Third-Party Risk Management – A Step-by-Step Guide to Getting Started

In today’s hyper-connected business environment, organizations rely heavily on third parties for critical operations—ranging from SaaS vendors to cloud providers and logistics partners. While these relationships accelerate digital transformation and business agility, they also introduce new cyber, regulatory, and operational risks. A well-defined Third-Party Risk Management (TPRM) program is not optional—it’s essential.

This blog outlines a step-by-step framework to build an effective TPRM program and then explains how COMPASS supports these efforts across the vendor lifecycle.

What an Effective TPRM Program Requires

1.      Vendor Tiering

Not all vendors carry the same level of risk. Start by classifying vendors into tiers (e.g., critical, high, medium, low) based on:

·       Access to sensitive data or systems

·       Business criticality

·       Regulatory exposure

This helps define the appropriate level of scrutiny and frequency of assessments.

2.     Pre-Onboarding Risk Assessment

Before engaging a vendor, conduct a structured risk assessment to evaluate their:

·       Security posture

·       Data protection practices

·       Regulatory compliance history

·       Incident response capabilities

The output should help determine whether the vendor meets your baseline security standards.

3.     Risk Scoring and Requirements Definition

Use assessment results to:

·       Assign a risk score to the vendor

·       Define minimum required controls based on risk level (e.g., encryption, access control)

·       Set reassessment frequency and audit expectations

4.     Contractual Safeguards

Translate risk insights into enforceable agreements. Contracts should include:

·       Security and privacy clauses

·       Right to audit

·       Termination and liability provisions

5.     Continuous Monitoring and Reassessment

Risks evolve—so should your oversight. A strong TPRM program includes:

·       Periodic reassessments based on tier and performance

·       Real-time alerts for non-compliance or incidents

·       KPI monitoring to reduce full assessment load

Ad-hoc assessments should also be built into the program. These are triggered outside the normal review cycles and are essential when there are security incidents, service outages, or regulatory events involving a vendor. Such assessments help evaluate the immediate risk impact, validate control effectiveness, and determine whether remediation or escalation is needed. Timely execution of ad-hoc reviews ensures rapid containment of third-party exposure and strengthens incident response.

6.     Business Stakeholder Enablement

Business owners often manage vendor relationships. They need:

·       Visibility into risk scores and control gaps

·       Guidance on remediation or escalation paths

·       Tools to plan for contingencies or exit strategies

7.     Secure Vendor Termination

Upon offboarding:

·       Ensure access is revoked

·       Verify secure return or destruction of data

·       Document all exit-related risks and remediations

How COMPASS Supports the TPRM Lifecycle

COMPASS simplifies and automates key elements of a TPRM program:

·    Pre-built Questions Library: Standardized, customizable vendor assessment templates

·    Vendor Tiering: Built-in workflows to assign risk levels and map control expectations

·  Issues Management: Tracks control failures and non-compliance with real-time remediation updates

·   Ongoing Monitoring: Task workflows, periodic reassessment scheduling, and KPI review support

·   Stakeholder Dashboards: Centralized visibility into third-party risks for both risk teams and business owners

Conclusion

A strong TPRM program protects your business from inherited risks while maintaining operational efficiency. By following a structured lifecycle and leveraging a platform like COMPASS, organizations can turn third-party risk management into a proactive, transparent, and business-aligned process.