If you've worked in third party risk management (TPRM) for any length of time, you know budget season rarely gets easier. Third party populations continue to grow. Business units expect reviews to move faster. Regulations continue to evolve, and AI has introduced new considerations into third party due diligence. Regulators have also made something else clear. Effective TPRM requires appropriate staffing, expertise, governance, and ongoing oversight. Leadership is responsible for ensuring those resources are available. The challenge, of course, is that leadership can't fund what it doesn't understand. It's up to TPRM leaders to demonstrate where the program stands today, where the gaps exist, and what resources are needed to support the business. That's where a well-built budget becomes one of the most important tools in your program. Start with Actual Spending Before building next year's budget, understand where this year's money actually went. Last year's approved budget is only part of the picture. Actual spending often tells a different story. Software renewals increase. A hiring freeze leaves a key position vacant longer than expected. An unplanned third party event requires outside expertise. Break spending into broad categories such as: Technology and software Outsourced assessments Staffing Training and certifications Consulting and audit support Some of these costs may be buried inside shared enterprise budgets, so partnering with finance early can save hours of reconstruction. Once you've organized the numbers, identify the largest variances. Those differences often reveal where the program is changing and provide the strongest justification for next year's request. Pro Tip: Compare at least two years of actual spending. Trends usually tell a stronger story than a single year's variance. Measure the Gaps The next question is whether your program is keeping pace with demand. Has your third party population grown? Are reassessments staying on schedule? Has your backlog increased? Are business units waiting longer for reviews? Are the risk domains you are assessing covering the right risks? If you aren't tracking these metrics yet, start now, even if it's only in a spreadsheet. Whenever possible, convert the problem into numbers. If third party growth resulted in forty additional assessments this year, estimate the effort required to support that increase. Finance can evaluate measurable impacts much more easily than general statements about workload. Quick Check How many third parties were added this year? What's your average assessment turnaround time? Where is your largest backlog? Which bottleneck would disappear first if your budget were approved tomorrow? How Does Your Program Compare? Every organization has different priorities, but it helps to understand where other TPRM programs are investing. According to KPMG's 2026 Global Third Party Risk Management Survey of 851 organizations, the top investment areas are risk assessments and due diligence (52%), TPRM technology (51%), cybersecurity and data protection (49%), and regulatory audits (45%). More than 80% of organizations outsource at least part of their TPRM activities, while only 17% reported having fully reliable TPRM data. These findings aren't a blueprint for your budget, but they provide a useful benchmark. Pro Tip: If your investment priorities look very different from your peers, be prepared to explain why. Sometimes there's a good reason and being able to articulate it to leadership is essential. Think about it this way... What level of third party risk does the organization need to manage, and what people, technology, intelligence, and assurance capabilities are required to manage it effectively? AI Is Expanding the Scope of TPRM AI is becoming part of more third party products every month, including products many organizations already use. As a result, existing third party relationships now require additional scrutiny. Questions about training data, model governance, customer information, and contractual protections have become routine parts of due diligence. Many organizations also expect AI to reduce costs and staffing needs. That expectation has largely outpaced reality. According to KPMG's survey, only 22% of organizations rated their AI initiatives as very effective. Finance may expect efficiency gains that haven't materialized, while TPRM teams face additional review work. Budget for the resources needed to support that growth. Budget Checklist Update AI due diligence questionnaires. Review AI-specific contract language. Invest in team training. Consider managed services or specialized expertise. Evaluate tools that improve assessment efficiency. Headcount May Not Be the Only Answer When workloads increase, it's easy to assume another team member is the answer. Sometimes that's true. Sometimes the real issue is an inefficient process, a technology gap, or the need for specialized skills. Before requesting another position, step back and identify what's actually slowing the program down. You can also ask which TPRM activities are consuming human capacity without requiring human judgement. Then consider all of the available options. Improve or redesign an existing workflow. Use capabilities already available in your technology stack. Automate repetitive administrative tasks. Outsource TPRM processes such as due diligence document collection or reviews Bring in part-time contractors during peak periods. Share platforms or subscriptions with Procurement, Information Security, or Compliance to reduce total cost of ownership. If another employee is still the right solution, you'll have a much stronger business case because you've already evaluated the alternatives. Pro Tip: Before requesting another FTE, ask whether the problem is capacity, process, technology, skills, or temporary workload. The answer will help you determine which investment will drive the improvement you need. Don't Overlook the Small Line Items Some of the easiest budget items to miss are also the ones most likely to create problems later. Recurring costs often increase over time, and one-time projects have a way of becoming recurring if they aren't clearly identified. Spending a little extra time reviewing your assumptions now can prevent mid-year surprises. Commonly Forgotten Budget Items Platform renewals and licensing increases Team training and certifications AI-specific assessment tools or questionnaire updates Fourth-party risk initiatives One-time consulting or implementation projects Pro Tip: Separate one-time investments from recurring operating expenses. It makes future budgeting easier and helps finance understand your long-term costs. Separate Needs from Nice-to-Haves Few organizations receive everything they request. Before budget discussions begin, decide which investments are essential and which would simply improve the program. Those decisions are much easier to make before you're sitting across the table from finance. A simple prioritization exercise can save time later. Must Have Regulatory or contractual obligations Minimum staffing requirements Critical platform renewals Required operational activities Reasonable Due Diligence capacity to support the business Nice to Have Additional reporting capabilities New dashboards Premium platform features Nice efficiency improvements that can wait another budget cycle Pro Tip: Ask yourself one question: If finance approved only half of this request tomorrow, what would stay? If you know that answer before the meeting, you're already ahead of the conversation. Build a Business Case, Not Just a Budget Budgets are approved because they support business objectives, not because a department needs more money. Rather than focusing on workload, explain what the investment enables the business to accomplish. Support your request with measurable outcomes whenever possible. For example: Improve supplier onboarding. If assessments currently take 90 days and your goal is 60, estimate how many projects or contracts could move forward 30 days sooner. Reduce operational risk. Estimate the potential impact of a supplier disruption, delayed implementation, or security incident, then compare it to the cost of earlier detection through stronger due diligence and monitoring. Strengthen regulatory readiness. If audit findings or manual processes require recurring remediation, estimate the effort required to address those issues today versus preventing them in the future. Support business growth. If the organization expects significant third party growth, estimate the additional assessment workload and show how your request will help maintain service levels and avoid backlogs. The stronger your data, the stronger your business case. Third party growth, assessment volumes, turnaround times, backlog trends, and remediation effort all provide objective evidence that leadership can evaluate. Pro Tip: Don't ask for more money. Ask for the ability to deliver a measurable business outcome. Keep Tracking Throughout the Year Budget season shouldn't be the only time you look at your numbers. Review spending throughout the year and compare actual expenses against your budget. Track trends such as assessment volume, cost per assessment, outsourced versus internal work, and unexpected costs resulting from third party incidents. Those metrics become the starting point for next year's budget instead of forcing you to rebuild the story from memory. Track These Metrics Quarterly Budget versus actual spending Third party growth Assessment turnaround time Assessment backlog Cost per assessment Outsourced versus internal work Final Thoughts No organization gets every budget request approved. The goal isn't to win every budget discussion. The goal is to build a request that's grounded in data, tied to business priorities, and realistic about where the program needs to grow. Organizations that consistently track workload, spending, and performance throughout the year rarely start from scratch when budget season arrives. They already have the data to explain where resources are needed and how those investments support the business. Budgeting is never just about the numbers. It's about demonstrating that your program understands its risks, knows where it needs to improve, and has a practical plan for getting there. 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.

