Comparing Third-Party Risk Management Approaches: A Deep Dive into Five Solution Types

Cost-Effective
Spreadsheets are usually part of office software suites, which many organizations already own and pay for out of the IT budget. This makes them a cost-effective option for TPRM teams—or one with at least a low initial cost that avoids the need for purchasing and implementing specialized risk management tools.

Scalability
Spreadsheets can easily become cumbersome and challenging to manage, especially with large vendor populations. Large datasets can slow down spreadsheet performance, leading to inefficiencies.

Flexibility and Customization
Spreadsheets are easily customized to fit specific risk management processes and templates. Almost anyone can adjust and modify them to accommodate changing needs and new data points.

Data Integrity and Accuracy
Spreadsheets are prone to human error like incorrect data entry, formula mistakes, and unintentional alterations. Spreadsheets also lack robust data validation mechanisms, which increases the risk of inaccurate or incomplete data.

Ease of Use
Most users know how to use spreadsheet software, so there’s no learning curve. Sharing information is also easier because stakeholders are familiar with the tool. Basic data visualization tools, such as charts and graphs, help illustrate risk data.

Lack of Advanced Features
Spreadsheets offer minimal automation, leading to time-consuming manual processes. They do not provide real-time monitoring or alerts for changes in third-party risk status, limiting their usage to questionnaire-based assessments.

Easy Access
Spreadsheets can be easily shared and accessed across different devices and platforms, ensuring that all relevant stakeholders can view and edit the data.

Collaboration Challenges (e.g., Version Control)
Managing multiple versions of a spreadsheet can lead to confusion, discrepancies, and version control problems. Limited support for real-time, multi-user collaboration (especially involving those outside the organization) can hinder program efficiency and coordination.

Security Concerns
Spreadsheets often lack advanced security features, making sensitive risk data vulnerable to unauthorized access and breaches, especially when shared with third parties. Implementing and managing access controls can be challenging, especially in larger organizations.

Static Reporting
Generating comprehensive third-party risk reports from spreadsheets can be labor-intensive and time-consuming. Reports are often static and do not provide dynamic, real-time insights into third-party risk.

Cyber Risk Specialists
These tools use various data sources (some owned, and others licensed) and methodologies to evaluate the cybersecurity strength of third parties, assigning scores based on their findings.

Cyber Only
Cybersecurity risk ratings tools are limited to cybersecurity risk only, lacking broader risk monitoring for business and financial problems, ESG findings, compliance and sanctions violations, and operational disruptions.

Continuous Monitoring and Alerting
Cybersecurity risk ratings tools offer ongoing monitoring of third-party cybersecurity practices and alert organizations to changes in risk levels.

Limited Questionnaire-Based Assessment
Most cybersecurity risk ratings tools are either unable to conduct questionnaire-based internal controls assessments or treat assessments as a post-monitoring afterthought, leaving unremediated risks. This is a non-standard approach, since most organizations prefer to first conduct internal controls assessments and then use external monitoring solutions to validate the vendor-reported data.

Data-Driven Insights
Cyber scoring tools leverage big data and machine learning to provide actionable insights and predictive analytics.

False Positives
Cybersecurity risk ratings tools are notorious for returning false positives. This can make it difficult for third-party risk teams to properly understand the true risks they face and require significant investigation time, distracting from important risk mitigation activity.

Holistic Risk Management
GRC tools offer a unified platform to manage various types of risks, including third-party risks, within the context of overall enterprise governance and compliance requirements.

Lack of Third-Party Focus
Because many GRC tools offer a bolt-on module for third-party risk (usually acquired and integrated), they typically lack specialization and deep expertise in TPRM.

Policy Orchestration and Compliance Integration
GRC tools emphasize aligning third-party risk management with internal policies and regulatory requirements.

Complex and Costly Deployments
GRC tools are notoriously complex and can require significant customization to address the breadth of risks for which they are designed. The initial cost of purchasing and implementing GRC tools can be significant, which may be a barrier for smaller organizations.

Reporting and Analytics
GRC tools often come with robust reporting and analytics, facilitating comprehensive risk analysis and decision-making.

Extensive Resources Required
Ongoing maintenance and updates of GRC tools can be resource-intensive, requiring dedicated IT support.

Limited Help Available
Most GRC tools lack managed services to aid and augment internal IT security teams’ third-party risk assessment initiatives. Without extra scale, internal teams can fall behind in their assessments.

Integrated Procurement and Risk Management
S2P suites integrate risk management into the procurement lifecycle, ensuring that risk considerations are factored into sourcing decisions.

Lack of Third-Party Focus
Like GRC tools noted above, many S2P suites offer a bolt-on module for third-party risk (usually acquired and integrated), and therefore typically lack specialization and deep expertise in TPRM – especially from the perspective of cybersecurity risks.

Supplier Evaluation and Onboarding
S2P suites offer tools for evaluating and onboarding suppliers, including risk assessments and compliance checks.

Focused on Early Stages
Because of their usage by procurement professionals, S2P suites often overlook broader risk aspects by focusing on sourcing, initially evaluating and onboarding vendors. Less consideration is paid to other important stages of the third-party risk lifecycle or to the unique concerns of IT security teams.

Contract and Performance Management
Source-to-pay suites help manage supplier contracts and performance, incorporating risk metrics and monitoring.

Limited Risk Assessment
S2P suites deliver risk insights through partnerships with data and risk intelligence providers, which is intended to score supplier risk and enable better decision making. However, the level of risk analysis typically included in most S2P suites is insufficient for ongoing risk management.

Specialization
A TPRM platform’s laser-focused approach enables in-depth expertise and advanced functionalities tailored to third-party risk management.

Integration
Dedicated TPRM platforms are specifically designed to manage third-party risks, which may require integration with other risk management tools such as S2P suites, GRC tools, reporting platforms, etc.

Tip: Look for TPRM solutions that feature a library of pre-built integrations or an open API that can quickly speed the process.

Comprehensive Risk Assessment
TPRM platforms offer extensive risk assessment capabilities, including cybersecurity, financial, operational, regulatory, and reputational risk evaluations.

Proprietary or Non-Standardized Assessments
Be wary of overly customizing risk assessments; this can make comparing and scoring vendors less consistent.

Tip: Seek out TPRM solutions that offer an extensive library of standardized assessment templates.

Continuous Monitoring
TPRM providers typically offer real-time monitoring and alerting mechanisms to keep track of third-party risk status and changes in between regular assessments.

Siloed Monitoring Tools
Some dedicated TPRM platforms lack comprehensive continuous monitoring of multiple risk types beyond cybersecurity threats.

Tip: Investigate fully integrated platforms that deliver seamless integration between assessment findings and continuous monitoring results.

Lifecycle Coverage
TPRM platforms typically specialize in evaluating and mitigating risks across the lifecycle of the third-party relationship – from sourcing and selection to offboarding and termination.

Resource Flexibility
To accommodate growing numbers of third parties to assess, organizations may need to allocate appropriate resources.

Tip: Examine managed services options or networks of completed risk assessments to alleviate resource constraints.