OR Core Component [4] Third-Party Risk Management

Operational Resilience Core Component [4]: Third-Party Risk Management

Third-Party Risk Management (TPRM) is an integral part of operational resilience.

Organizations can fortify their ability to withstand disruptions, maintain operations, and adapt effectively when faced with third-party-related challenges by identifying, assessing, mitigating, and continuously monitoring risks associated with external relationships.

TPRM is crucial in bolstering an organization's operational resilience, especially in today's interconnected business landscape, where many operations rely on external vendors, suppliers, and service providers.

These are the factors on how TPRM is related to operational resilience.

Dependency and Interconnectedness

Many organizations depend on third parties for critical services, products, or technology. Any disruption or failure in these third-party services can directly impact the organization's operations.

Operational resilience involves understanding and managing these dependencies to ensure continuity, making robust TPRM essential.

Risk Identification and Assessment

TPRM involves identifying and assessing risks associated with third-party relationships. These risks could include operational failures, cybersecurity vulnerabilities, compliance issues, or financial instability within the third-party organization.

Identifying these risks is critical to enhancing operational resilience by proactively addressing potential points of failure.

Mitigation and Controls

TPRM focuses on implementing controls and mitigation strategies to manage risks associated with third-party relationships.

This contributes to operational resilience by reducing the likelihood and impact of disruptions caused by third-party issues.

Contractual Agreements and BC-CM Planning

Operational resilience requires having robust contractual agreements with third parties that include business continuity and crisis management plans in case of disruptions.

TPRM involves negotiating contracts that outline responsibilities during disruptions, ensuring that the organization can maintain essential operations even if a third party faces challenges.

Continuous Monitoring and Response

TPRM involves continuous monitoring of third-party performance and risk factors. This proactive approach aligns with the broader concept of operational resilience, which emphasizes the need for ongoing monitoring and adaptive responses to maintain operations in the face of disruptions.

Recovery and Business Continuity

In the event of a disruption caused by a third party, operational resilience includes having contingency plans and recovery strategies to minimize the impact and swiftly recover operations.

TPRM contributes by providing insights into potential disruption scenarios and helping develop recovery plans.

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