Navigate the complexities of third-party relationships with proven risk management strategies.
- Gartner client? Log in for personalized search results.
Third-Party Risk Management (TPRM): An Essential Guide
Understand the third-party risk management trends that are driving better risk outcomes
Expanded risk exposure has led to increased board and stakeholder oversight of third-party risk management (TPRM) programs. In response, legal and compliance leaders are prioritizing a coordinated, consolidated view into mitigation efforts and results.
Download “5 Key Insights for Third-Party Risk Management Design and Governance” to uncover opportunities for immediate changes to TPRM activities that can yield:
Better risk identification
Effective risk remediation
Improved risk outcomes
Build an efficient, effective third-party risk management program
As networks expand to include more third, fourth and fifth parties, effective governance has never been more critical. Improve TPRM outcomes by focusing on the following:
Streamlined Processes
Centralized Governance
Best-Fit Technologies
Optimize third-party risk management with efficient operational practices
Third-party networks continue to increase in number and scope, and 40% of compliance leaders say that between 11% and 40% of their third parties are high-risk. As a result, senior leaders, including boards, are taking greater interest in TPRM oversight, and most organizations have shifted governance structures to federated or centralized models.
As the scope of third-party risk management expands, these operational practices can help mitigate risk at minimal expense:
Desilo risk-relevant information. Modernize your third-party risk management program and ensure that risk-relevant information is available across functions by taking the following steps:
Develop RACI frameworks to determine who owns responsibility and accountability, who needs to be consulted and who needs to be informed of third-party risk management issues across functions. Also, determine what information each function has access to, what systems they use and any core functionality that compliance could also use.
Establish primary ownership of third-party risk management based on which function will bring about the right level of assurance and coordination for the best risk result. Top functional owners of third-party risk management include ERM, IT, legal, procurement and compliance.
Choose a governance model that supports info sharing and coordination. In 64% of cases, organizations are implementing centralized (single function) or federated (multifunction) TPRM models of governance (see Tab 2).
Partner with the business. Coordinate with stakeholders who sit closest to your organization’s third-party relationships to be sure they:
Understand the impact of third-party scope changes on the business. Educate business partners about the risks associated with scope changes, the criticality of addressing those changes, and a simple process for dealing with them. This practice encourages business partners to become more proactive in communicating scope changes when they occur — which can improve risk outcomes by 36%.
Understand and communicate about risk profile changes. Based on ongoing monitoring, ask questions of the business such as: “How do we monitor risk appetite?”; “Which metrics relate to risk exposure with a given third party?”; “Is the business willing to take on more risk?”
Understand risk escalation criteria. Educate the business about what raises risk in third-party relationships. Specify what red flags they can mitigate on their own versus the red flags compliance wants to know about that could potentially require enhanced due diligence.
Improve third-party risk management oversight with a coordinated model
Legal and compliance leaders are seeing an increase in the number of third-party startups and/or business model innovators, and many of these third parties are performing new-in-kind technology services. For many organizations, this introduces new risks that existing third-party risk management programs can’t handle.
To solve for this, some organizations — especially in highly regulated industries like financial services — are adopting a centralized governance model. Centralized models typically house all TPRM activities within a centralized office that owns responsibility for decision making across the following activities:
Onboarding and due diligence prior to the parties joining the organization
Continuous monitoring of third-party vendors to make sure third parties comply with contractual obligations and track any new risks that may arise
Third-party incident response planning, in which the TPRM office coordinates with other functions to oversee the response to potential risk events such as a data breach
Training and awareness programming related to third-party risk management
Performance metrics management, including deciding what metrics to track and analyzing them to determine how to improve the program
Third-party risk management reporting to senior leadership on the status of third-party risks and the effectiveness of the program
Organizations that have centralized governance experience multiple benefits, including:
Greater understanding of third-party risks. Instead of having several functions managing disparate responsibilities, a centralized third-party risk management office can develop a long-term vision and develop a strategy proactively.
Standardized risk management practices. Centralized offices make it easier to build consistent understanding and management of third-party risks across the organization.
Streamlined processes and workflows. By centralizing the information-gathering process and due diligence/monitoring workflows, organizations are less likely to miss third-party risks.
Better data. Centralized offices can aggregate data from various sources, ensure that the data is complete and accurate, and better understand how effective their TPRM program is.
Cost savings. Consolidating resources and legal technology tools eliminates redundant processes and leads to increased efficiency and long-term financial savings.
Manage third-party risk management workflows with foundational, scalable solutions
Forty-two percent of organizations believe third parties are more critical for their organization’s profitability than they were just three years ago. As demand for third parties grows, so do the regulatory oversight and disclosure requirements that determine how organizations manage their third parties. Many regulators now require disclosure of cyber and ESG-related risks. This adds new risk terrains to compliance leaders’ existing obligations and increases the pressure to find effective third-party risk management technology solutions.
But the market is highly fragmented, and many companies end up compromising in their search for a best-fit TPRM solution. Challenges include:
Limited end-to-end support. Platforms that manage risks can provide competitive advantage and agility, but often have limited support for due diligence and monitoring.
Limited support across risk terrains. Synthesizing risk metrics for multiple functional leaders remains out of scope for some vendors.
Limited support for a primary functional leader. Solutions often restrict the primary owner’s access to critical third-party risk information.
Lack of understanding by the vendor. Vendors typically try to sell across organizations but don’t fully understand compliance buyers’ requirements.
To gain more control of your organization’s third-party ecosystem:
Establish a named primary owner for third-party risk management. Having a single point of entry for third parties can help reduce risk. It also helps establish clear ownership and decision-making rights that can improve defensibility in the event of an issue.
Acknowledge that technology is a foundational part of a solid third-party risk management program. Keep in mind that all-in-one solutions may not cover continuous monitoring of dynamic risk terrains and processes throughout the organization.
Look for foundational systems that satisfy the need for risk evaluation for primary risk owners and can scale TPRM processes in existing enterprise tools. Complement that foundation with solutions that support analytics, security rating services and other specialized monitoring services.
Attend a Conference
Join Gartner experts and your peers to accelerate growth
Gather alongside fellow leaders on September 8–9 in Grapevine, TX to gain insight on emerging trends, receive one-on-one guidance from Gartner experts and create a strategy to tackle your priorities head-on.
8 – 9 Sep 2025
Gartner Enterprise Risk, Audit & Compliance Conference
Grapevine, TX
Related third-party risk resources
Gartner clients: Log in for a complete suite of actionable insights and tools on third-party risk management.
Third-Party Risk Management FAQs
What is third-party risk management?
Third-party risk management (TPRM) involves identifying, assessing and mitigating risks associated with outsourcing to external vendors or partners. It ensures that third-party relationships do not compromise the organization’s security, compliance or operational integrity.
What are the key steps in third-party risk management?
The key steps in TPRM include:
Identifying third-party relationships.
Assessing risks associated with each vendor.
Implementing risk mitigation strategies.
Monitoring third-party performance and compliance management.
Reviewing and updating risk assessments regularly.
How often should third-party risks be assessed?
Assess third-party risks at least annually or whenever significant changes occur in the vendor relationship, such as new services, contract renewals or changes in regulations. Regular assessments ensure that risks are identified and managed proactively.
What are TPRM best practices?
TPRM best practices include:
Conducting thorough due diligence before onboarding vendors.
Regularly monitoring vendor performance and compliance management.
Using standardized risk assessment frameworks.
Establishing clear communication channels with vendors.
Continuously updating vendor risk management policies and procedures.
Drive stronger performance on your mission-critical priorities.