Sanctions compliance may traditionally sit with legal, trade compliance, or another specialized function, but it has direct implications for third party risk management. A prohibited relationship can expose an organization to blocked transactions, frozen payments, regulatory enforcement, financial penalties, operational disruption, and reputational damage. In this episode of the TPRM Exchange, host Hilary Jewhurst speaks with Michael Volkov of The Volkov Law Group about how sanctions apply to third parties, where sanctions risk appears throughout the lifecycle, and what practitioners can do to build a practical and defensible process. Sanctions Risk Does Not Stop at the Border One of the most common—and potentially costly—misunderstandings is that U.S. sanctions no longer apply when a transaction is routed through an entity outside the United States. As Volkov explains, a U.S. company cannot avoid its sanctions obligations simply by working through a third party in another country. “The risk continues from wherever you’re located. If you’re a U.S. person or a U.S. company, it continues through your third parties, no matter where they are located.” — Michael Volkov Sanctions may target particular activities, individuals, entities, industries, or entire countries. Regardless of the specific program, the practical question for an organization is whether it is permitted to conduct business or complete a financial transaction with the party involved. Screening Should Begin During Onboarding Sanctions issues can emerge at several points in the third party lifecycle, but onboarding is the most important place to establish a control. Before a vendor, supplier, customer, distributor, or other third party is entered into an organization’s master database or approved for payment, the party should be screened. Building screening into the existing approval workflow allows the organization to identify potential issues before a contract is signed, goods are shipped, or money changes hands. Waiting until a bank blocks a payment puts the organization in a much more difficult position. By that point, goods may already have been delivered, contractual commitments may have been made, and funds may be frozen while the parties investigate. The Entity Name Is Only the Beginning Screening the contracting entity is an essential first step, but it may not reveal the full risk. Organizations may also need to examine the company’s beneficial owners, officers, directors, or other principals. Under certain sanctions rules, an entity can be treated as blocked when one or more sanctioned persons own 50% or more of it—even if the entity itself does not appear by name on a sanctions list. Ownership structures can also obscure the individuals who ultimately control or benefit from a company. When an initial screen produces a red flag, practitioners may need to gather additional ownership information and work with legal or compliance specialists to determine whether the relationship is permissible. Sanctions Exposure Extends to Nth Parties The conversation also highlights the importance of looking beyond direct contractual relationships. Sanctioned goods, materials, entities, or individuals may appear several levels down a supply chain or later in a distribution channel. Volkov uses supply chain and transshipment examples to illustrate how an organization can face liability even when it does not directly contract with the sanctioned party. Risk may arise when prohibited materials enter the supply chain through a subcontractor or when a distributor redirects a product to a sanctioned destination. Managing that exposure may require: Risk-based supply chain due diligence Appropriate sanctions and trade-compliance clauses End-use and end-user controls Supplier representations and certifications Supply chain audits Escalation procedures for geographic or ownership concerns The appropriate level of diligence will depend on the organization’s products, markets, geographic reach, distribution model, and overall exposure. Build Forward Instead of Trying to Fix Everything at Once Organizations implementing formal sanctions screening may discover that hundreds or thousands of existing third parties have never been screened. That does not mean the program must resolve the entire backlog before introducing an effective control. “You’re not going to boil the ocean over this. We don’t have time for that, nor the resources.” — Michael Volkov A more manageable approach is to establish a clear implementation date and screen every new third party from that point forward. The organization can then address its existing population using a risk-based plan. Higher-priority reviews may include third parties with: Operations in higher-risk countries or regions Significant organizational spend or revenue Exposure to known transshipment locations Complex or unclear ownership structures Access to regulated products, technology, or services Roles deeper within critical supply or distribution chains This approach allows the organization to establish a consistent control immediately while addressing historical exposure in a deliberate, defensible order. Screening Is Not a One-Time Activity A third party that passes screening today may be added to a sanctions list tomorrow. Sanctions designations can change quickly in response to geopolitical events, national security concerns, criminal activity, or changes in government policy. Automated screening platforms can help by retaining screened parties and issuing alerts when a party’s status changes. Organizations without an automated tool may begin with available government screening resources or seek assistance from qualified legal or compliance professionals, but manual screening becomes harder to sustain as international activity grows. Regardless of the technology used, the process should define: Who is screened When screening occurs Which lists and data sources are used How potential matches are reviewed Who can clear or reject a match How decisions are documented How active relationships are monitored When issues must be escalated The tool supports the control, but it does not replace a clear workflow and accountable decision-making. TPRM Does Not Have to Own the Process—but It Must Understand It Sanctions screening may be performed by compliance, legal, procurement, trade compliance, sustainability, or another team. Organizational structures vary, and there is no single operating model that works for every company. However, TPRM practitioners should understand how the process works even when another function owns it. They should know who makes sanctions decisions, what tools or information that team uses, what evidence confirms that screening occurred, and how an issue is escalated. That knowledge is necessary to explain the organization’s controls to business stakeholders, auditors, examiners, and leadership. It also prevents gaps between functions—particularly when onboarding involves several teams with different approval responsibilities. Compliance Must Be Positioned as a Business Partner Business stakeholders may view sanctions screening as another obstacle standing between them and a time-sensitive transaction. Volkov recommends approaching those conversations as a partner focused on helping the business proceed safely. The message should be straightforward: involve the appropriate risk and compliance teams early, and they can identify concerns, explore permissible options, and help prevent transactions from being blocked later. TPRM and compliance teams should also establish reasonable turnaround expectations. A well-designed screening process should support timely decision-making while ensuring that unresolved red flags do not pass unnoticed into the vendor master or payment process. When an Existing Supplier Triggers an Alert If a long-term supplier appears on a sanctions notice, the organization must act promptly. The immediate response should generally include pausing business and financial activity, notifying the appropriate internal stakeholders, and investigating the alert. The organization should contact the third party for an explanation while legal or trade-compliance personnel determine whether the notice is accurate and whether the relationship can lawfully continue. Contracts and purchase orders should contain sanctions-compliance language that supports the organization’s ability to suspend or terminate prohibited activity. These protections are particularly important when a designation occurs in the middle of a transaction or during a multiyear agreement. Practitioners should not assume that every alert establishes a confirmed violation. False positives and explainable matches occur. Nevertheless, activity should not resume until qualified personnel have reviewed the issue and documented a defensible decision. Two Practical Priorities Volkov closes with two primary actions for practitioners: Implement a sanctions-screening capability that supports onboarding and continued monitoring. Provide annual sanctions training to employees whose responsibilities may bring them into contact with sanctions-related issues. Training does more than communicate rules. It creates an opportunity for employees to raise questions, describe emerging business activities, and identify transactions or relationships that might otherwise remain outside the risk team’s view. Ultimately, effective sanctions compliance depends on visibility, defined ownership, appropriate technology, and cooperation across the organization. By embedding screening into onboarding, monitoring active relationships, accounting for beneficial ownership and nth parties, and responding quickly to alerts, TPRM practitioners can help protect the organization while still enabling the business to move forward.

