While vendor risk management (VRM) and third-party risk management (TPRM) are closely related concepts, they offer different perspectives for shaping your risk management strategy. Understanding their unique layers is the key to fully mapping the vulnerabilities in your business partnerships and limiting your risk exposure.
This guide explores the critical differences between vendor risk management and third-party risk management from the perspective of optimizing your risk management program. We’ll then help you decide which is best for your organization and how you can benefit from integrating both strategies into a comprehensive program.
VRM and TPRM explained
To understand the difference between VRM and TPRM, you should first distinguish between the terms “vendor” and “third party” and familiarize yourself with their risk profiles.
Vendors are entities that are typically bound by contract to provide an organization with goods and services, either upstream or downstream. While you might think of them as suppliers, keep in mind that “vendor” is the broader term—it encompasses both suppliers and service providers.
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The term “third party” goes a step further—it encompasses vendors and all the other entities across various functions and disciplines. Some examples of third parties beyond vendors include the following:
- Contractors
- Consultants
- Tax agencies
- Affiliates and subsidiaries
In other words, VRM is the process of assessing, monitoring, and mitigating only vendor-specific risks. Meanwhile, TPRM is a more comprehensive concept that helps an organization understand and mitigate risks related to all third parties it interacts with.
Understanding this difference is important because vendors and third parties can have slightly different risk profiles.
For example, vendors carry business continuity risks because any failure to deliver the product pr service as agreed can disrupt your operations. Many third parties can’t impact your organization this way, though they may come with additional risks that aren’t expected with vendors. A good example would be a third-party auditor who can expose you to compliance risks if they miss important assessments.
VRM vs. TPRM: Approach and methodology
VRM and TPRM may involve different approaches and methodologies to meet the nuanced requirements of specific decision-making scenarios. While the risk coverage often overlaps significantly, VRM revolves around more granular practices, such as:
- Vendor due diligence
- Financial analysis
- Operational risk assessments
- Quality assurance
Your TPRM program can encompass similar processes, though it should cast a wider net to include risks that typically aren’t addressed by VRM. With TPRM, you get a bird’s-eye view of risks throughout your supply chain and within other external partnerships, as well as their implications for your organization’s standing.
Other minor approach-oriented differences between VRM and TPRM include the following:
- Audit scope: VRM has scope for regular audits because you can assess a vendor’s processes and review the security of the data shared with them. However, third-party relationships beyond vendors are more delicate and typically do not allow for audits or similar checks.
- Program integration: VRM programs can be run independently on a smaller scale, while TPRM is often embedded into enterprise GRC programs.
- Ease of implementation: TPRM may be more challenging to implement than VRM due to the diversity of third parties you may be working with and the additional processes required to manage them.
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Should you implement VRM or TPRM?
In practice, VRM and TPRM aren’t mutually exclusive—you need both to address risks at micro and macro levels. Both concepts largely address the same risk types, so it comes down to choosing the specific practices used to assess and mitigate them.
A VRM program is easier to implement and has a more focused landscape. It’s common for organizations to start with it and then mature into a comprehensive TPRM program. You can determine whether your program requires such maturity by asking yourself the following questions:
- How much do external parties (beyond direct vendors) influence our organization’s ability to meet its goals?
- What can we do to mitigate the threats these parties expose our organization to?
If your current program has no clear answers to these questions, you may need to uplevel your from VRM to TPRM and create an integrated program.
Benefits of an integrated VRM and TPRM program
An integrated VRM and TPRM program involves upgrading your risk management strategies and shifting focus from vendor-specific risks to the broader impact of third parties on the organization.
Creating such an integrated program comes with many benefits, including:
- Comprehensive vulnerability coverage: A well-executed program should give you insights into what data each third party can access and the vulnerability points associated with it.
- Risk management standardization: A cohesive risk management program provides a transparent process for selecting, onboarding, and monitoring all third parties and documenting their corresponding risks.
- Cost-effectiveness: Integrating VRM into your TPRM program can eliminate redundant processes, resulting in considerable cost savings.
- Enhanced compliance and reputation: A robust TPRM program may help you meet different compliance regulations due to overlapping requirements, which fosters stakeholder trust.
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Stay on top of your VRM and TPRM workflows with Vanta
VRM and TPRM require comprehensive software solutions to streamline activities and reduce manual processes. Vanta's Vendor Risk Management solution is designed to support VRM and TPRM workflows with capabilities like:
- Automated discovery of vendors and third-party applications.
- Centralized third-party inventory that eliminates the need for spreadsheet-tracking.
- Real-time monitoring of third-party and vendor risk profiles.
- Auto-scoring of risks with configurable criteria.
- Trust Center to host or import security information and showcase your security posture.
Watch our webinar to learn more or schedule a custom demo with a Vanta expert today.
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Introduction to TPRM
VRM and TPRM: What's the difference?
