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What is TPRM (third party risk management)?

What is the meaning TPRM? Why is it so important? How can you implement an effective third party risk management process for your business? In this post, we explain everything you need to know about TPRM and give you some useful tips on how to carry it out!

TPRM meaning

TRPM stands for Third Party Risk Management. TRPM is a type of risk management that focuses on the risk that third parties can represent for a business, and how to reduce it.

As a business, you probably rely on third parties to carry on certain activities on your behalf. Third parties are the contractors you may have hired (consultants, developers, a social media manager, etc.), but also services you use for your business (cloud services, analytics, web hosting companies). Since these third parties will have access to the data your business collects and processes, you need to make sure they’re reliable.

Why is third party risk management important?

Without a third-party risk management process in place, your organization may face major repercussions.

A TPRM helps you identify different kinds of potential risks — compliance, cyber, financial, strategic, technological, as well as reputational — and assess whether it’s worth working with a specific third party.

Moreover, a thorough TPRM can help you reduce the risk of data breaches.

📌 Did you know that a cyberattack happens every 39 seconds?

And if one of the third parties you rely on is breached, then you’re exposed to the same risk too!

Tips for your TPRM

Identify your third parties: first of all, you should have a clear idea of all the third parties you’re working with and be aware of their security and privacy practices.
Assess and mitigate the risk: next, you need to assess the risk they represent for your business. Are the benefits of working with them higher than the potential repercussions? You should also consider that it’s almost impossible to work without risks. So ask yourself: what is an acceptable risk for your business? You should have a standard framework to do this.
Frequently review your third parties’ security and privacy practices, to be sure they’re in alignment with your standards.
Create reports and records: it’s important that you keep track of all this by keeping up-to-date records and reports to share within your organization. In the event that something were to happen, these records can help you have a clearer idea of the situation.

💡 Did you know?

There’s another type of risk assessment you may need to carry out. If you’re processing personal data, you may need to perform a “Data Protection Impact Assessment (DPIA)”.

Unlike the TPRM, the DPIA is directly mentioned under laws like the GDPR and is meant to help you mitigate the risk of fines, sanctions, and reputation damage that might affect your organization.

👉 Learn more here