Navigating the complex landscape of vendor and third-party relationships is crucial for modern businesses. This brings us to the pivotal concepts of Vendor Risk Management (VRM) and Third-Party Risk Management (TPRM). While these terms are often used interchangeably, understanding their differences is essential for effective risk management strategies.
Vendor Risk Management
VRM is all about managing risks associated with vendors, those entities that supply goods or services to your organization. This process involves thorough risk assessments of both new and existing vendors. The key here is to mitigate the potential risks these vendors might bring into your business ecosystem.
VRM is not just about evaluating but about continuous monitoring and reassessment to ensure that vendors align with your organization’s risk tolerance and operational standards. The scope of VRM typically includes the following:
- Selecting vendors
- Conducting due diligence
- Managing procurement processes
- Maintaining ongoing relationships through systematic monitoring
Read more: How To Select a Vendor Risk Software
Third-Party Risk Management
Moving beyond just vendors, TPRM takes a broader view. It encompasses not only vendors but all kinds of third-party associations, including business partners, consultants, contractors, and even federal agencies. TPRM is a continuous process of identifying, examining, and mitigating risks presented by these third parties to your organization’s data, operations, and financial health. Unlike VRM, which is more vendor-specific, TPRM involves a holistic approach to risk management, considering all external entities that interact with your organization.
The Difference Between VRM and TPRM
While both VRM and TPRM are geared toward managing risks from external parties, the difference lies in their scope and focus. VRM is specifically tailored towards vendors—entities that have a direct contractual relationship to provide goods or services.
In contrast, TPRM covers a wider range of third parties, each with varying degrees of interaction and impact on your organization. Essentially, while all vendors are third parties, not all third parties are vendors. TPRM’s broader scope makes it more comprehensive, encompassing various types of third-party relationships beyond just vendors.
VRM as a Starting Point in TPRM
Interestingly, VRM can be seen as a subset or a starting point within the broader TPRM framework. Initially, organizations might focus on vendor risk management, especially when dealing with critical vendors.
However, as the business landscape evolves and more third-party relationships emerge, extending the VRM framework into a more inclusive TPRM strategy becomes necessary. This progression ensures that your organization is not just focusing on immediate vendor risks but is also prepared to manage and mitigate risks from all kinds of third-party interactions.
Take Control of Your Vendor Risks
Contact us to elevate your risk management strategy with ComplyAssistant’s vendor risk management software, ensuring comprehensive, efficient third-party risk solutions for your business.