Understanding Vendor Risk Management (VRM)
Vendor Risk Management (VRM) is a crucial process for organizations that engage with third parties to scale their operations. It involves vetting new and existing vendors through risk assessments to ensure that they do not pose unacceptable risks or disruptions to the business.
VRM encompasses all types of third parties, including SaaS providers, manufacturers, and more. The goal is to evaluate the potential risks associated with these vendors and mitigate them effectively.
By implementing a VRM program, organizations can maintain control over their risk appetite and ensure that vendors align with their security requirements.
Understanding Third Party Risk Management (TPRM)
Third Party Risk Management (TPRM) is a broader discipline that goes beyond VRM. It is a continuous process of identifying, analyzing, and controlling risks presented by third parties to an organization, its data, operations, and finances.
TPRM programs allow organizations to gain insights into potential business risks arising from outsourcing services and products. It covers various aspects of risk management, including supplier risk management and contract risk management.
While VRM focuses specifically on vendors, TPRM extends its scope to include all types of third parties, such as business partners, contractors, customers, federal agencies, and even mergers and acquisitions.
By implementing a TPRM program, organizations can gain a comprehensive understanding of the risks associated with their entire third party ecosystem and take appropriate measures to manage those risks.
The Difference Between VRM and TPRM
The main difference between VRM and TPRM lies in their scope and approach. VRM focuses solely on vendors, while TPRM encompasses all types of third parties.
While VRM ensures that vendors meet the organization’s risk appetite and security requirements, TPRM takes a more holistic approach. It not only assesses and monitors the security posture of third parties but also aligns their security controls with the organization’s risk tolerance and objectives.
TPRM recognizes that as organizations expand their third party ecosystem and undergo digital transformation, the need for a comprehensive risk management approach becomes even more critical.
By implementing a TPRM program, organizations can effectively manage the risks associated with all their third party relationships and ensure that their operations remain secure and resilient.