If you spend enough time in third party risk, you’ll notice something unfair. Your third parties have their own third parties, and when those downstream providers fail, your organization still feels the impact, even though you never signed a contract with them. This leads to a common question: “How are we supposed to manage those third parties?” The short answer is that you don’t manage them directly. Instead, you focus on reducing the risks that come with these extended relationships. Fourth- and nth-party risk means knowing where these downstream dependencies are, how their failures could disrupt your services or affect your customers, and making sure your TPRM program identifies, analyzes, and reduces those risks where it matters most. Who is a 4th or nth party? In third party risk management (TPRM), “third party” usually means any external organization or supplier under contract to deliver a product, service, or process. That is the part everyone is used to tracking. A “fourth party” is any provider your third party relies on. These can be cloud platforms, sub‑processors, subcontractors, and upstream suppliers that sit behind the scenes but can still disturb your operations, affect your customers, or negatively impact your compliance posture when something goes wrong. “Nth‑party risk” is the more general term for the additional layers beyond that, including the third parties supporting those fourth parties and further out in the chain. Taken together, this extended chain of third, fourth, and nth parties is part of what many practitioners now refer to as extended enterprise risk, the risks that arise across the wider network of external relationships that support your organization’s products and services. Why fourth- and nth-party risks are getting attention Fourth- and nth-party relationships are getting more attention because shared dependencies are now easier to see. For example, one cloud platform, KYC provider, or infrastructure service can affect several third parties at once, turning a single incident into a disruption across multiple services. Regulators and boards are also asking more specific questions about sub‑processors, concentration risk, and resilience. Once you accept that fourth and nth‑party relationships can materially affect your organization, the next question is what to do about it in practice. You cannot manage every downstream provider directly, but you can absolutely design a TPRM program that properly addresses fourth‑ and nth‑party risk. Here are eight practical actions you can take to help your organization more effectively identify, analyze, and mitigate those extended‑ecosystem risks. 1: Determine How Far You Will Go If you try to map your whole supply chain, you’ll end up with too much information and little value. It’s usually better to set clear criteria for what’s in scope, like access to customer data, critical services, or when the same downstream provider is used by several third parties. Start by deciding how deep you are willing to go. A reasonable standard for many programs is your direct third parties, plus their critical sub‑processors and major shared platforms that would materially affect your business if disrupted. Make sure your final decision is reviewed and documented. If someone asks why a certain downstream provider is included or not, you should be able to explain it easily. 2: Know How to Identify Your 4th And Nth Parties After you decide how deep to look, the next step is finding those downstream entities. Some third parties will give you a clear list of sub-processors, but many will not. A practical way to do this is to gather information from several sources: SOC 2 Type II reports, especially the system description and subservice organization sections. External risk intelligence tools that map hosting providers, DNS, IP ranges, and technology stacks. Public trust centers and compliance pages that list sub‑processors or infrastructure partners. Regulatory or industry disclosures that reference key providers. Internal insight from Architecture, Security, and Operations teams that already know which shared platforms sit underneath important services. You are not trying to build an exhaustive inventory. You are trying to identify the downstream relationships that can materially impact your operations, customers, compliance, or reputation. 3: Think In Terms of Fourth‑Party Failure and Concentration When you look past your direct third parties, it helps to break fourth-party risk into two simple questions. Fourth‑party failure risk Start with a single third party and ask, “What if one of their critical fourth parties fails?” For that third party: Which fourth‑party providers are critical to the service they deliver to you? What parts of your operations stop working if one of those fourth parties has an outage or incident? How quickly would the third party detect and communicate that issue to you, and who owns the response on your side? What options exist if that fourth party is unavailable for an extended period (alternate providers, workarounds, manual processes)? This approach keeps the focus on a specific relationship: your third party, their key fourth party, and how it affects your organization. Fourth‑party concentration risk Then step back and ask, “How many of our third parties rely on the same fourth parties?” Across your third party portfolio: Which fourth‑party providers appear repeatedly in different third party relationships? How many critical services in your inventory ultimately depend on the same fourth‑party cloud, KYC, payments, or messaging provider? Are there specific fourth‑party entities that, if impaired, would create issues across multiple third parties at once? Here, you’re mapping shared fourth-party dependencies across your third parties . The result should be a short list of fourth-party providers and the services or third parties they support, so leadership can see where the biggest exposures are. By looking at fourth-party failure risk for each third party and concentration risk across your whole portfolio, you get a clearer view of where extended-ecosystem risk is acceptable and where you need to focus more attention. 4: Understand How Your Third Parties Manage Their Third Parties Since you can’t manage all your third parties’ third parties, one of your best controls is making sure your third parties have strong TPRM practices themselves. This means asking if your third parties identify and rank their own third parties, separate critical providers from less important ones, do proper due diligence, and monitor those relationships over time. Third parties with mature TPRM programs are more likely to spot their own dependencies, catch issues early, and alert you to important problems. If your third party does a weak job managing its own supply chain, you inherit that weakness. If they are disciplined about risk tiers, due diligence, and ongoing monitoring, you gain a layer of protection and visibility you could not create on your own. 5: Build Visibility into the TPRM Lifecycle It’s easier to manage downstream risk when you include it in your existing processes, instead of tracking it separately in a spreadsheet. This can be as simple as asking the right questions or gathering key information at each stage of the lifecycle: Risk Assessment: Identify your critical products and services and focus on their sub processors. Due Diligence: Ask third parties about material sub‑processors and critical upstream services during due diligence. Record those entities in your third party/supplier record so they can be tracked over time. Contracting: Ensure clauses cover disclosure of critical sub-processors and notifications when they change. Monitoring: Update the record when sub‑processors change, new dependencies appear, or incidents affect key downstream providers. Exit: Capture what you learned about the third party’s downstream footprint and use it in future assessments. By including fourth- and nth-party oversight in your regular processes, you create consistent risk checkpoints and collect data that helps you make better decisions. 6: Contract For Downstream Control You might not have contracts with fourth- or nth-party entities, but you do have contracts with your third parties who rely on them. That’s where you have leverage. Useful terms include the requirement to disclose material sub‑processors, notice before changes, flow‑down obligations for security and resilience, incident notification when a sub‑processor issue affects your service, and independent assurance where appropriate. You obviously can’t dictate how someone else’s third party or supplier program operates. You can hold your third parties accountable for managing their own downstream relationships in line with your risk expectations. 7: Use Risk Alerts and Threat Intelligence for Key Downstream Providers You don’t need a contract with a downstream provider to keep an eye on public risk information about them. Risk alert services, external monitoring platforms, and threat intelligence feeds use public and open-source data, making them helpful for key nth-party relationships. For higher-impact downstream entities, you can monitor domains, infrastructure, leaked credentials, breach chatter, major vulnerabilities, and other warning signs. This monitoring won’t replace good third party management, but it gives you another way to spot issues with important shared providers. This is especially useful when a downstream provider supports several third parties in your environment. In these cases, a single alert can tell you more than multiple questionnaires. 8: Embed Downstream Risk into Governance Fourth- and nth-party risk management works best when it’s included in the same governance channels as your other key risks. This could mean including shared dependencies in outsourcing discussions, resilience reports, third party portfolio reviews, and contract playbooks. When it’s part of regular reporting and oversight, it becomes a normal part of your program instead of a special topic. Conclusion Fourth- and nth-party risk falls somewhere between your third parties’ responsibilities and your own. You can’t control every downstream provider, but you also can’t ignore how those relationships might affect your organization and your customers. The eight actions in this blog are designed to give you a practical starting point. If you pick a few and add them to your program, you’ll get better visibility into the downstream relationships that matter most and a more consistent way to manage their risks. You don’t have to solve everything at once. Focus on bringing the right extended relationships into view and handling them with processes you can explain, repeat, and improve over time. That’s what real progress on fourth- and nth-party risk looks like in a TPRM program. 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.

