Navigating Third Party Risk Management: A Comprehensive Guidebook Overview

Blog was inspired by the January 2024 TPRA Practitioner Member roundtable facilitated by TPRA CEO Julie Gaiaschi. (To watch the full presentation, TPRA Members can visit our On-Demand meetings and navigate to the January 2024 meeting recording.)  

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The management of third party risks has become a major priority and area of focus for companies across a variety of industries because of the constantly changing nature of business operations. Recognizing the nuances and challenges that come with this field, the Third Party Risk Association (TPRA), along with a dedicated team of TPRM practitioners and service provider organizations, worked towards creating a comprehensive guidebook that assists in navigating the creation and implementation of a comprehensive Third Party Risk Management (TPRM) program. 

The Development of the Guidebook 

TPRA’s “Third Party Risk Management 101 Guidebook” was created not as a standalone project but as a collaborative effort that included feedback from an extensive group of TPRM professionals and service providers from a diverse range of industries. Over monthly meetings spanning three years, this group discussed various subjects related to TPRM tools, topics, and trends. Each aspect of a strong TPRM program was carefully examined and discussed by TPRA’s focus group members, from clarifying best practices to anticipating emerging risks and aligning with regulatory guidelines. 

This comprehensive process of discussion, analysis, and synthesis is where the guidebook originated. With input from numerous stakeholders, the guidebook gradually took shape, undergoing a year-long editing process to condense the vast number of materials into a user-friendly format enhanced with graphics, insights, and real-world examples. 

Unveiling the Guidebook: A Deep Dive 

Building a TPRM program is not unlike building a house. The first step is always to make sure it’s built on a solid foundation so that it may withstand the inevitable storms to come. The TPRA guidebook gives you the tools and materials needed to begin building a successful and productive TPRM program brick by brick. 

The TPRM guidebook's foundation is a lifecycle approach, outlining a strategy and framework that encompasses the entire spectrum of TPRM. Let’s dive into its key phases: 

1. Planning and Oversight 

Planning and oversight are the cornerstones of any TPRM program and create the conditions for success. Important topics covered in this phase include: 

• Establishing governance structures 

• Executive support 

• Budgeting 

• Policy Formulation 

• Metrics & Reporting 

This phase supplies an organization with a strong foundation and the requirements needed to develop and steadily support their overall TPRM program. It also ensures the program can address third party risk at the highest level, while also warranting governance structures are in place to run the program effectively. If implemented correctly, the Program Planning and Oversight phase will make certain key stakeholders are aware of, support, and help implement program requirements. This phase ensures your entire organization is on-board with the TPRM program. After all, this program will touch every department within your organization (from Business Owners to Legal and Security). 

2. Pre-contract Due Diligence 

This phase emphasizes the importance of conducting comprehensive due diligence before an agreement is signed.  Key objectives during this phase include, but are not limited to:  

• Formalizing contractual agreements  

• Developing a robust third party profile 

• Performing Inherent risk assessments 

• Executing risk-based evaluations 

In this phase, organizations thoroughly assess and mitigate potential third party risk before signing and committing to a contractual relationship. A company conducting this phase can minimize risks, avoid legal issues, and build and maintain a more secure partnership with their third party. The house metaphor comes back into play, allowing for that solid foundation to be secured, which in turn allows for more productive and compliant business partnerships.  

3. Contract Review 

As they say, the devil lies in the details, and the contract review process is where potential problems are addressed. This stage involves: 

• Negotiating contract terms 

• Examining key clauses 

• communicating expectations  

This is to ensure that contracts match your organizational goals and risk tolerance. 

The contract review phase is one of the most essential steps in the TPRM process, ensuring that any expectations for your third party relationship can hold up in a court of law. It also can address risks identified during the previous phase, Pre-contract Due Diligence, and ensures that all enforceable language is clear and specific. It is crucial for TPRM practitioners to collaborate with legal counsel to ensure their contracts include the necessary remedies in the case of a third party failure. Regular contract review and upkeep is essential to maintain and reflect the organization’s risk tolerance. 

