5 Red Flags by Third-Party Risk Management Domain

5 minute read

April 2024

Third-party risk management (TPRM) teams have a challenging job: they must evaluate a large volume of third parties across various risk domains without slowing down onboarding cycle times or creating challenges for the Procurement and Risk teams. Making matters trickier, they need to do so with limited visibility into the organizations they’re looking to partner with. Where an internal compliance or cybersecurity officer has the leverage necessary to gain organizational visibility, a third-party risk manager must work from outside. Every organization’s third-party risk management needs differ, but this blog will review red flags, sorted by third-party risk management domain, that everyone should look out for. 


No organization works independently of its geographical and political context. Suppose a company is based in a country known for widespread corruption and political instability. In that case, that may indicate that your TPRM team should approach them with caution and investigate their operations. Often, in locations where corruption is the norm, bribery and dishonest dealing are considered part of doing business—and that can lead to serious regulatory penalties for any company that works with them.  

Another geopolitical factor worth investigating is a company’s relationship with the government of the country in which they are based. If key members of the organization are connected to the government by fiscal or family relationships, that may be a sign of illegal dealings. Similarly, if major stakeholders are currently serving as government officials, or if they did serve in the past, that’s another indicator that the TPRM team should further investigate for signs of corruption. For instance, the war in Ukraine and sanctions imposed on Russia may influence the cost/benefit of working in those regions, especially depending on the relationship between key stakeholders and the relevant government bodies. Additionally, anti-bribery and anti-corruption (ABAC) laws can severely impact which countries are worth working with. 


It’s not easy to put a price tag on an organization’s reputation—but it’s not hard to see the adverse impact of a reputation gone bad. For example, reporting on the strenuous working conditions at Shein’s suppliers made many consumers uncomfortable doing business with the company. This eventually pushed the organization to create a $15 million expenditure to improve standards at its supplier factories.  

When evaluating a prospective third party for reputational risk, one red flag to look for is environmental, social and governance (ESG) reporting that focuses on only one jurisdiction of the company’s operations. Organizations that carry out reputationally damaging operations often focus their disclosures on where they are headquartered while ignoring their operations in jurisdictions with looser regulations. This strategy gives analysts the false impression of a clean bill of health. 



One red flag regarding a prospective vendor’s cybersecurity is a lack of training requirements for employees and service providers. While organizations should have policies and technologies to protect their data, most data breaches are caused by human error. According to recent research, social engineering accounts for 98% of cyber-attacks 

The implications are obvious: a company can have state-of-the-art technology protecting its assets and systems, but its data isn’t safe until its employees and partners are effectively trained to detect phishing and social engineering when it happens. For this reason, TPRM professionals must be on the lookout for training policies in the third-party ecosystem. After all, if a cybersecurity team has tenuous control over internal employees’ cyber-related behavior, then behavior at the third-party level must be trained and documented before an organization can be confident that its data is safe. 


A strong indicator that a prospective third party might introduce compliance risk to your organization is if their industry or location would subject your organization to regulations it didn’t have to comply with previously. At that point, it may be worth shaping up your policies to achieve compliance, but the cost of attaining compliance may outweigh the profit gained by securing a new customer or partner. Another area to look at when evaluating compliance risk is a potential partner’s compliance history: have they maintained a good compliance status over time, or do they have a history of violations? Do they have a history of strong responses when they are found in violation?  

Supply Chain 

The explosion of the global vendor ecosystem has been a massive boon for organizations around the world. It allows companies to execute functions that would be too complex or expensive to handle in-house, enabling organizations to adjust to a dynamic business environment more nimbly. Still, some unique challenges have arisen as third-party partnerships have become endemic to modern business. While at first glance, the explosion of vendor relationships would appear to distribute functionality and provide a bulwark against service disruptions, the opposite is sometimes true. 

Concentration risk is the risk that large portions of your vendor ecosystem depend on a small handful of vendors to provide you with essential services, meaning a breach or disruption at one of the central providers could have unforeseen consequences across various critical functions. Suppose a prospective third party relies on a centralized body of large providers to provide you with functionality. In that case, that is a strong indicator that they may be subject to concentration risk and may introduce the risk of service interruptions. 

How ProcessUnity Can Help

ProcessUnity can play an instrumental role in helping your team identify and manage TPRM red flags. We offer a comprehensive, scalable solution that combines automation, data integration, an assessment exchange, and AI capabilities for effective third-party risk management. ProcessUnity’s platform can help standardize risk assessments, automate workflows, and provide actionable insights for informed decision-making. Its powerful analytical tools and customizable dashboards make monitoring and reporting a breeze, ensuring compliance with various frameworks, regulations and standards. With ProcessUnity, you can transform your TPRM from a daunting task into a strategic advantage, enhancing risk visibility, improving vendor relationships and driving organizational resilience. 

Get started on your journey to a more resilient, data-driven, and proactive third-party risk management process with the ProcessUnity Third-Party Risk Management platform. Don’t hesitate – take the next step in revolutionizing your risk management approach today. Contact us to schedule a demo or to learn more about how ProcessUnity can empower your organization. ProcessUnity can empower your organization. 

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About Us

ProcessUnity is a leading provider of cloud-based applications for risk and compliance management. The company’s software as a service (SaaS) platform gives organizations the control to assess, measure, and mitigate risk and to ensure the optimal performance of key business processes. ProcessUnity’s flagship solution, ProcessUnity Vendor Risk Management, protects companies and their brands by reducing risks from third-party vendors and suppliers. ProcessUnity helps customers effectively and efficiently assess and monitor both new and existing vendors – from initial due diligence and onboarding through termination. Headquartered outside of Boston, Massachusetts, ProcessUnity is used by the world’s leading financial service firms and commercial enterprises. For more information, visit www.processunity.com.