Staying on top of third party risks doesn’t stop at onboarding. Ongoing monitoring is crucial for ensuring your third parties remain compliant and resilient over time. Review the infographic below for actionable tips to enhance your continuous monitoring strategy. Interested in learning more about Continuous Monitoring? Check out our Free TPRM 101 Guidebook: https://www.tprassociation.org/guidebook Download the infographic:

A decade ago, most third party risk programs followed a simple routine: assess the third party's risk level, perform adequate due diligence, review the contract, and check in once a year. While this approach is still used, it no longer meets today’s broader expectations for resilience, cybersecurity, privacy, supply chain oversight, and artificial intelligence, putting your business at risk of non-compliance or disruption. In 2026, TPRM is governed by a much broader mix of frameworks and regulations, including the Digital Operational Resilience Act (DORA), the Network and Information Systems Directive 2 (NIS2), the General Data Protection Regulation (GDPR), the Corporate Sustainability Due Diligence Directive (CSDDD), and the UK critical third parties regime. These requirements may highlight different risk concerns, but they often affect the same parts of a TPRM program: third party classification, due diligence, contract terms, monitoring, issue management, and exit planning. More Frameworks Now Affect TPRM The biggest change is not a single regulation, but the increase in frameworks that now apply to third party oversight. DORA requires financial firms to manage third party IT risk through governance, testing, concentration risk management, and record keeping. NIS2 broadens cybersecurity and supply chain requirements, making third party risk a key part of incident response and operational governance. Privacy and supply chain rules add complexity. GDPR continues to guide how organizations manage third parties handling personal data. CSDDD and Germany’s Supply Chain Due Diligence Act (LkSG) also drive organizations to examine risks, including human rights and environmental risks, beyond direct suppliers. Key takeaways Managing third party risk now means meeting broader standards for resilience, cybersecurity, privacy, and supply chain oversight. One process change may need to address multiple frameworks at once. Operational Resilience Has Raised the Standard Operational resilience rules continue to emphasize the importance and urgency of third party oversight. DORA requires firms to identify critical providers, manage concentration risk, include oversight and exit terms in contracts, and maintain detailed records. NIS2 also strengthens supply chain security and incident readiness, treating third party failures as broader issues. The UK’s critical third party regime adopts a similar approach for financial services, allowing direct oversight of providers whose disruption could affect many firms or the wider market. The bottom line: if a third party supports a critical service, regulators expect more than just a one-time review. Key takeaways Critical third parties require heightened scrutiny as new regulations and resilience rules emphasize operational dependencies and disruption risk. Third party classification, contracts, continuity, and documentation must adapt to resilience standards. Overlapping Rules from Different Jurisdictions Create Practical Challenges One challenge for TPRM teams is that third party oversight often goes beyond a single country’s rules. For example, a U.S. organization may begin with local requirements but find extra obligations if it serves customers in the EU or UK, supports regulated firms there, or uses third parties that do. This means the same third party might need different review steps based on location, customer type, or service model. To manage this complexity, organizations should prioritize requirements that carry the highest regulatory or business risk and look for opportunities to harmonize controls where possible. Establishing a baseline set of global controls, then layering on local or high-priority requirements, can help ensure compliance without duplicating effort. When faced with conflicting rules, consult with legal, compliance, or risk experts to determine which requirements should take precedence. Multiple regulatory requirements often create challenges as organizations grow. A TPRM program built for one country might struggle when the company expands to new markets or supports clients in other jurisdictions. DORA can even apply to non-EU providers serving EU financial firms; NIS2 covers organizations offering services in the EU, and the UK’s rules affect non-UK providers serving UK financial companies. Key takeaways Expanding your business across borders often brings overlapping regulatory requirements. TPRM needs adaptable due diligence and oversight for global third parties. Less Frequent Reviews Are Hard to Justify Annual assessments are useful, but less convincing when third party risk changes during the year. DORA and NIS2 both emphasize ongoing oversight and incident readiness. Not every organization needs to implement automated monitoring or redesign risk re-assessment schedules; however, critical third parties, major subcontractor changes, concentration points, and significant incidents should be addressed between formal reviews. Key takeaways Point-in-time reviews leave gaps when third party risk changes quickly, making it harder for your organization to respond to emerging threats. Higher-risk third parties require ongoing monitoring year-round. AI Highlights Weaknesses in Older TPRM Processes Artificial intelligence (AI) is now providing clear indicators of where older TPRM tools fall short. Standard questionnaires developed a few years ago might cover security and privacy but probably miss basic questions about AI use, data inputs, model governance, and how important changes are explained. This means organizations are trying to assess new risks with outdated templates. Regulations make this even more challenging. AI-related requirements can come from specific AI rules, privacy laws, model risk standards, or industry supervision, depending on the country and use case. As a result, the same third party may need different levels of review based on its services and where it operates. Key takeaways AI risks increasingly surface in third party relationships that older processes may overlook. Cross-border third parties need flexible, AI-specific due diligence and contracts. A Few Things Organizations Can Do Now Most organizations do not need to completely rebuild their TPRM programs. By strengthening the parts facing new regulatory pressures, you can meet evolving requirements and keep your business protected. Current frameworks all point toward better visibility into third parties and dependencies, stronger documentation, clearer governance, and more up-to-date oversight, delivering the assurance your organization needs. Here are a few practical steps that can help: Update your list of critical third parties and confirm which regulations apply based on service, location, customer type, and data exposure. Prioritize requirements that carry the highest regulatory or business risk and look for opportunities to harmonize controls where possible. Review your questionnaires and contract templates to ensure they cover resilience, subcontractor visibility, AI use, incident response, and exit support as needed. Set up monitoring triggers for Critical and high-risk third parties, such as major incidents, subcontractor changes, declining performance, sanctions updates, or concentration points affecting critical services. Ensure that changes or updates to your processes are documented, including the rationale for those changes. TPRM programs are always evolving, and recent changes mean many organizations must now align with overlapping expectations from DORA, NIS2, GDPR, CSDDD, and local rules for how third parties are chosen, contracted, monitored, and, if needed, exited. This is harder in multi-jurisdiction environments and with AI-enabled services, where the same third party can fall under several rule sets at once. Organizations that keep a clear view of critical third parties and jurisdictions, keep their questionnaires and contracts up to date on resilience and AI, and add reliable monitoring triggers, should be able to keep up without rebuilding their program every year. 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.

Third party risk management (TPRM) looks very different now than it did 20 years ago. Back then, teams mainly checked procurement and contracts and conducted basic due diligence. Rules were simpler, and oversight was mostly manual. Today, TPRM covers just about every part of the business, including cybersecurity, privacy, resilience, business continuity, AI, fourth-party and supply chain risks, compliance, Environmental, Social, Governance (ESG), and even geopolitics. The field has become more specialized, with dedicated professionals, certifications, technology tools, and standardized industry practices. As TPRM evolves, practitioners must continuously learn to ensure their skills remain current. This article covers key TPRM skills to consider in today’s environment and shares practical ways to build them through your daily work and ongoing learning. Practical Technical Skills and Understanding Everyone working in TPRM should have a solid grasp of the basics: lifecycle stages, core risk domains, risk tiering, critical third party identification, ongoing monitoring and reassessment, performance oversight, and offboarding. Comfort with these fundamentals is essential for TPRM professionals. The next sections outline technical skills and experience that are increasingly vital for both new and seasoned practitioners. Understanding AI in a TPRM Context By now, most professionals have heard that anyone who does not learn AI will be left behind. For TPRM practitioners, the bar is higher than just knowing how to use a tool. The key capability is understanding how AI is actually being used across your organization and your third party ecosystem, as well as how that use affects existing risk domains such as cybersecurity, privacy, operational resilience, reputation, and governance. Organizations vary in AI maturity. Some have formal governance and oversight; while others are still finding out where AI is used across their business and third party services. Even when governance structures are still developing, effective third party risk practitioners prioritize understanding AI well enough to ask informed questions, recognize its presence in workflows and products, and identify potential operational, cybersecurity, or compliance concerns before formal processes are established. Ways to build capability include: Learn the basics of how AI systems function, including concepts such as large language models, training data, automation, model drift, and generative AI. Focusing on your higher-risk third parties, pick one that markets “AI-powered” capabilities and review its documentation, privacy notice, or security whitepaper. Note where data use, governance, and controls are clearly explained and where information is vague or missing. Ask internal Security, Data, Architecture, or Technology teams to walk through one existing AI use case and its risk review. Identify which of those questions you should also be asking during third party due diligence. Review a current questionnaire, contract template, or assessment process and identify