• CUSTOMER LOGIN
  • Products
    • TPRM by ThirdPartyTrust
    • Beacon by ThirdPartyTrust
  • Resources
    • Blog
    • Strategy Guides
    • Case Studies
    • Data Sheets
    • Webinars
    • API
  • Company
    • About us
    • Partners
    • Product Security
    • Privacy Policy
REQUEST DEMO
  • Products
    • TPRM by ThirdPartyTrust
    • Beacon by ThirdPartyTrust
  • Resources
    • Blog
    • Strategy Guides
    • Case Studies
    • Data Sheets
    • Webinars
    • API
  • Company
    • About us
    • Partners
    • Product Security
    • Privacy Policy
REQUEST DEMO
  • CUSTOMER LOGIN
  • Products
    • TPRM by ThirdPartyTrust
    • Beacon by ThirdPartyTrust
  • Resources
    • Blog
    • Strategy Guides
    • Case Studies
    • Data Sheets
    • Webinars
    • API
  • Company
    • About us
    • Partners
    • Product Security
    • Privacy Policy
REQUEST DEMO
  • CUSTOMER LOGIN
  • Products
    • TPRM by ThirdPartyTrust
    • Beacon by ThirdPartyTrust
  • Resources
    • Blog
    • Strategy Guides
    • Case Studies
    • Data Sheets
    • Webinars
    • API
  • Company
    • About us
    • Partners
    • Product Security
    • Privacy Policy
REQUEST DEMO
  • Products
  • TPRM by ThirdPartyTrust
  • Beacon by ThirdPartyTrust
  • Solutions
  • Risk Assessment Automation
  • Security Questionnaire Automation
  • Shadow IT Management
  • Zero Day Remediation
  • Integrations
  • Industries
    • Financial
    • Energy
    • Healthcare and Hospitals
    • Legal
    • Life Sciences
    • Manufacturing Industry
    • Retail
    • Technology
    • Other Industries
  • Pricing
  • Resources
  • Blog
  • Strategy Guides
  • Case Studies
  • Data Sheets
  • Webinars
  • Dictionary
  • API
  • Company
  • About us
  • Careers
  • Partners
  • Partners Login
  • Product Security
  • Privacy Policy

What is due diligence in third party risk management?

Published by Sabrina Pagnotta on March 31, 2022
Categories
  • Blog
Tags
  • TPRM Best Practices
what is due diligence

When assessing risk from third party vendors, one term usually comes up: due diligence. What is due diligence, though, and how does it relate to vendor management?

Due diligence is the investigation that a business or person takes before entering into an agreement or contract with another party, in order to confirm the accuracy of the offer and appraise its value.

These investigations are conducted across industries in many business cases, such as: 

  • Investors and companies considering M&A deals, including equity research analysts, fund managers, broker dealers, and individual investors.
  • Buyers and sellers seeking to determine whether the other party has substantial assets to complete the purchase, either for legal or voluntary reasons.
  • Employers conducting a background check on a potential employee.
  • Organizations seeking to assess the inherent risk of engaging with a new third party vendor for outsourced services like accounting, cloud hosting, logistics, and more.

Throughout the years, the term due diligence has grown from everyday use to encapsulate legal, business, compliance, and investment connotations.

Performing due diligence as part of your vendor management

With increased reliance on third party vendors for critical services, as well as increased scrutiny from examiners and customer expectations, security and compliance leaders are under pressure to deliver vendor due diligence results in a timely manner.

In the context of third party risk management (TPRM), vendor due diligence is the process by which an organization examines a current or potential third party vendor’s risk to its business operations. It’s often a regulatory requirement in guidelines such as those issued by the OCC and the FFIEC.

As outlined in the FDIC Financial Institution Letter 44-2008:

Comprehensive due diligence involves a review of all available information about a potential third party, focusing on the entity’s financial condition, its specific relevant experience, its knowledge of applicable laws and regulations, its reputation, and the scope and effectiveness of its operations and controls.

In essence, vendor due diligence is a risk-based decision making process, where you collect and analyze as much information as possible from a vendor before making a decision to engage with them in a business relationship.

Read more: How to conduct a vendor risk assessment

Vendor due diligence tips

While often perceived as manual and time-consuming, due diligence can be streamlined, standardized, and automated given the right toolset. 

After all, it’s in your organization’s best interest to ensure that vendors have been appropriately vetted and are protecting your sensitive data.

Here are some tips for your reviews:

  1. Prioritize vendors by risk and set the requirements needed for each level of risk associated with the product or service; don’t subject all vendors to the same scrutiny.
  2. Set alerts for reassessments and document updates; documents like SOC reports, financial statements, business continuity or disaster recovery plans expire or become outdated, so make sure you always have their latest versions.
  3. Create a procedure for approving due diligence when you can’t gather enough evidence; eventually, the answer will be “no”, so make sure you document the outcome. 
  4. Take the time to analyze the evidence instead of just collecting it, and document your findings.
  5. Store all evidence and documentation in a safe place, like a dedicated vendor management repository.
  6. Investigate the following factors: business impact analysis, business type, insurance, contracts and SLAs, relationship ownership, confidentiality statements, business continuity and disaster recovery plans, and overall security posture.

Whether you use a standardized questionnaire for all vendors or a series of custom questionnaires, due diligence is a fundamental pillar of vendor management. One that ultimately protects your organization, your customers, and your data.

Need help with your vendor management program?

ThirdPartyTrust specializes in vendor risk management, with a dedicated tool where enterprises and vendors connect to perform risk assessments, automate TPRM and compliance workflows, and share security documents. Contact us today to learn more.

Buyers Guide TPRM

Looking for a vendor risk management tool?

Finding the right TPRM tool is a unique process for every organization as they navigate their journey to TPRM maturity.

This guide will help you decide based on your needs around security ratings, custom questionnaires, integrations, and other features.

Get the Buyer’s Guide
Sabrina Pagnotta
Sabrina Pagnotta
Sr. Content Strategist
    • Phone
      |+1-617-245-0469
    • Address
      |
      111 Huntington Ave, Suite 2010, Boston, MA 02199
    • Sales
      |sales@bitsighttech.com
    • Contact Us
    Laika_SOC2_TypeI_PurpleIris        CSA_Trusted_Cloud_Provider

    ©2022 ThirdPartyTrust, LLC and its Affiliates. All Rights Reserved. | 111 Huntington Ave. Suite 2010 Boston, MA 02199
    • BLOG
    • PARTNERS LOGIN
    • CONTACT US
    • PRIVACY POLICY
    We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept”, you consent to the use of ALL the cookies.
    Do not sell my personal information.
    Reject AllAccept
    Cookie Settings
    Manage consent

    Privacy Overview

    This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
    Necessary
    Always Enabled
    Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
    CookieDurationDescription
    cookielawinfo-checkbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
    cookielawinfo-checkbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
    cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
    cookielawinfo-checkbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
    cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
    viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
    Functional
    Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
    Performance
    Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
    Analytics
    Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
    Advertisement
    Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
    Others
    Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
    SAVE & ACCEPT