What’s the Difference? Vendor Risk vs Third-Party Risk vs Supplier Risk Management

Risk Management Program Differences

The words are frequently used interchangeably. Is there a difference between them? 

The Basics 

Vendor Risk Management (VRM), Third-Party Risk Management (TPRM), and Supplier Risk Management (SRM) are programs that companies employ to assess their relationships with third parties or suppliers for potential risk. The most common types of risk a company will want to evaluate for are regulatory, operational, financial and reputational.   

The purpose and function of VRM, TPRM and SRM are similar: the core process is to identify, assess, monitor and mitigate risk. The slight variations between each program depend on your company’s unique relationship and demands. 

Vendor Risk Management or Third-Party Risk Management 

In recent years, risk experts have (mostly) come to agree that the difference between Vendor and Third-Party Risk Management is overwhelmingly semantic. “Third-party” is a catch-all term used to describe every organization your company interacts with, while “vendor” is typically used to describe a provider of a product or service. 

Regardless of nomenclature, both programs are equally concerned with monitoring risk for the duration of the third-party lifecycle, from initial onboarding to the end of contract. By focusing on a company’s individual relationship with each vendor or third-party, each program provides a thorough evaluation of inherent and residual risk 

There will always be risks, but the specific risks and degree of that risk will differ based on several factors: data, network or facility access, volume of information exchanged, geographic location, etc. A risk management program platform that identifies third-party risk tiers and automates the processes can help you focus on critical vendors 

Supplier Risk Management  

Supplier Risk Management strays from Third-Party Risk Management’s fine-tuned focus to assess the entire supply chain. SRM programs also monitor sourcing to protect the organization against risks that can result in grave consequences before a supplier is onboarded.  

SRM is most relevant to the product industry, where companies need a clear understanding of who they are sourcing materials, labor and other components from. Like Third-Party Risk Management, organizations need to know exactly what a supplier does for them, and they must also assess the supply chain on a broader scale to understand how its structure can pose additional risks. For example, a company may assess for geographic concentration to limit the risk a natural disaster could pose by assessing if their suppliers are all located in one areaWith the general shift towards offshoring practices, SRM also considers unique risks such as ethical production, geographical concentration and spend concentration. 

Though Supplier Risk Management is concerned with different risks than Third-Party Risk Management, the way these risks are managed within program remains consistentThe first step in establishing a successful risk management program is identifying the unique risks your third parties or suppliers pose. 

Building the Right Program for Your Company 

The most important question to consider when building your program is where your company stands with third parties or suppliersDo they pose an inherent risk to your organizationWhat data do you share with them? Which regulations do they need to comply withOther factors, such as industry focus, company size and the number of third-parties or suppliers you must assess must also be considered to fully determine risk.  

When it comes to risk management, there are no hard and fast rules  depending on size and focus, companies can have both types of programs at varying maturity levels.  Your organization should select the framework that best fits your needs, keeping in mind that there is no right or wrong between programs. It is simply a matter of effectively aligning your business process with your risk process. A centralized platform solution can help your organization achieve this. 

Selecting the Right Platform for Your Program 

Determining the most fitting program for your company is only one piece of the puzzle – the next step is to centralize your program with an efficient and intuitive solution. Selecting a standardized platform with automated tools for the entire third-party lifecycle is crucial to seeing a return on your program investment. ProcessUnity Vendor Risk Management automates workflows within any of the three programs, helping you to creata streamlined, all-in-one program that enables your company to easily assess and mitigate risk.  

ProcessUnity Vendor Risk Management eliminates the time and resources that are wasted in spreadsheet-based programs by simplifying program processes for ongoing monitoringdue diligence, assessments and moreWhether your company is looking for a quick-to-deploy solution or more complex program, ProcessUnity enables risk management teams to drive results. 

Whichever risk management program your company demands, be it third-party or supplier, the solution should ensure that your program works for you. A powerful solution will synchronize your unique process to build a consistenteffective risk management program within your organization. To learn how ProcessUnity Vendor Risk Management can help you formalize your risk management program, request a demonstration or contact us today.