where AI-related questions, disclosures, or governance language should be added or strengthened. Spending time on these activities helps you see how AI really works in your company and with third parties. This hands-on experience shows that AI is more than just an abstract idea. Seeing Risk Beyond the Questionnaire Many third party risks don’t show up in questionnaires or security checks. Instead, they appear as outages, repeated failures, missed promises, poor escalation, unhappy teams, or customer complaints. It’s important to spot risks beyond checklists and understand how vendors work every day. Strong TPRM links third party oversight to real operations. This requires knowing where the business relies most on a provider, where workarounds exist, where support issues recur, and where failures cause disruption. These insights often come from conversations, incident reviews, and observing relationships over time. Ways to build capability include: Ask a business owner to walk through how they use a key third party during a normal workday, including where they experience the most dependency, delays, or operational pain points. After a third party-related incident or outage, review the event summary and identify where stronger TPRM visibility or earlier questioning may have helped surface concerns sooner. Sit in during operational, service review, or escalation meetings involving key third parties to see how issues are handled in practice versus how they appear in contracts or assessment responses. Review recurring support tickets, performance metrics, or complaint trends tied to critical third parties and look for patterns that may indicate broader operational or governance concerns. Strengthening this area helps you spot operational risks early, establish credibility with business stakeholders, and expose hidden gaps that questionnaires may miss. The key is proactively identifying risks and gaps before they impact operations or stakeholder trust. Turning Data into Something People Can Use Most TPRM teams collect plenty of data, but much of it is hard to use or doesn’t support decision-making. Reports can be overwhelming, dashboards confusing, and important issues can get lost. A key skill is making information clear so the business can focus on what matters. You don’t need to be a reporting pro or data-visualization expert, but you do need to organize info so people can see the real risks, know what matters, and focus. The best reports make things clear quickly, not just dump out all the data. Ways to build capability include: Review a dashboard or report your team regularly produces and identify what people actually reference during meetings versus what is largely ignored. Take a large third party spreadsheet and reduce it to a short summary focused only on critical third parties, overdue remediation items, or unresolved high-risk issues, then see whether the simpler version improves the discussion. Ask a business stakeholder which third party metrics or reports they actually find useful versus which ones feel confusing or too complicated. Practice summarizing a complicated third party issue in a few plain-language sentences without leaning on acronyms, scoring formulas, or framework terms. When you make data easier to understand, people can make better decisions. Clarity helps drive action with confidence. Building Contract and Performance Awareness No one expects you to be a lawyer, but you do need to know contracts and performance standards well enough to spot when something is missing, unclear, or doesn’t line up. Big risk calls often hinge on service levels, security promises, escalation rules, audit rights, or how you can end a contract, even if you’re not the one negotiating the details. Good TPRM means spotting the gap between stakeholder assumptions and contract terms. If you understand service level agreements (SLAs), reporting, and accountability, you give better advice and catch problems before they become disputes. Ways to build capability include: Select one important third party agreement and review only the sections tied to SLAs, security obligations, audit rights, incident notification requirements, and termination language, then summarize the key commitments in plain business language. When a third party repeatedly underperforms, compare the operational issues being reported to the contractual requirements and identify where expectations and obligations do not line up. Sit with Procurement, Legal, Vendor Management, or Business teams during a contract review discussion to see which provisions tend to create the most negotiation friction or operational risk. Review a recent third party’s escalation or dispute and identify whether the issue stemmed from poor performance, unclear expectations, weak governance, or contract language that lacked specificity. Improved contract and performance awareness empowers you to address gaps early and drive realistic risk conversations. Takeaway: Understand contracts to manage operational outcomes. Soft skills deserve equal attention Technical expertise helps you identify problems and assess risk, but your influence on outcomes hinges equally on how you communicate, negotiate, and collaborate. These interpersonal skills are least likely to be automated, making them necessary for long-term career endurance in this field. Telling the Risk Story So People Listen Risk management matters only when people understand it clearly enough to make decisions or act. Many TPRM teams provide detailed, accurate assessments, yet leaders leave discussions uncertain about priorities. The ability to explain risk in practical, relevant terms tied to business impact is priceless. Effective communication in TPRM is not about sounding technical. It is about making information usable. Stakeholders need to understand the issue, how it could affect the business, the trade-offs, and the action you recommend. That often means simplifying language, cutting unnecessary detail, and focusing on consequences and decisions rather than framework terminology. Ways to strengthen this area include: Take a recent assessment or finding and rewrite the summary for a business leader in five short sentences, focusing on impact, exposure, and available options. Before a meeting or escalation discussion, identify the specific decision, approval, or action you need and shape your talking points around that outcome. Review an older risk report or assessment summary and spot where acronyms, scoring language, or technical detail may have made the message harder to understand. Ask a non-TPRM stakeholder to review one of your summaries or presentations and explain back what they believe the risk or concern is, then notice where misunderstandings occur. Clear communication makes it much easier to build stakeholder trust, gain support for remediation efforts, and help the business make well-informed decisions. Handling Stakeholders, Negotiation, and Conflict TPRM is often caught between different pressures. Business teams want speed and flexibility. Security wants stronger controls. Legal cares about liability. Procurement focuses on cost and timing, and third parties want quick agreements. Handling these tensions is a normal part of the job. The goal isn’t to win every argument or block progress. Good TPRM work means raising concerns clearly, explaining trade-offs, and helping others make reasonable decisions without causing extra friction or damaging relationships. Ways to strengthen this area include: During a difficult conversation or escalation, start by clearly summarizing the other party’s priorities or concerns before presenting your own risk perspective or recommendations. When documenting disagreements or unresolved concerns, frame the situation around available options, tradeoffs, and potential impacts rather than reducing it to a simple approval-versus-rejection decision. Observe how experienced leaders in your organization handle difficult stakeholder conversations, especially where business pressure and risk concerns collide. After a challenging meeting, reflect on which communication approaches helped move the discussion forward and which ones created defensiveness or blocked progress. Getting better at this builds your credibility and helps others see TPRM as a collaborative partner who solves problems, not just a gatekeeper. Growing Yourself and Your Team If you lead a TPRM function, these same capabilities apply at the team level. The work is changing, and so are expectations. It is not enough to build processes and buy tools. Teams need chances to practice, learn from mistakes, and grow in both technical and soft skills. To ensure ongoing development is effective, consider tracking team growth through regular skills assessments, structured feedback sessions, and peer reviews. These approaches help you spot where the team is making progress and where more support is needed. You don’t need a formal rotation program. Small, intentional opportunities within your current work can help people grow. In practice, that can look like: Giving analysts chances to present their own work instead of always presenting for them, then debriefing afterward on what landed well and what could be clearer next time. Inviting team members to observe a contract negotiation, a difficult third party call, or a high-stakes risk discussion, and then talking through why certain points were pushed, where tradeoffs were made, and how tone influenced the outcome. Using real assessments, incidents, or escalations as teaching moments, walking through not just what decision was made, but how you weighed business pressure, control gaps, and relationship impact. Pairing less experienced staff with more senior colleagues on complex third parties so they can see how judgment is applied, not just how checklists are completed. These practices help move TPRM from just following steps to building real judgment, which is more important than ever. Conclusion Third party risk management will continue to evolve as long as organizations rely on external products, services, platforms, and partners. There is no way to predict exactly what the next few years will bring, whether that is new regulatory pressure, different operating models, more embedded AI, or risks that are not getting enough attention today. What tends to set the most effective people in this field apart is a strong grasp of the foundations, paired with communication, judgment, stakeholder management, and a willingness to keep learning as the environment changes. For people already doing this work, that means keeping your eyes open, staying curious, and treating the job itself as part of your ongoing development. With so many skills to develop, it helps to prioritize based on both organizational needs and your personal areas for improvement. Start by talking with your manager or stakeholders about which risks or capabilities are most urgent for your business right now. Consider where you feel least confident or where you have received feedback, and target skill-building there first. Reviewing recent incidents, business objectives, or audit findings can also help you choose the most relevant areas to focus on. By identifying a few high-impact skills to work on at a time, you can make continuous progress without becoming overwhelmed. For those leading teams, it also means building the bench, creating opportunities for people to grow, and helping strong practitioners expand into the more extensive range the field now demands. 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.

