Have you ever wondered what sets a vendor risk assessment apart from a third-party risk assessment? It’s easy to confuse them because they sound so alike. In fact, people often mix them up, but they aren’t quite the same. Understanding the difference can change how well your business handles outside risks.

Think of it like red apples and tomatoes. They’re both round and red, so they seem similar at first. But when you taste them, they’re completely different. One is a fruit, and the other is a vegetable. It’s the same with vendor and third-party risk assessments. They might sound like they cover the same thing, but they focus on different types of risks.

In this blog, we’ll explain what makes these two assessments different, when to use each one, and how both can help protect your business.

Let’s Start with the Basics: What Are Third-Party and Vendor Risk Assessments?

To protect your business, it’s important to understand both third-party and vendor risk assessments. Let’s start with a third-party risk assessment. Third-party risk assessments involve identifying, assessing, and managing risks from any outside group working with your company. These groups can be but are not limited to, suppliers, partners, or service providers. These relationships often provide substantial benefits that help your business grow, but they can also open your organization to severe risks. Third-party risks are not uncommon either, a survey by Deloitte shows that 83% of companies have faced problems because of third parties.

To dive deeper into how third-party risks can impact your business, check out our detailed blog on What is a Third-Party Risk Assessment? The blog explains why 60% of security problems come from third-party weaknesses and shares practical ways to handle these risks, so your business stays safe while working with external partners.

Now, let’s talk about what a vendor risk assessment is. Vendor risk assessments focus on  risks from your direct suppliers, the ones providing the goods and services your business relies on daily. If you ignore these risks, you could face delays or problems with product quality. Since cybersecurity has become a major concern, Gartner is predicting that by 2025, 60% of companies will prioritize cybersecurity when choosing vendors. To understand vendor risk assessments in detail, be sure to check out our upcoming blog, what is a Vendor Risk Assessment and How to Conduct One? It will walk you through the vendor risk assessment process step-by-step to help you protect your business from vendor-related risks.

In the next section, we’ll talk about the key differences between these two assessments and when to use each one.

Key Insights: How a Vendor Risk Assessment Differs from a Third-Party Risk Assessment

Risk assessments aren’t a one-size-fits-all risk mitigation tool. Third-party risk assessments cover a wide range of external partners, while vendor risk assessments focus more narrowly on your suppliers. Let’s break down the key differences to see how each one can protect your business in different ways.

• Scope of Coverage

A third-party risk assessment covers all the external entities your business deals with, like partners, consultants, service providers, and other outside groups. It looks at a broad range of external relationships that  impact your business. Essentially, anyone or any group that’s part of your operations falls under third-party risk.

On the other hand, vendor risk assessments focus specifically on direct suppliers i.e. those who provide the goods and services essential to your business’s daily operations. This includes companies that supply raw materials, parts, or any service directly tied to your business’s core activities.

• Risk Focus

A third-party risk assessment takes a broader approach. It looks at risks such as regulatory compliance, cybersecurity vulnerabilities, and the reliability of all external partners. This is important because any third party could introduce risks that affect multiple areas of your business, like legal issues, data breaches, or service interruptions.

In contrast, vendor risk assessments focus more specifically on supply chain risks. These include delivery delays, product quality problems, or a vendor’s overall performance. The goal is to ensure that your suppliers consistently meet your needs without causing disruptions or compromising quality.

• Assessment Approach

Third-party risk assessment uses a comprehensive framework to evaluate all your external partners. This includes reviewing their compliance with industry regulations, the security of their IT systems, and their ability to maintain operations. The aim is to make sure that any third party working with your business doesn’t introduce serious risks.

For vendor risk assessments, the focus is narrower. It’s all about your suppliers; reviewing their reliability in delivering goods or services on time, the quality of what they provide, and how well they meet their contracts. This assessment ensures that your suppliers meet your expectations for performance and reliability.

• Impact on Business

A third-party risk assessment can impact many areas of your business, including compliance with laws and regulations, data security, and overall business continuity. For example, if a third-party IT service provider suffers a security breach, it could cause legal and operational challenges for your company.

Vendor risk assessments, on the other hand, focus more on your supply chain. Issues like delivery delays or poor-quality products can directly affect your ability to meet customer demands and maintain smooth operations. These problems are typically operational and can lead to production slowdowns or unhappy customers.

• Risk Mitigation Techniques

When it comes to third-party risk assessments, risk mitigation involves continuous due diligence and monitoring. This means regularly checking that your third parties remain compliant with regulations, have strong cybersecurity measures, and continue to be reliable partners. The goal is to maintain long-term security and compliance across all external relationships.

For vendor risk assessments, the focus is on monitoring performance. This involves tracking delivery times, product quality, and overall reliability. By keeping a close eye on these factors, businesses can make sure that vendors continue to meet expectations and don’t cause disruptions.

When to Use Each Approach

Knowing when to use a third-party risk assessment versus a vendor risk assessment is crucial for managing risks. Each one has its own purpose and using the right one can protect your business.

You should use a third-party risk assessment when you’re dealing with a wide range of external entities. This could include IT service providers, consultants, or partners helping with regulatory compliance. These relationships can have a big impact on your business, so it’s important to assess them carefully.

A vendor risk assessment is best used when focusing on direct suppliers and businesses that provide the goods or services you need every day. For example, raw material suppliers or logistics providers play a vital role in keeping your operations running smoothly, so assessing their risks helps you avoid disruptions.

The Right Tools for Effective Risk Assessment

Having the right tools to manage both third-party and vendor risks is essential for protecting your business. With the right risk management solution, you can easily assess risks, monitor ongoing issues, and prevent disruptions.

That’s where iTech GRC, an IBM OpenPages Partner, comes in. IBM OpenPages offers an all-in-one platform designed to help you manage both third-party and vendor risk assessments. It automates the entire process, from identifying risks to continuous monitoring, ensuring your business stays compliant and secure. With iTech GRC’s expertise, you’ll get the most out of IBM OpenPages, tailored to your unique business needs. Whether you’re managing suppliers or external partners, we help you strengthen your risk management strategy.

Final Thoughts

By using both vendor and third-party risk assessments in the right way, you can protect your business from external threats. With iTech GRC and IBM OpenPages, you have the tools to stay ahead of risks and keep your operations safe.

Want to improve your risk management? Contact iTech GRC today to learn more about how we can support your business. If you have any thoughts or questions, feel free to leave a comment below. We’d love to hear from you!