Third-party relationships can introduce risks to privacy, security, and regulatory compliance. If left unchecked, these risks can lead to non-compliance, operational disruptions, and reputational damage.
Consequently, TPRM (Third-party risk management) has become integral to corporate policy. Adopting TPRM allows companies to plan for business continuity and monitor third parties to uphold brand reputation.
However, third-party risk management isn’t short of challenges. To help you prepare, we pulled together a list of the ten most common TPRM challenges and discussed how you can overcome them.
What Is Third-Party Risk Management?
Third-party risk management is a framework of policies and procedures to identify and mitigate risks associated with outsourcing to third-party service providers or suppliers. Today, however, most companies extend the scope of supplier management to mitigate fourth-party and fifth-party risks, especially when they process sensitive data, intellectual properties, and other sensitive data.

Third-Party Risk Management Challenges
Even with the best approach, your company will likely face third-party risk management challenges. The exact challenges largely depend on a company’s level of reliance on third parties, financial well-being, and compliance with regulations.
However, let’s focus on the top 10 challenges plaguing TPRM systems.
1. Getting Third-Parties to Collaborate and Share Information
Implementing an effective TPRM program depends heavily on the collaboration and transparency of third parties. Third parties need to share their compliance and regulatory information with your organization to ensure they are adequately covered to work with you. However, some third parties are reluctant to share proprietary or sensitive information due to concerns about confidentiality, competitive advantage, or legal and contractual constraints.
With limited information, a business will struggle to gather reliable and timely data for its TPRM program, risk mitigation strategy, incident response protocols, and security practices.
To foster collaboration for a successful TPRM program, your organization should encourage open communication with third parties, build stronger relationships, and clearly define contract information-sharing protocols.
2. Regulation Compliance
An organization can have suppliers in different regions and countries. However, having suppliers in different locations poses issues when undertaking a comprehensive supplier risk assessment since different jurisdictions have unique regulations and policies. Besides, keeping tabs on the ever-changing requirements of various regions can be overwhelming.
To remain compliant, clearly communicate your regulatory guidelines to new suppliers during onboarding. If necessary, educate them on your policies and expectations. You can also minimize risk exposure by verifying your suppliers’ certificates of insurance (COI) as part of due diligence.
3. Managing Complex Supply Chains
When an organization partners with multiple suppliers, the supply chain becomes complex, making it difficult to identify, assess, and mitigate third-party risks. This complexity can complicate the tracking of potential risks, limiting understanding of a threat’s origin. And when the chain includes suppliers from different regions or industries, monitoring and enforcing compliance becomes more challenging.
Position your TPRM systems so that they can assess risks at every level of your supply chains. Let your team collaborate with different departments in your company, such as procurement and legal, to foster a culture of accountability when dealing with a third party.
4. Data Integration and Management
Effectively managing third-party risks involves compiling data from various sources, including safety reports, supplier risk assessments, COI reports, and performance metrics. Managing these diverse data types and ensuring consistency in interpretation can be challenging. After all, different data sources have different structures, formats, and terminology.
Centralizing your TPRM system is the easiest way to overcome data integration and management challenges. It consolidates information from multiple sources, analyzes the collected data, and facilitates a data-driven approach to risk management.
5. Cultural Resistance and Change Management
Some organizations have deeply entrenched processes and have problems with significant cultural shifts. Board members may be unwilling to support implementing a comprehensive TPRM program due to budget concerns or fear of profit cuts. When that’s the case, arm yourself with reports and statistics and explain to board members that ignoring third-party risk management challenges will expose your organization to risks in the long run.
6. Prioritizing Third-Party Risks and Allocation Resources
After a company has identified all the risks third parties pose, deciding which ones are worthy of risk remediation might be challenging. Businesses have limited time, energy, and resources to pursue remediation, communicate solutions, analyze flaws in third parties, and monitor updates. As such, choosing the third party to prioritize can be difficult.
However, an organization with complete third-party risk management software, such as Evident, will have an easier time addressing the challenges of risk remediation. The software allows a company to:
- Rank security risks by severity
- Proactively monitor third-party risk
- Waive non-critical risks
- Request remediation from third parties
- Gather security evidence
- Prioritize remediation across the entire ecosystem
7. Prioritizing Supplier Risks and Allocating Resources
Due to limited resources, an organization might have to prioritize third-party suppliers with the highest risk. Choosing which suppliers to assess first and allocate resources accordingly is challenging.
In that scenario, generative AI in your TPRM program becomes a necessity rather than a luxury. The role of generative AI in automating processes and assessments, providing trend reports, and supporting document mapping will help your organization reduce costs and address labor limitations.
8. Overlooking Low-Risk Suppliers
A low-risk supplier presents the lowest likelihood of causing disruptions and operations downtime. However, sometimes TPRM teams might label suppliers as low-risk without thorough vetting, leading to unanticipated risks.
Proper vetting should be the bare minimum. Your organization can achieve this by following strict criteria to determine appropriate standards for third-party financial stability, delivery consistency, and policy and insurance compliance with relevant authorities.
9. Transparency Issues
Third-party suppliers can be unwilling to collaborate if there are transparency issues. These often lead to poor communication and restrict the sharing of critical data.
When you’re overseeing critical suppliers, prioritize building trust. Once you’ve established trust, it will be easier for different teams and departments to liaise and share data more openly. That way, you can anticipate potential issues before they snowball, leading to a more resilient and successful partnership.
10. Reliance on Manual Processes
One of an organization’s biggest challenges in managing third-party risks is determining what risk assessment activities are necessary to audit the third party’s risk profile. When executing due diligence, the company needs to assign third parties to separate risk tiers depending on factors such as:
- Operation importance
- Third-party proximity to sensitive data
- Jurisdiction
The categorization allows businesses to manage and accurately assess the risk level a third party poses to an organization. If a business skips the categorization in its due diligence plan, it might have difficulty assessing the safety of its third parties.
Many organizations tend to have most of their TPRM processes done by an employee who is likely reaching retirement age and has been doing it manually for decades. As a company, you may be looking to replace this job with a software application to automate workflows. Automation will streamline data collection, risk assessments, and process monitoring to improve efficiency, consistency, and accuracy.
Besides, an automated TPRM can readily integrate with other systems in other departments to facilitate data sharing, improve visibility across departments, and support holistic risk management strategies.
Overcome TPRM Challenges With Evident
Overcoming TPRM challenges requires preparation to manage an effective TPRM program. Your company should identify and address the most common struggles in managing third-party risks.
In a setting where risks are as diverse as third-party management, integrating generative AI and natural language processing can help process data, streamline workflows, minimize administrative tasks, and ensure compliance.
Evident can do the heavy lifting for you if you’re looking to add intelligence to every phase of the TPRM lifecycle. Request a demo today to learn how Evident can help you transform your TPRM program.
