Understanding Vendor Risk Management (VRM)
Vendor Risk Management (VRM) is a crucial process for organizations that engage with third parties. It involves vetting new and existing vendors through risk assessments to ensure that they do not pose unacceptable risks or disrupt business operations. VRM covers a wide range of third parties, including SaaS providers, manufacturers, and more.
Exploring Third Party Risk Management (TPRM)
Third Party Risk Management (TPRM) is a broader discipline that focuses on identifying, analyzing, and controlling risks presented by third parties. This includes risks to an organization’s data, operations, and finances. TPRM goes beyond VRM and encompasses other forms of risk management, such as supplier risk management and contract risk management.
Distinguishing Vendors from Third Parties
While terms like supplier, provider, contractor, vendor, and third party are often used interchangeably, there is a clear distinction. All vendors, suppliers, contractors, and providers are considered third parties to an organization. However, not all third parties are vendors. The term “third party” is a broad category that encompasses any organization with a working relationship with another, including business partners, consultants, and more. Vendors, on the other hand, are a specific type of third party that typically has a written contract with an organization and provides goods and services, particularly in the context of SaaS offerings.
Differences between VRM and TPRM
The main difference between VRM and TPRM lies in their scope. VRM focuses specifically on managing the risks associated with vendors, while TPRM encompasses a broader range of third parties. TPRM extends beyond vendors to include mergers and acquisitions, business partners, federal agencies, contractors, customers, and other external entities that could pose risks to an organization.
Furthermore, TPRM takes a more holistic approach compared to VRM. While VRM involves completing a set of requirements to assess a vendor’s security posture and make a decision, TPRM goes deeper. It measures and continuously monitors the security controls of all third parties to align with an organization’s risk tolerance and overall objectives. This is particularly important as organizations expand their third party ecosystem and undergo digital transformation.