Software

Gain a 360-degree view of third-party risk by using our SaaS software to centralize, track, automate, assess and report on your vendors. 

Managed Services

Let us handle the manual labor of third-party risk management by collaborating with our experts to reduce the workload and mature your program. 

Overview
Document Collection
Policy/Program Template/Consulting
Virtual Vendor Management Office
Vendor Site Audit

Ongoing Monitoring

Let us handle the manual labor of third-party risk management by collaborating with our experts.

VX LP Sequence USE FOR CORPORATE SITE-thumb
Venminder Exchange

As Venminder completes assessments for clients on new vendors, they are then made available inside the Venminder Exchange for you to preview scores and purchase as you need.

CREATE FREE ACCOUNT

Use Cases

Learn more on how customers are using Venminder to transform their third-party risk management programs. 

Industries

Venminder is used by organizations of all sizes in all industries to mitigate vendor risk and streamline processes

Why Venminder

We focus on the needs of our customers by working closely and creating a collaborative partnership

1.7.2020-what-is-a-third-party-risk-assessment-FEATURED
Sample Vendor Risk Assessments

Venminder experts complete 30,000 vendor risk assessments annually. Download samples to see how outsourcing to Venminder can reduce your workload.

DOWNLOAD SAMPLES

About

Venminder is an industry recognized leader of third-party risk management solutions. 

Our Customers

900 organizations use Venminder today to proactively manage and mitigate vendor risks.

Get Engaged

We provide lots of ways for you to stay up-to-date on the latest best practices and trends.

Gartner 2020
Venminder received high scores in the Gartner Critical Capabilities for IT Vendor Risk Management Tools 2021 Report

READ REPORT

Resources

Trends, best practices and insights to keep you current in your knowledge of third-party risk.

Webinars

Earn CPE credit and stay current on the latest best practices and trends in third-party risk management.  

See Upcoming Webinars

On-Demand Webinars

 

Community

Join a free community dedicated to third-party risk professionals where you can network with your peers. 

Weekly Newsletter

Receive the popular Third Party Thursday newsletter into your inbox every Thursday with the latest and greatest updates.

Subscribe

 

Venminder Samples

Download samples of Venminder's vendor risk assessments and see how we can help reduce the workload. 

resources-whitepaper-state-of-third-party-risk-management-2023
State of Third-Party Risk Management 2023 

Venminder's seventh annual whitepaper provides insight from a variety of surveyed individuals into how organizations manage third-party risk today.

DOWNLOAD NOW

What Are Third-Party Risks?

4 min read
Featured Image

Whenever you obtain a product or service from a third party, you expose your organization and your customers to what is known as third-party risk. The specific types and amounts of risk present in a third-party engagement will vary greatly depending on the product or service. Identifying and understanding these risks is the first step in managing them.

Read on to learn more about the most common risks your organization may face when purchasing products and services from third parties.

Understanding What Third-Party Risks Are 

The term “third-party risk” refers to any risk introduced to your organization or its customers through an engagement with a third party. Third-party risk management is the process and practice of identifying, assessing, and managing those risks.

Before we dive further into risk types, there are two risk categories to understand. These are known as inherent risk and residual risk:  

  • Inherent risk is the natural or raw risk that occurs or is associated with a product or service and, therefore, the third-party relationship. The measure of inherent risk doesn't account for any existing or future controls that may reduce those risks' likelihood, occurrence, severity, or impact. 
  • Residual risk considers the amount of remaining risk after controls have been studied and substantiated. By measuring residual risk, you can evaluate how effectively the third party's controls address the inherent risks.

Often, the third-party controls can adequately address the risk, justifying your organization's decision to move forward with the relationship. However, controls are sometimes insufficient, and the residual risk may be too much for your organization to accept, resulting in a decision to avoid the relationship altogether. 

Types of Third-Party Risks

There are various risks depending on the type of third-party product or services your organization uses. Let's look at several of the most common types of third-party risks:

  • Strategic risk occurs when your third party's actions and/or decisions fail to help your organization meet its goals and objectives. For example, if your third party uses outdated technology, it may become difficult for your organization to perform normal operations. 
  • Compliance or regulatory risk happens when your third party fails to comply with laws or industry-specific guidelines. Your organization is liable for your third party's compliance and can be subject to legal action if your third party violates regulations. Examples of compliance risks include violating consumer privacy laws or having insufficient cybersecurity practices. 
  • Cyber or information security risk includes both cyber and physical security risk. It’s present whenever you have a third party that accesses, transmits, or stores your organization's sensitive data or that has access to your privileged networks or facilities. The threat of third-party data breaches has grown as hackers have developed more aggressive and sophisticated ways to breach private networks. Any gaps in your third party's controls must be addressed to protect your organizational or customer data.  
    third party risks
  • Financial risk exists when your third party has poor or declining financial health. Increasing costs, decreasing revenues, or losing a major customer can force your third party to discontinue a service or product that is crucial to your business or they may go out of business entirely. 
  • Operational risk is present when a third party's product or service is necessary to maintain your organization's daily operations. Suppose a business-disrupting event, such as a system failure or natural disaster, occurs and interrupts normal operations. In that case, your third party must have adequate plans to continue service at agreed-upon levels or resume operations within a given time.
  • Concentration risk occurs when your organization obtains several high-risk or critical products or services from the same third party. Suppose the third party suffers a major business interruption or failure. In that case, your organization will be impacted more severely than if the products and services were provided by different third parties.
  • Reputation risk occurs when your third party's actions or decisions impact your customers' perception of your organization. For example, suppose your organization suffers from a third-party data breach that resulted from a gap in your third party's security. In that case, your customers will have a negative opinion of your organization. Other examples include bad customer reviews, lawsuits, and negative publicity. 

It's important to note that these are only the most common types of third-party risks that your organization may face. There are, of course, more risks (such as geopolitical and ESG risks), and new risks are always evolving. Therefore, it’s crucial to perform thorough risk assessments to identify and understand the risks that must be managed to safeguard your organization and its customers. 

Every third-party relationship contains some risk; however, to manage those risks, you must first fully understand what third-party risks are. You must remain diligent as your organization outsources products and services and be aware of the risks posed by third parties.

Subscribe to Venminder

Get expert insights straight to your inbox.

Ready to Get Started?

Schedule a personalized solution demonstration to see if Venminder is a fit for you.

Request a Demo