Operational Resilience and Third-Party Risk Management are two key concepts essential to success. While these terms may seem similar, they have distinct differences and similarities that set them apart.
This blog will detail the differences and similarities between Operational Resilience and Third-Party Risk Management.
Operational resilience is the ability of an organization to withstand and recover from operational disruptions, whether caused by internal or external events.
Operational resilience involves identifying critical business functions and ensuring they can continue operating during a disruption. It also consists in developing plans to recover from the disruption and return to normal operations as quickly as possible.
Third-Party Risk Management (TPRM) is a crucial process for organizations that rely on external vendors, suppliers, partners, contractors, or service providers to deliver goods or services. These external entities are often referred to as "third parties."
TPRM focuses on identifying, assessing, mitigating, and monitoring potential risks associated with these third-party relationships. Disruptions or security breaches experienced by a third party can significantly impact your organization's operations, reputation, and financial well-being.
Differences between Operational Resilience and Third-Party Risk Management
| Operational Resilience | Third-Party Risk Management |
| Scope | |
| Takes a holistic view, focusing on the organization's ability to deliver critical business services during any disruption, regardless of its source. This could include disruptions caused by natural disasters, power outages, internal failures, pandemics, or even human error. | Focuses on managing risks associated with external entities such as vendors, suppliers, partners, contractors, or service providers (third parties). Disruptions or security breaches experienced by these third parties can indirectly impact your organization's operations. |
| Focus | |
| Emphasises identifying and mitigating all potential threats that could disrupt critical services. It focuses on building a robust internal foundation and ensuring the organization adapts and recovers from disruptions. | Focuses on assessing and managing risks that are explicitly associated with external dependencies. The goal is to ensure third parties are reliable and their potential failures won't have a ripple effect on your critical business services. |
| Relationship | |
| TPRM is a subset of OR: While OR addresses the broader spectrum of threats, TPRM plays a vital role within that framework by addressing risks specifically stemming from third-party relationships. A strong TPRM program can significantly enhance an organization's overall operational resilience. | OR provides the context for TPRM: Understanding third-party failures' impact on critical services allows for targeted risk assessments and mitigation strategies within TPRM. |
| Analogy to Illustrate the Difference | |
| is like building a solid foundation, sturdy walls, and a reliable roof to withstand various weather conditions (disruptions). It also involves having backup generators and alternative water supplies (adapting to different scenarios). | is like inspecting the quality of building materials used by subcontractors working on your house (assessing third-party reliability). |
Similarities between Operational Resilience (OR) and Third-Party Risk Management (TPRM)
| Proactive Approach |
| Both OR and TPRM emphasize a proactive approach to risk management. They identify potential threats (internal and external) in advance, assess their likelihood and impact, and implement strategies to mitigate or minimize those risks. |
| Shared Goal |
| Both frameworks aim to ensure the uninterrupted delivery of critical business services. While OR addresses disruptions from any source and TPRM focuses on third-party-related disruptions, both aim to minimize downtime and maintain operational continuity. |
| Risk Management Techniques |
| Both OR and TPRM rely on similar risk management techniques. These include risk identification, assessment, mitigation, and monitoring. Organizations build a comprehensive risk management strategy by applying these techniques to internal operations (OR) and external dependencies (TPRM). |
| Incident Response |
| Whether the disruption stems from an internal failure, a cyberattack on a third party, or another event, OR and TPRM emphasize the importance of having a well-defined incident response plan. These plans outline how the organization will identify, contain, and recover from disruptions while minimizing damage. |
| Communication and Collaboration |
| Effective communication and collaboration across various organizational levels are crucial for OR and TPRM. Sharing information, raising concerns, and working together to address weaknesses in internal operations or third-party relationships are essential for building a resilient organization. |
Summing Up ...
In essence, OR provides the broad framework for identifying and mitigating all potential disruptions to critical services.
TPRM focuses on a specific but crucial element within this framework: managing risks associated with external dependencies.
By working in tandem, OR and TPRM create a comprehensive approach to building a resilient organization capable of anticipating, adapting to, and recovering from diverse challenges.
Supplementary Explanations
More Information About Operational Resilience OR-5000 [BL-OR-5] or OR-300 [BL-OR-3] Course
To learn more about the course and schedule, click the buttons below for the OR-3 Blended Learning OR-300 Operational Resilience Implementer course and the OR-5 Blended Learning OR-5000 Operational Resilience Expert Implementer course.
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