TPRM: Establishing Accountability at All Levels of the Organization

Third-party risk management (TPRM) primarily aims to safeguard the organization and its customers from potential threats, including data breaches, service interruptions, and hefty regulatory fines—particularly in heavily regulated industries. While the principles of TPRM may seem simple, putting them into action can be quite intricate, requiring a web of interconnected and sometimes complex processes and tasks. However, even the most well-crafted TPRM framework can fall flat without a strong foundation of accountability. Without accountability, the consequences can be severe, leading to increased risk exposure, regulatory non-compliance, and potential damage to the organization's reputation. Simply put, accountability is the backbone of effective TPRM; it ensures that responsibilities are clearly defined and distributed among stakeholders, with everyone playing a vital role in managing risks.

To ensure effective accountability, many organizations utilize the Three Lines of Defense model established by the Institute of Internal Auditors (IIA) in 2013. This model delineates the roles in risk management:

• Operational Management as the first line of defense.

• Risk Management and Compliance as the second line.

• Internal Audit, which provides independent assurance, is the third line.

This framework clarifies responsibilities and enhances risk management effectiveness, making it ideal for establishing accountability in TPRM. Now, let's explore each of the three lines and their roles in TPRM.

1. First Line of Defense: The frontline employees who directly handle and manage the products or services provided by third-party vendors and service providers. Their primary TPRM responsibilities include identifying and managing risks associated with third-party offerings, such as data security breaches, service interruptions, and regulatory non-compliance. They are also responsible for setting service level agreements (SLAs) and monitoring and managing third-party performance. They are also typically responsible for completing inherent risk assessments and are crucial in establishing exit strategies for high-risk and critical third parties should they need to end the relationship.

2. Second Line of Defense: This group includes dedicated third-party risk management teams, the enterprise risk team, and subject matter experts from compliance, legal, finance, information security, business continuity, and more. They establish the policies, frameworks, and tools necessary for effective vendor risk management while monitoring first-line activities to ensure consistency and quality risk measurement and management

3. Third Line of Defense: An independent assurance function, often comprised of internal auditors who assess and monitor the overall effectiveness of third-party risk management activities. Their role is crucial in providing an unbiased evaluation of the TPRM process. They evaluate the effectiveness of risk management frameworks, the quality of the risk management work, and compliance with all laws and regulations. They report any gaps or weaknesses to the board of directors and senior management and provide recommendations for improvement. Regular audits of the TPRM framework and processes are a necessary part of a healthy TPRM function.

The Board of Directors and Senior Management: When it comes to managing third-party risks, each line of defense plays a crucial role in keeping accountability in check. However, the ultimate responsibility for making sure these defenses work effectively falls on the board of directors and senior management. They’re the ones who define the company’s appetite for risk around third parties and shape the governance strategies that guide the organization.

The board and executive team must be engaged to effectively manage third-party risks. This means not just approving risk management policies but also setting a strong ‘tone from the top’ that highlights the importance of TPRM at the organization. The board should also review any issues occurring from critical third parties, review independent risk assessments, and allocate sufficient resources for effective third-party risk management. By integrating these considerations into the company’s broader strategies and decision-making, they can ensure that third-party risks are addressed proactively and effectively.

Whether your organization adopts the three lines of defense strategy or chooses a different structure, one thing is clear: accountability at all levels of the organization is essential for effective third-party risk management (TPRM). When everyone—from frontline employees to executives—understands their roles and responsibilities, it creates a solid foundation for managing the risks associated with using third-party products and services. This clarity not only aids in identifying and mitigating third-party issues but also fosters a culture of collaboration and vigilance, empowering everyone to contribute to safeguarding against third-party risks.

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Author Bio

Hilary Jewhurst

Sr. Membership & Education Coordinator at TPRA

Hilary Jewhurst is a seasoned expert in third-party risk and risk operations, with nearly two decades of experience across financial services, fintech, and the nonprofit sector. She has built and scaled third-party risk programs from the ground up, designed enterprise-wide training initiatives, and developed widely respected content that helps organizations navigate regulatory complexity with clarity and confidence.

Known for turning insight into action, Hilary’s thought leadership and educational work have become go-to resources for professionals looking to mature their TPRM programs. She regularly publishes articles, frameworks, and practical guides that break down complicated risk topics into meaningful, accessible strategies.

Hilary recently joined the Third-Party Risk Association (TPRA) as a staff member, supporting industry-wide education, peer learning, and advancing best practices. She is also the founder of TPRM Success, a boutique consultancy that helps organizations strengthen their third-party risk management capabilities through targeted training, tools, and strategic guidance.