4. Continuous Monitoring 

In the TPRM field, where risks are dynamic and ever-changing, continuous monitoring is essential. To maintain situational awareness and responsiveness, this phase uses mechanisms like site visits, triggered reviews, and the use of monitoring tools to mitigate risks within an always changing environment. 

This phase is crucial for organizations to better assess third party risk in order to meet contract terms, business obligations, legal and regulatory requirements, and performance expectations. It also allows organizations to stay informed about changes in operations, financial stability, cybersecurity posture, and compliance status that may affect their risk exposure. This also enables swift action when risk mitigation is required and ensures full compliance with any legal and regulatory requirements. 

5. Disengagement 

The disengagement phase, which is frequently overlooked, ensures a smooth exit strategy, reduces lingering risk, and protects sensitive and valuable assets when third party relationships conclude. 

Disengagement is the process of transitioning away from a third party with minimal impact if the relationship ends due to contract expiration or when certain adverse conditions are met. This phase can be complex and challenging due to the need of the business wanting to end the relationship quickly. Organizations and companies don’t often disengage with third parties, which can lead to rushed and overlooked processes.   If the third party maintains sensitive data post-disengagement, your organization should continue to assess the third party from a cybersecurity perspective (potentially in a limited capacity).  

6. Continuous Improvement 

TRPM is a journey marked by constant change and evolution. The concept of continuous improvement emphasizes the importance of flexibility and adaptability, calling for regular evaluation and adjustment to keep up with changing laws, emerging risks, and technical advancements.  

This phase overlaps all other phases within the TPRM lifecycle as continuous improvement is necessary in all phases. It allows organizations to adapt to regulatory requirements, respond to new business practices, and incorporate technological advancements. This phase allows organizations to remain agile in a complex environment. 

Navigating the Guidebook 

Navigating the TPRM guidebook is easy due to its informative graphics, detailed definitions, intuitive sections, and helpful resources. The implementation of this guidebook will vary depending on your organization’s size, industry, and types of third party relationships.

While the guidebook provides you with standards from which to begin crafting your TPRM program, careful consideration must be paid to your organization's established risk appetite when determining how to implement said standards. Your program should be rigid enough to have established criteria for the review and mitigation of third party risk, but also flexible enough to consider the variability of third party relationships, regulations, geographic locations, and emerging risks.   

Accessing the Guidebook 

TPRA’s first draft of our Third Party Risk Management 101 Guidebook is currently available as a free, downloadable eBook to all TPRM professionals. Visit the TPRA website and complete a short form to access this body of knowledge. 

By downloading the guidebook, stakeholders can effortlessly delve into its contents, leveraging its insights to fortify their TPRM endeavors. 

Conclusion: Charting the Course Ahead 

The TPRM 101 Guidebook provides organizations with comprehensive guidance, tools, and resources as they navigate the complex terrain of third party risks. It enables stakeholders to navigate relationship complexities, mitigate risks and foster resilience in a dynamic environment. The guidebook is considered the golden standard for the Third Party Risk Management industry and ignites a culture of vigilance, adaptability, and continuous improvement.  

In the dynamic realm of business operations, where risks lurk at every turn, the TPRM guidebook emerges as a steadfast companion, illuminating the path to success amidst uncertainty and complexity. The journey of TPRM is not merely a destination but a perpetual odyssey of discovery, resilience, and excellence, and the guidebook serves as a trusted compass, guiding stakeholders towards the shores of   resilience in an ever-changing sea of risks. But the journey doesn’t end here.

TPRM Practitioners are welcome to join the TPRA for free to continue their learning journey by benchmarking off their fellow peers, participating in engaging webinars and conferences, and contributing thought leadership to roundtables and future published guidance. To join, please visit www.tprassociation.org/join.