Executive Summary Third-Party failures rarely begin as legal disputes. They being as performance weaknesses, control breakdowns, or operational gaps that contracts failed to anticipate, define or enforce. Most organizations treat contracts as legal protection and service level agreements (SLAs) as operational metrics. But in reality, contracts and SLAs are among the most powerful risk management tools an organization has – if they are designed to reflect the priorities of all stakeholders and monitored through a risk lens. This paper introduces the concept of Contractual Fitness: the degree to which a vendor agreement translates enterprise risk, regulatory expectations, and resilience requirements into enforceable obligations and measurable performance indicators. It also outlines how SLA performance monitoring, when aligned to risk impact rather than technical convenience, becomes an early warning system for vendor instability, compliance exposure, and operational disruption. The Core Problem: Why Contracts Often Fail the Business Across industries, contracts are negotiated in silos Function What They Focus On What Often Gets Missed Legal Liability, indemnification, dispute terms Operational enforceability of resilience & security IT Technical SLAs Business impact of service degradation Compliance Regulatory clauses Monitoring mechanisms to validate compliance DR/Resilience Recovery capabilities Contractual testing and proof requirements Procurement Commercial Terms Risk-based performance accountability TPRM Risk identification Ensuring mitigations become binding obligations Results: risks are identified during due diligence but never fully embedded into contractual language or measurable SLAs. Contracts describe services – they don't always control risks. Defining Contractual Fitness Contractual Fitness is the alignment between: Risk Exposure – What could go wrong Contractual Obligation – What the vendor is legally required to do Performance Metrics (SLAs) - How ongoing effectiveness is measured Governance & Enforcement – What happens when performance degrades A contract is “fit” when risk expectations are: Clearly Defined Measurable Auditable Enforceable Stakeholder Priorities and How They Translate into Contract SLAs Vendor risk is multi-dimensional. A contract that works only for Legal or for IT is incomplete. Below is a cross-functional view of what each stakeholder needs from vendor agreements. Stakeholder Primary Concern Critical Contractual Clauses Key SLA / Monitoring Metric Common Gap Information Security Protection of systems and data Security control requirements, vulnerability management, audit rights, incident notification timeliness Patch remediation timeliness, vulnerability remediation cycle time, incident response time Security language is vague (“reasonable security”) and not measurable Privacy Lawful data processing & subject rights Data Processing Addendum, sub processor approval, cross border transfer terms, deletion or return of data DSAR support response time, deletion certification timelines, sub processor change notifications Privacy obligations exist but are not operationalized or tracked DR / Resiliency Service recovery within tolerance Defined RTO/RPO, mandatory testing, geographic redundancy, dependency transparency DR test success rates, actual recovery time vs. Contracted RTO, backup validation results RTO/RPO written in contract but no tested or reported IT / Engineering Reliable technical performance Availability SLAs, incident response SLAs, change management notice, maintenance windows Uptime % latency, MTTR (mean time to restore), change notification timeliness SLAs measure performance but not business disruption Legal Liability containment & enforceability Indemnification, limitation of liability carve-outs, termination rights, cooperation clauses Tracking repeated breaches of contractual obligations Operational failures not escalated as contractual risk triggers Compliance / Regulatory Ability to demonstrate oversight Right to audit, regulatory cooperation, control evidence requirements Timeliness of evidence delivery, audit finding remediation timeliness Contract allows audit, but evidence collection is not structured Finance / Procurement Financial exposures & value Service credits, benchmarking, billing audit rights, termination for convenience SLA credit trends, billing accuracy rates, overcharge recovery Credits are claimed but not analyzed as risk signals TPRM Holistic risk oversight Risk-based obligations, subcontractor flow-down performance reporting requirement SLA degradation rends, control testing results, unresolved issue aging Risk findings don’t always translate into enforceable contract terms. From Clause to Control: What “Good” Language Looks Like A major element of contractual fitness is moving from vague commitments to measurable obligations. Risk Area Weak Clause Contractually Fit Clause DR “Vendor will maintain disaster recovery capabilities” “Vendor shall maintain DR capabilities sufficient to restore services within an RTO of 8 hours and an RPO of 15 minutes. Vendor will conduct at least annual failover testing and provide documented results and remediation plans.” InfoSec “Vendor will use reasonable security measures” “Vendor shall maintain security controls aligned to ISO 27001 or NIST CSF and remediate critical vulnerabilities within 14 days and high vulnerabilities within 30 days.” Incident Notification “Vendor will notify customer of breeches promptly” “Vendor shall notify Customer within 24 hours of becoming aware of a confirmed or suspected security incident affecting Customer Data and provide status updates every 48 hours until containment.” Sub processors “Vendor may use subcontractors” “Vendor must provide 30 days prior notice of new sub processors, flow down equivalent security and privacy obligations, and remain fully liable for their performance.” SLA Reporting “Vendor will provide performance reports.” “Vendor shall provide monthly SLA performance reports including uptime, incident metrics, and root cause analysis for any SLA breach.” SLA Performance Monitoring as a Risk Discipline SLAs are often treated as operational scorecards. But they are more powerful when viewed as risk indicators. SLA Metric Traditional Interpretation Risk-Based Interpretation Uptime % Service quality Operational continuity and customer impact risk Incident Response Time Help desk efficiency Cyber containment and business disruption risk DR Test Results Technical exercise Organizational survival dependency Patch Timelines IT hygiene Exposure window for cyber exploitation Change Notification Process formality Risk of unassessed system or data impact When TPRM tracks these metrics over time, patterns emerge that may include: Control fatigue Under-investment by the vendor Operational instability Elevated breach or outage likelihood Trending & Early Warning Indicators Isolated SLA failures happen. Trends tell the real story. Trend Patterns Potential Risk Signals Gradual increase in SLA credits over multiple quarters Declining service quality or capacity strain Missed DR testing deadlines Weak recovery preparedness Slower vulnerability remediation times Security control deterioration Increasing incident response times Staffing or Operational stress at vendor Delays in providing audit evidence Compliance maturity issues These trends allow organizations to act before a regulatory breach, data compromise, or major outage occurs. Governance: What Happens When Performance Degrades Measurements without action creates - “risk tolerance” by default. A contractually “fit” governance model includes: Operational Review – immediate discussion of SLA breach Formal Notice of Performance Concerns – Triggered by repeated failures Executive Governance Escalation – senior-level accountability Documented Remediation Plan – with deadlines and reporting Termination Readiness – exercising exit rights if risk remains unacceptable. These steps must be supported by contract clause allowing: Formal notice of breach Mandatory remediation Service credits Termination for chronic failure The Integrating Role of TPRM TPRM is uniquely positioned to connect: Phase TPRM Role Pre-Contract Identify risk and required control expectations Contracting Ensure risk requirements translate into clauses & SLAs Ongoing Monitoring Analyze SLA trends and control performance Escalation Elevate chronic issues as enterprise risk concerns Renewal / Exit Use performance history to inform decisions TPRM transforms contracts from static documents into dynamic risk management tools. Actionable Take-Aways For TPRM Map risk tiers to mandatory clauses and SLA expectations Trend SLA performance as part of ongoing monitoring Treat repeated SLA failures as risk events, not vendor nuisances For Legal Replace “reasonable efforts” with measurable, auditable standards Preserve audit, termination, and step-in rights Ensure operational clause are enforceable, not just aspirational For IT, Security, Resilience Team Define SLAs based on business impact tolerance, not vendor defaults Require testing and documented evidence for recovery and security claims For Procurement & Finance Analyze SLA credits and billing issues as indicators of operational risk Tie commercial leverage to performance accountability For Executives View chronic vendor underperformance as an enterprise risk signal Support cross functional governance when SLA show sustained decline Contracts should not simply describe services; they should operationalize trust. When risk expectations are translated into enforceable obligations and monitored through meaningful SLAs, vendor agreements become what they were always meant to be. A front-line control for protecting the organization's operations, data, customers, and reputation. Authors Heather Kadavy Director of Membership Success at TPRA Ryan Hesser VP Third Party Risk Mgmt & Legal Counsel at VyStar CU

