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Although many people use the terms third-party risk management (TPRM) and vendor risk management (VRM) interchangeably, the two have nuanced differences. While both vendors and third-parties enable business processes and require contracts, the types of services or products and the way in which they provide these services or products differs. Explore frequently asked questions around TPRM and VRM and how they compare and contrast.
What does third-party risk mean?
Third-party risk refers to the potential IT risk or damage that an organization takes on when they rely on external entities to perform day-to-day business operations. Third-party risk has never been greater as more organizations than ever are turning to vendors and service providers for improved operational efficiencies. These vendors often have access to your organization’s critical company and customer information, so it’s important to ensure that they are taking the necessary steps to protect that data.
What is third-party risk management?
TPRM involves the continuous monitoring and management of a third-party vendors’ cybersecurity posture, helping to ensure security across your organization’s entire IT ecosystem. A TPRM program is important for many reasons, but the goal is ultimately to identify vulnerabilities and potential threats so that clear steps can be determined for mitigating said risks.
What is a vendor?
Vendors are usually people or entities that provide goods and services either in a business-to-business, business-to-consumer, or business-to-government relationship. In a business context, vendors might be freelancers or technology device suppliers.
What is a third-party vendor?
Third-party vendors are entities, as opposed to individuals, that either provide products or services to an organization’s customers on its behalf or to the organization in a way that enables it to maintain daily business operations. In a business context, third-parties might be resellers of a product or cloud-service providers whose tools enable the company to manage financials.
Examples of third-party vendors
There are many different types of third-party vendors that an organization can decide to work with. Examples of potential third-party vendors include:
- Delivery companies
- Service providers
- CRM provider
- Marketing agency
- Short or long-term contractors
- Telephone companies
- Manufacturers and suppliers
- Consultants and advisors
In short, while both require monitoring, they also incorporate slight differences that change the risks they pose.