Introduction to TPRM
While vendor risk management (VRM) and third-party risk management (TPRM) are closely related concepts, they offer different perspectives for shaping your risk management strategy. Understanding their unique layers is the key to fully mapping the vulnerabilities in your business partnerships and limiting your risk exposure.
This guide explores the critical differences between vendor risk management and third-party risk management from the perspective of optimizing your risk management program. We’ll then help you decide which is best for your organization and how you can benefit from integrating both strategies into a comprehensive program.
VRM and TPRM explained
To understand the difference between VRM and TPRM, you should first distinguish between the terms “vendor” and “third party” and familiarize yourself with their risk profiles.
Vendors are entities that are typically bound by contract to provide an organization with goods and services, either upstream or downstream. While you might think of them as suppliers, keep in mind that “vendor” is the broader term—it encompasses both suppliers and service providers.
{{cta_withimage5="/cta-modules"}}
The term “third party” goes a step further—it encompasses vendors and all the other entities across various functions and disciplines. Some examples of third parties beyond vendors include the following:
- Contractors
- Consultants
- Tax agencies
- Affiliates and subsidiaries
In other words, VRM is the process of assessing, monitoring, and mitigating only vendor-specific risks. Meanwhile, TPRM is a more comprehensive concept that helps an organization understand and mitigate risks related to all third parties it interacts with.
Understanding this difference is important because vendors and third parties can have slightly different risk profiles.
For example, vendors carry business continuity risks because any failure to deliver the product pr service as agreed can disrupt your operations. Many third parties can’t impact your organization this way, though they may come with additional risks that aren’t expected with vendors. A good example would be a third-party auditor who can expose you to compliance risks if they miss important assessments.
VRM vs. TPRM: Approach and methodology
VRM and TPRM may involve different approaches and methodologies to meet the nuanced requirements of specific decision-making scenarios. While the risk coverage often overlaps significantly, VRM revolves around more granular practices, such as:
- Vendor due diligence
- Financial analysis
- Operational risk assessments
- Quality assurance
Your TPRM program can encompass similar processes, though it should cast a wider net to include risks that typically aren’t addressed by VRM. With TPRM, you get a bird’s-eye view of risks throughout your supply chain and within other external partnerships, as well as their implications for your organization’s standing.
Other minor approach-oriented differences between VRM and TPRM include the following:
- Audit scope: VRM has scope for regular audits because you can assess a vendor’s processes and review the security of the data shared with them. However, third-party relationships beyond vendors are more delicate and typically do not allow for audits or similar checks.
- Program integration: VRM programs can be run independently on a smaller scale, while TPRM is often embedded into enterprise GRC programs.
- Ease of implementation: TPRM may be more challenging to implement than VRM due to the diversity of third parties you may be working with and the additional processes required to manage them.
{{cta_simple17="/cta-modules"}}
Should you implement VRM or TPRM?
In practice, VRM and TPRM aren’t mutually exclusive—you need both to address risks at micro and macro levels. Both concepts largely address the same risk types, so it comes down to choosing the specific practices used to assess and mitigate them.
A VRM program is easier to implement and has a more focused landscape. It’s common for organizations to start with it and then mature into a comprehensive TPRM program. You can determine whether your program requires such maturity by asking yourself the following questions:
- How much do external parties (beyond direct vendors) influence our organization’s ability to meet its goals?
- What can we do to mitigate the threats these parties expose our organization to?
If your current program has no clear answers to these questions, you may need to uplevel your from VRM to TPRM and create an integrated program.
Benefits of an integrated VRM and TPRM program
An integrated VRM and TPRM program involves upgrading your risk management strategies and shifting focus from vendor-specific risks to the broader impact of third parties on the organization.
Creating such an integrated program comes with many benefits, including:
- Comprehensive vulnerability coverage: A well-executed program should give you insights into what data each third party can access and the vulnerability points associated with it.
- Risk management standardization: A cohesive risk management program provides a transparent process for selecting, onboarding, and monitoring all third parties and documenting their corresponding risks.
- Cost-effectiveness: Integrating VRM into your TPRM program can eliminate redundant processes, resulting in considerable cost savings.
- Enhanced compliance and reputation: A robust TPRM program may help you meet different compliance regulations due to overlapping requirements, which fosters stakeholder trust.
{{cta_testimonial5="/cta-modules"}}
Stay on top of your VRM and TPRM workflows with Vanta
VRM and TPRM require comprehensive software solutions to streamline activities and reduce manual processes. Vanta's Vendor Risk Management solution is designed to support VRM and TPRM workflows with capabilities like:
- Automated discovery of vendors and third-party applications.
- Centralized third-party inventory that eliminates the need for spreadsheet-tracking.
- Real-time monitoring of third-party and vendor risk profiles.
- Auto-scoring of risks with configurable criteria.
- Trust Center to host or import security information and showcase your security posture.
Watch our webinar to learn more or schedule a custom demo with a Vanta expert today.
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