In this episode of the TPRM Exchange Podcast, host Hilary Jewhurst sits down with Tracy Keeping, Founder of Steel Harbor Consulting and former risk executive at State Street, JPMorgan Chase, and Deutsche Bank, to explore one of the most pressing challenges facing third party risk programs today: geopolitical uncertainty. “Geopolitical uncertainty becomes a third party problem the moment it impacts operational decisions.” The conversation explores why traditional geopolitical risk assessments often fail to capture the speed and interconnectedness of these changes, and how organizations can move from passive visibility to active decision-making. Rather than treating geopolitical risk as a standalone category, Tracy explains how emerging conditions are exposing vulnerabilities hidden deep within vendor ecosystems, supply chains, cloud infrastructure, and subcontractor dependencies. “Geopolitical risk isn’t creating entirely new problems — it’s accelerating the risks organizations already have.” This episode is especially valuable for practitioners navigating: Rapidly changing supplier and jurisdictional exposure Escalating concentration and fourth-party risk Executive pressure to make faster decisions with incomplete information The growing gap between assessment cycles and real-world events Governance and accountability challenges during periods of uncertainty Key Takeaway Geopolitical risk is no longer a static checkbox within a risk framework — it is a dynamic force accelerating existing vulnerabilities across third-party ecosystems. Organizations that succeed will be the ones that connect external events to operational decision-making in real time. About the Guest Tracey Keeping Founder and CEO Steel Harbor Consulting Tracy Keeping is the Founder of Steel Harbor Consulting and a former risk executive at State Street, JPMorgan Chase, and Deutsche Bank. 📩 Have a topic idea? Email: pod@tprassociation.org

I was pleased to be invited by Third Party Risk Association to attend April’s session on Emerging Risks and Geopolitical Uncertainty. The discussion reinforced how quickly the third party risk landscape is shifting and how interconnected these risks have become. AI, data sovereignty, supply chain realignment, cyber activity, financial stability, and operational resilience are no longer separate topics. They are converging. Across all of it, one message came through clearly: Organizations need a more integrated and leadership-led response. AI is changing the landscape of third party risk AI is no longer a niche technology issue. It is reshaping how organizations approach vendor oversight, data governance, and cross-border exposure. A vendor that appears straightforward on paper often relies on multiple layers beneath the surface. A SaaS provider may depend on an AI engine, which in turn relies on foundation models and sub-processors across multiple jurisdictions. That means data is moving across countries and entities, often without full visibility. The implication is clear... Organizations need to move beyond generic policy references. AI-specific due diligence, stronger contractual controls, and a clear understanding of data flows must now be foundational. Data sovereignty is now a live, operating issue Data sovereignty is becoming more complex, not less. It is no longer sufficient to know where a provider is headquartered. Organizations need to understand where data is stored, processed, accessed, and transferred across the full ecosystem of providers and infrastructure. The leadership question has shifted. It is no longer “Is the data protected?” It is “Can we clearly explain where our data is going and why?” Geopolitical fragmentation is reshaping supply chain risk Geopolitical tension is actively reshaping supply chains. Regional conflict, sanctions, trade tension, energy disruption, and concentration risk in sectors such as semiconductors and infrastructure are directly affecting resilience, pricing, and service continuity. Many organizations believe they have diversified. In reality, they have often redistributed risk. Third- and fourth-party dependencies remain a significant blind spot. Cyber activity is part of the operating environment Cyber risk continues to evolve in both scale and intent. The TPRA discussion highlighted activity targeting critical infrastructure, telecom providers, and software supply chains. This shift is important to note. This is no longer just about data loss. In some cases, threat actors are positioning themselves inside infrastructure to enable future disruption. This raises a critical question. How much visibility do you really have, not just into your vendors, but into the infrastructure they depend on? Financial stability still matters Financial stability remains a core risk factor, particularly in uncertain markets. Tariffs, energy pricing, and geopolitical instability are directly impacting vendor viability. This is especially relevant for smaller or newer providers where financial transparency may be limited. The practical question is straightforward... If a critical vendor failed tomorrow, could you transition? For many organizations, the answer is still no. Operational resilience is where this all comes together Operational resilience is no longer a standalone activity. It cannot be reduced to documentation or periodic assessments. It is shaped by: Geographic concentration of vendors Supply chain dependencies Location of talent and engineering teams Strength of contracts and communication protocols The ability to respond effectively under pressure The session emphasized the importance of testing real-world scenarios, including third party failure and geopolitical disruption. This is where the leadership challenge becomes visible because these issues do not sit in one function. They cut across legal, procurement, risk, cyber, compliance, operations, and executive decision making. What this means in practice If you are leading third party risk management today, focus on this: Move beyond visibility to decision readiness It is not enough to map vendors and dependencies. You need to understand how decisions will be made when something fails or is disrupted. Define ownership across functions before pressure hits Legal, procurement, risk, and the business often operate independently until there is an issue. Clarity on ownership and escalation paths need to be established in advance. Strengthen how you evidence decisions Regulators and boards are increasingly focused on how decisions are made, not just the outcome. Document rationale, trade-offs, and accepted risk clearly. Test your operating model under stress Tabletop exercises should reflect real scenarios such as geopolitical disruption, vendor failure, or cyber events. Many frameworks work in a steady state but fail under pressure. Reframe third party risk as an organization-wide issue This is no longer a compliance exercise. It requires executive engagement, cross-functional coordination, and board-level visibility. Final reflection The environment is no longer stable enough for siloed responses. AI, geopolitical tension, supply chain concentration, cyber disruption, and vendor viability are intersecting in ways that increase pressure on decision making. Organizations do not need more frameworks. They need to be able to make and defend decisions under pressure. This is where leadership becomes the differentiator. My thanks again to Third Party Risk Association for the invitation and for convening such a timely discussion. Author Bio Tracy Keeping Founder, Steel Harbor Consulting Tracy Keeping is the Founder of Steel Harbor Consulting, providing fractional executive leadership to organizations navigating governance, risk, and operational complexity. She works directly with CEOs and boards to drive decisions, execution, and defensible outcomes.

When the CFO asks "How many active suppliers do we have?", and you get three different answers from Procurement, Accounts Payable, and Legal, you don't have a TPRM problem - you have a data architecture problem. This scenario plays out more often than most organizations care to admit. Third-party risk management programs invest heavily in assessment tools, monitoring platforms, and automation workflows. But underneath all that technology sits a foundation that's often fractured: the supplier data itself. Multiple systems. Duplicate records. Conflicting information. Outdated details. No single source of truth. The result? TPRM teams spend enormous effort not managing risk, but managing data chaos. And that chaos creates real exposure that no amount of sophisticated tooling can fix. The Symptom Everyone Recognizes Ask any TPRM practitioner what consumes their time, and you'll hear familiar complaints: "We discovered during an audit that the same supplier had three different risk tiers across our systems." "IT says a vendor has admin access to our environment, but Procurement has no contract on file for them." "Legal approved a supplier based on one set of financials, but Finance is seeing completely different numbers in their system." "We can't tell auditors when we last assessed a critical supplier because the records are scattered across email, SharePoint, and two legacy platforms." These aren't edge cases. They're symptoms of a structural issue that undermines every TPRM initiative: fragmented supplier information. Why Data Quality Breaks Down TPRM data quality problems don't happen because teams are careless. They happen because of how organizations evolve: Mergers and acquisitions bring together disparate systems, each with its own supplier database. Integration gets deprioritized, and suddenly the organization is operating with three "master" supplier lists. Departmental silos mean Procurement tracks suppliers in an ERP, Compliance uses a GRC platform, IT maintains a separate vendor access registry, and Finance works from Accounts Payable records. Each system becomes authoritative for its domain, but none owns the complete picture. Tool proliferation compounds the problem. Organizations add point solutions for vendor risk scoring, contract management, security assessments, and ESG tracking. Each creates its own data repository. Each requires manual updates. None integrate cleanly. Spreadsheet workarounds emerge when systems don't talk to each other. Teams build Excel-based "integration layers" to bridge gaps. These spreadsheets become critical infrastructure, despite being fragile, error-prone, and impossible to audit. The result is predictable: data decays. Supplier information becomes stale the moment it's entered, because there's no mechanism to keep it current across all the places it lives. The Hidden Costs of Bad Data Poor data quality isn't just an operational annoyance. It creates genuine risk and measurable cost: Failed audits and regulatory findings. When auditors ask for evidence of due diligence on critical suppliers, teams scramble to piece together documentation from multiple sources. Gaps