If you haven’t already implemented third-party risk management automation in your organization, it should be high on your priority list. Automation in third-party risk management brings a multitude of benefits, from facilitating real-time continuous vendor risk monitoring to eliminating tedious manual tasks that are time-consuming and error-prone.
Before we discuss the reasons why you should automate third-party risk management, let’s define the term in detail.
What Is Third Party Risk Management?
Third-party risk management (TPRM) is a risk assessment framework that involves identifying, assessing and mitigating cybersecurity and compliance risks that third parties pose in business processes. Third parties are service providers, vendors, contractors, suppliers, partners and any other external business your company collaborates with. The primary differentiation between third party and vendor is that vendor is a narrower term that’s included in “third party”.
The main goal of a third-party risk management program is to identify potential security vulnerabilities that can come from working with third parties and to develop a risk mitigation framework to avert those risks. Ideally, a TPRM program is a 5-step process that includes:
- Risk identification
- Risk assessmentÂ
- Risk mitigation
- Ongoing risk monitoringÂ
- Offboarding process
Completing each step involves a lot of complex and repetitive workflows like verifying identities and tax information and OFAC screening. This is where automated workflows save the day. Automating these processes saves time and resources and reduces the chances of errors slipping into workflows.
Top 5 Reasons for Third-Party Risk Management Automation
Take a look at these compelling reasons to automate third-party risk management.
1. Compliance With Nacha’s Upcoming Rule Changes
The National Automated Clearing House Association (Nacha) sets rules and policies for the Automated Clearing House (ACH) network. All types of businesses, from big retailers such as Amazon to financial institutions and online vendors, rely on the ACH network to make payments for different bills.
The widespread use of ACH allows for many cyber fraud risks, such as vendor impersonation and Business Email Compromise (BEC). Nacha’s rule update, set to start in June 2026, seeks to stop these risks by mandating organizations that send ACH payments to implement risk-based processes to mitigate various ACH-related risks.
The update requires companies to develop a process to verify third party bank account information. Here again, automation is your best option for implementing this rule update effectively. Nacha urges organizations to automate payee onboarding and ongoing transaction monitoring to stay fully compliant with the regulatory requirements.
2. Optimize Third-Party Onboarding and Due Diligence
The more your organization grows, the more third parties you’ll work with. This means more onboarding and due diligence workflows. Conducting these processes manually takes too much time and limits your capacity to validate and efficiently onboard multiple vendors. But automation enables intelligent third-party onboarding at scale by eliminating manual processes such as vendor data entry and assessment.
Artificial intelligence (AI) tools support third party onboarding and due diligence by automating:
- Third-party data extractionÂ
- Third-party risk profiling
- Third-party questionnaire routing and reviews
- Third-party background checks
Automating these detailed processes helps your company scale third-party onboarding without compromising security standards or the onboarding experience. In addition, automated tools can continuously monitor third-party compliance with frameworks like SOC 2 or ISO 27001, reducing compliance risks across the supply chain.
3. Streamline Third-Party Risk Auditing and Continuous Monitoring
You may start your third-party risk management automation with validation and onboarding, but it doesn’t end there. Rather, you must undertake continuous monitoring to assess the changing security posture of the third parties you’re in business with. This involves continually auditing their risk profiles and monitoring their security practices to identify possible security vulnerabilities early.
Automating risk auditing and monitoring enables you to receive real-time alerts of possible cyber attacks before they happen. Such proactive alerts give you the wiggle room to fortify the cybersecurity framework of your third-party ecosystem and avert costly data breaches. According to IBM’s Cost of a Data Breach Report, breaches involving third-party vendors cost $370,000 more on average than incidents contained within an organization’s own systems. Automation reduces this risk by ensuring continuous monitoring and compliance reporting.
4. Centralize Third-Party Risk Validation and Management Systems
Automation allows you to develop a central ecosystem for third-party risk validation and management instead of using multiple disconnected systems that can lead to inefficiencies and missed risks. Fortunately, AI-powered systems act as centralized control towers for automated third-party risk management systems.
With a centralized ecosystem, an AI-powered TPRM employs multiple AI agents to track the risk profile of different vendors and relay those assessments in real time. The TPRM then synchronizes all the data for analysis, giving you better visibility of your collective risk profile. This consolidation streamlines your risk validation and management efforts, so you invest less time and effort to complete these tasks.
Considering that the average organization grants access to 181 vendors weekly, the need for centralized systems to manage this complexity effectively is high.
5. Align Third-Party Risks With Changing Company Goals
To maintain business continuity, you must constantly align your risk assessment framework with the evolving industry needs and market goals. New regulations and industry developments affect your company’s risk profile and goals, which require you to adjust your risk models to fit the new challenges.
Automation makes this possible by leveraging AI-driven analytics to spot emerging industry trends and their associated risks. With the data-driven reports generated by these AI-based analytics and consolidated on a single platform, it’s easier to evaluate developing third-party risks and communicate with your vendors. This way, they can share their insights too and contribute directly to strategic goals, such as regulatory compliance and operational resilience.
Why Automation Is Non-Negotiable for Third-Party Risk Management
As organizations expand their reliance on external partners, the risks tied to third parties are growing just as quickly. Manual methods make it difficult to track vendor risk, complete consistent vendor risk assessments, and respond to evolving cybersecurity risk. This lack of visibility increases cyber risks and slows down decision-making.
Automating third-party risk management gives you the structure and scale to manage this complexity. Centralized platforms use automated workflows to streamline due diligence, ongoing monitoring, and reporting. This helps ensure alignment with regulatory requirements and creates a single source of truth for your entire vendor ecosystem.
With the right third-party risk management software, you can shift from reactive oversight to proactive risk control, reduce exposure, and strengthen trust with critical partners. Automation turns third-party risk from a challenge into a strategic advantage.
With our simplified approach to business automation, Onspring can strengthen your third-party risk management strategies. Schedule a demo to learn more.
