drawing on our extensive experience of program delivery and deep subject matter expertise, the white paper outlines 10 essential steps you need to take to establish a robust TPRM program in your organization.

10 Steps to TPRM Success

1. Set a clear vision and strategy

TPRM is a maturing risk management principle. Establishing a vision and strategy requires a coordinated effort from senior management, including a board-level mandate, investment, and cross-departmental engagement. Therefore, setting a clear vision and strategy from the outset is essential to laying the right foundations.

2. Establish and mobilize a TPRM program

A dedicated TPRM program team should be responsible for executing the vision and strategy, and coordinating the activities needed to define, design, and deploy the necessary TPRM capabilities.

3. Develop an actionable roadmap

To achieve your desired outcomes, the TPRM program needs a documented roadmap. This roadmap acts as a compass, guiding the implementation process from vision to execution and supporting the overall strategic direction

4. Leverage existing initiatives

Leveraging and collaborating with other strategic initiatives will also be mutually beneficial. Operational Resilience programs, for example, may require a more robust TPRM focus to address key dependencies and gaps in oversight and governance.

5. Review and harmonize frameworks

Many organizations may not be fully aware of their existing TPRM capabilities and resources, due to a lack of formalization and a previously fragmented approach. A company-wide review can help identify all resources and artifacts currently deployed that touch upon TPRM.

6. Develop a sustainable enterprise-wide TPRM operating model

There are various TPRM operating models to consider, ranging from decentralized (local or entity ownership of third-party relationships) to centralized (harmonized oversight across the organization), with hybrid models offering a balance between the two.

7. Build an effective TPRM risk and control framework

Organizational complexity, unclear roles and responsibilities, and fragmented governance structures can all hinder the effectiveness of the TPRM engagement model across the three lines of defense – preventing vertical and horizontal alignment.

8. Implement risk based principles throughout the third-party lifecycle

Risk assessments should be conducted throughout the entire third-party lifecycle, starting with a comprehensive assessment at the onboarding stage. This assessment should utilize tiered risk factors based on the type of third party and the services they provide.

9. Establish framework alignment and cascade matrix

Organizations can struggle to integrate TPRM frameworks with their existing strategic frameworks. Focus on strategic alignment and a functional cascade of the Enterprise Risk Management Framework (ERM Framework) and Operational Risk Management Framework (ORM Framework) into the TPRM Framework.

10. Implement a TPRM technology platform to automate risk reporting and management

There is still a heavy reliance on fragmented manual processes, with many organizations using numerous documents, spreadsheets, and duplicate reports. Together with automated risk workflows, businesses will be in a better position to oversee and govern their third-party risk environments.