TPRM, Why Your Business Needs It
Better known as TPRM, Third-party Risk Management is a process used by businesses to analyze and control potential risks from third-party vendors that provide services and products. Some vendors require the exchange of sensitive data and can have an effect on important processes within your organization. To prevent potential risks, it’s important to use TPRM software.
Third party vendors can pose a variety of risks to your organization.
Reputation is important to any organization; it’s how customers and the public view your organization. While you can control what happens within your own company, third parties lie outside of that control. If one of your third parties experiences a data breach or conducts immoral business practices, your customers and the public will look at your organization differently.
Third parties pose a risk to the operation of your organization. Whether they provide a service or product, they have the potential to have failures within their organization; this can be due to natural events, like an earthquake, or an internal process within the company itself, like poor training or outdated technology. If a third party experiences issues, it can affect the operation of your business.
There is the potential for financial risk with third parties; with a third party vendor, your organization can experience high costs or lost revenue. This is due to the third party not meeting the fiscal performance requirements that your organization has set.
Every organization has a standard or regulation that it must follow. Many industries have begun incorporating third party risk as a compliance requirement. Third parties can pose a compliance risk to your organization if they fail to follow both the regulations that the regulatory bodies have set forth and the policies and procedures that your own organization has set forth within the contract.
Why You Need TPRM
TPRM software is something every business needs. Beyond helping your business reduce costs and remain efficient, TPRM software has other benefits.
TPRM can help assist with vendor selection. Your organization will have the ability to assess the risks of potential third party vendors and help conduct due diligence. Not only does this put your organization in the position to select the best third parties to match with your organization, but it also gives your organization the opportunity to take steps to prevent damage.
TPRM software can also maintain an inventory of all of the third party relationships your organization has and assessments of all vendors.
Regulatory requirements are very important to follow, and your organization can risk non-compliance fines and penalties if the policies of your organization aren’t aligned with regulatory guidelines. Additionally, in many industries, an organization can be heavily penalized with fines because of a third party’s non-compliance.
There are many different risks that a third party vendor can pose, and some of the risks are unavoidable. However, a good TPRM program can assess all of the risks a vendor may pose and help your organization avoid or mitigate the risks. This way, your organization is better prepared to manage the risk if it arises.
Most TPRM software has three lines of defense: leadership, vendor management, and internal audit. The leadership line of defense has functions that manage risk, and the second line of defense both oversees and specializes in the management of these risks. The last line of defense provides independent assurance and internal audits.
TPRMs can also help your organization with its overall business strategy. The program doesn’t just manage risks; it can also help you manage different contracts, find your organization ways to save money, and help you manage critical business relationships. TPRM programs are essential to the inner workings of every organization.
Once your business begins to implement TPRM software, you’ll be able to address potential risks faster and spend fewer resources doing so, allowing your business to focus on its core functions.
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