appear. Inconsistencies raise questions. What should be a routine control verification becomes a finding. Duplicate assessments and supplier fatigue. Without a unified view, different teams send overlapping questionnaires to the same supplier. The supplier receives three security assessments, two financial reviews, and four ESG questionnaires in the same quarter - all asking similar questions. Response rates drop. Relationships deteriorate and generate supplier fatigue. Slow incident response. When a supplier experiences a security incident or operational disruption, response speed matters. But if the first 30 minutes are spent identifying who owns the relationship, what data they access, and which business functions they support, the window for effective action closes. Inaccurate risk aggregation. Executive dashboards show supplier risk metrics, but those metrics are only as good as the underlying data. If 40% of supplier records are incomplete or conflicting, leadership is making decisions based on fiction. Blocked business velocity. Sales teams wait for supplier approvals. Procurement can't onboard vendors quickly because compliance workflows are stuck gathering basic information that should already exist. The TPRM program becomes a bottleneck, not because processes are broken, but because data is. How to Diagnose Your Data Quality Problem? The MDM (Master Data Management) appears as the solution. Before fixing data quality, you need to measure it. Here's a practical framework for auditing your current state: Step 1: Map Where Supplier Data Lives List every system that stores supplier information. Don't limit this to "official" systems—include spreadsheets, Accounting, SharePoint sites, and departmental databases. For each system, document: Who maintains it What data fields it contains How often it's updated Who relies on it for decisions Most organizations discover they have 6-10 systems touching supplier data, with no clear owner for ensuring consistency. Step 2: Test for Basic Accuracy Pick 20 critical suppliers at random. For each one, answer these questions: How many records exist for this supplier across all systems? Do the records show the same legal entity name? Do they reflect the same address and contact information? Is the risk tier or classification consistent? Can you identify a single business owner? If you find significant discrepancies in more than 30% of your sample, you have a material data quality problem. Step 3: Measure "Time to Basic Information" Run this exercise: Ask someone outside the TPRM team to answer basic questions about a supplier: Is this supplier currently active? What services do they provide? When was their last risk assessment? Who is the business owner? Are they compliant with our requirements? Time how long it takes to get definitive answers. If it requires more than 5 minutes and multiple system lookups, your data architecture is creating friction. Step 4: Identify the "Data Conflict Rate" Pull supplier records from your three most-used systems. Compare key fields like risk tier, contract status, and last assessment date. Calculate the percentage of records where these fields conflict. A well-governed TPRM program should see conflict rates below 10%. Rates above 25% indicate systemic issues that automation alone won't fix. Building a Data Quality Remediation Roadmap Once you've diagnosed the problem, remediation follows a structured path: Phase 1: Establish a Single Source of Truth The first step is philosophical, not technical: decide where authoritative supplier data will live. This doesn't mean consolidating all systems into one platform immediately. It means designating one system as the "system of record" where the definitive version of core supplier information exists. Core fields typically include: legal entity name, primary contact, business owner, risk tier, criticality designation, contract status, and last assessment date. Other systems can maintain specialized data, but they should reference—not duplicate—the core record. Phase 2: Deduplicate and Consolidate Assign a team, or a subcontractor, to systematically merge duplicate supplier records. This is unglamorous work, but it's foundational. Start with critical and high-risk suppliers, then work down the tier list. Use a consistent methodology: Identify the authoritative record (usually the most recent or most complete) Merge data from other records, preserving any unique information Document the consolidation in an audit log Deprecate old records with clear redirects to the current one Use a common token as the Duns Number Phase 3: Implement Data Governance Data quality doesn't maintain itself. Establish clear ownership and processes: Assign a Data Steward role responsible for supplier data integrity Define update workflows: who can modify core fields, and with what approval Build quality checks into onboarding: new suppliers can't be activated with incomplete records Schedule periodic reviews: quarterly audits of high-risk suppliers, annual reviews of the full population Phase 4: Automate Validation and Monitoring Once foundational data is clean, use technology to keep it that way: Implement validation rules that prevent invalid or incomplete data entry Set up alerts for data conflicts (e.g., if a supplier's risk tier changes in one system, flag for review) Use APIs to synchronize core data fields across systems rather than manual updates Build dashboards that surface data quality metrics: completeness rates, staleness, conflict rates Why Technology Alone Won't Fix This It's tempting to believe that buying a new TPRM platform will solve data quality problems. It won't—at least not by itself. A new platform can provide better structure, more robust validation, and cleaner workflows. But if you migrate messy data into that new platform, you just have expensive, messy data. The organizations that succeed treat data quality as an organizational discipline, not a technology project. They invest in governance, assign clear ownership, and build data hygiene into their operational culture. Technology enables good data management. It doesn't create it. The Strategic Advantage of Clean Data When TPRM teams solve their data quality problem, something remarkable happens: the program shifts from reactive to strategic. Instead of spending hours reconstructing basic supplier information during incidents, teams respond in minutes using reliable, current data. Instead of duplicating assessments across departments, cross-functional teams collaborate from a shared view of supplier risk. Instead of building executive reports manually, leadership gets real-time visibility into third-party exposure. Clean data doesn't just reduce friction—it becomes a competitive advantage. Organizations can onboard suppliers faster, make risk decisions with confidence, and demonstrate control to auditors and regulators without scrambling. Moving from Chaos to Clarity The TPRM data quality problem is solvable, but it requires acknowledging that it exists. Too many organizations layer sophisticated risk analytics and automation workflows on top of fragmented, unreliable supplier information—and then wonder why their programs underperform. The path forward starts with measurement: understand where your data lives, how accurate it is, and where conflicts arise. Then commit to remediation: consolidate, deduplicate, govern, and maintain. The work isn't glamorous, but it's foundational. Because every TPRM capability—risk assessment, continuous monitoring, incident response, regulatory reporting—depends on one fundamental requirement: knowing the truth about your third parties. Author Bio Emmanuel Poidevin CEO and co-founder of Aprovall Emmanuel Poidevin is the CEO and co-founder of Aprovall, a TPRM platform serving 1,800+ organizations. Emmanuel leads Aprovall's vision to centralize supplier information, automate compliance workflows, and enable cross-functional risk management from a single system of record. Connect with Emmanuel on LinkedIn or learn more at www.aprovall.com. Aprovall provides a centralized TPRM platform designed to serve as a single system of record for third-party information, eliminating data fragmentation across procurement, compliance, legal, and risk teams. Organizations use Aprovall to establish data governance, automate validation, and maintain accuracy across the supplier lifecycle. To learn more about building a unified approach to third-party data management, visit www.aprovall.com.

Many third-party risk management (TPRM) programs today have reached a level of operational maturity. They have defined processes, lifecycle coverage, and established workflows for intake, due diligence, and monitoring. But a critical question remains: Is your program actually improving—or just maintaining the status quo? In this episode of the TPRM Exchange Podcast , Hilary , Senior Membership & Education Coordinator at TPRA, speaks with Keith Frantz, Director of Vendor Management at Prosper Marketplace, to explore the difference between maturity and true progress, emphasizing that strong programs continuously evolve alongside changing risks, technologies, and business needs. “If it’s a check-the-box exercise, you have room for improvement.” From identifying signs of stagnation to adapting for emerging risks like AI, this conversation highlights practical ways practitioners can refine assessments, strengthen monitoring, and deliver more meaningful insights to the business. What You’ll Learn Why maturity doesn’t equal improvement Signs your TPRM program may be stagnant How to modernize risk assessments and evidence standards The growing impact of AI and emerging risk domains How better reporting and monitoring drive stronger decisions Why collaboration across procurement, legal, and the business is critical Key Takeaway “Collaboration, communication, and education—that’s what makes a program successful.” About the Guest Keith Frantz, Prosper Marketplace Graduate of Baylor University, worked in Financial Industry for over 20 years under numerous umbrellas. While in the mortgage industry, I worked primarily in default and risk management providing oversight for mortgage servicers. After moving to risk and vendor management, I have built and matured several programs at different companies and now oversee Procurement, Third Party Risk, and Internal Controls for Prosper Marketplace. Have a question or topic idea? Send us your suggestions at: pod@tprassociation.org