As business processes become more complex, companies are turning to third parties to boost their ability to provide critical services from cloud storage to data management to security. It’s often more efficient and less expensive to do so, but the use of third-party services can also come with significant — often unforeseen — risks.

Third parties can be a gateway for intrusions, harm a company’s reputation if a service malfunctions, expose it to financial and regulatory issues, and draw the attention of bad actors from around the world. A poorly managed breakup with a vendor can also be perilous, resulting in the loss of access to systems put in place by the third party, loss of custody of data, or loss of data itself.

What is third-party risk management?

Third-party risk management (TPRM) is a risk management discipline that involves identifying, assessing, and mitigating risks associated with use of external parties, such as partners, vendors, suppliers, contractors, and service providers. Such third parties often have access to a range of your organization’s systems and data, and they often operate as key participants in your organization’s critical business operations. As a result, third parties can increase your cyber risk profile, given that any security issues they might incur can have a follow-on effect on your organization.