TPRM: The vendor you reviewed last year may be your biggest risk today
Banks, insurers and payment firms increasingly rely on external providers for critical operations, customer services and technology platforms. At the same time, regulatory expectations continue to rise. Under DORA, institutions are expected to understand their dependencies, maintain oversight and respond when risks change. Yet many organizations still rely on annual reviews, spreadsheets and static supplier classifications. The result? Risk moves faster than the process designed to manage it.
Why Traditional Third Party Risk Management is struggling
Most financial institutions can report their number of vendors. However, far fewer can say which third parties could disrupt their business tomorrow. The majority of Third Party Risk Management (TPRM) programs were built for a slower world: A vendor receives a classification during onboarding, completes a due diligence assessment and is reviewed again a year later. This cyclic evaluation rests on the assumption that little changes in between, but in reality, a lot can change.
For instance, an acquisition might introduce concentration risk, a software provider may suddenly support multiple critical business functions or new data types may be added to a service. Yet vendors often remain in the same risk tier for years simply because nobody revisits the file. This creates a dangerous blind spot; the vendor that looked low risk twelve months ago may now represent one of the organization's most significant operational or regulatory exposures.
Prioritization and dynamic risk tiering
While there is no lack of policies or questionnaires, teams struggle with what to focus on first with limited resources. When every vendor goes through the same process, critical providers compete for attention with low-risk suppliers. Teams spend valuable time reviewing office services and commodity vendors while high-impact third parties may not receive the scrutiny they deserve.
Leading organizations address this through dynamic risk tiering. Instead of relying on intuition or contract value, vendors are classified using factors such as operational criticality, data sensitivity, regulatory relevance, concentration and substitutability risk, external cyber and financial risk indicators.
A quick reality check on your TPRM
Select the ten vendors that support your most critical business services and ask:
Has their business scope changed in the last year?
Are they processing more sensitive data than before?
Would you classify them in the same risk tier today?
What event would trigger a reassessment?
If those questions are difficult to answer, operational visibility may be an issue.
The biggest TPRM risk is not necessarily a weak vendor. It is an outdated view of vendor risk. Financial institutions need a more dynamic approach that continuously reflects the reality of their third-party landscape, because you cannot effectively manage the risks you are no longer seeing.
For more considerations and practical steps, download the guide From policy to practice: how to operationalize TPRM in the financial sector.
Rather talk about TPRM directly? Get in touch
Davide Bonalumi
Senior Manager Cybersecurity
+31615045242
