Third Party Risk Management Market Size, Assessment, Share, Growth, Trends, Competition, Industry Analysis, Actionable Insights Report; By Component, By Deployment Mode, By End-User Industry, By Organization Size, By Region, and By Country; Outlook and Forecast, 2023 - 2030

Report Summary

Third Party Risk Management, commonly known as TPRM, encompasses a range of solutions, services, and tools/platforms designed to effectively track, monitor, analyze, control, and manage risks arising from the engagement of third-party vendors or services. It is a specialized field and subset within risk management and is also referred to as vendor risk management, supply chain risk management, or supplier risk management, depending on the specific context and use cases.

Third party risk management (TPRM) plays a vital role in today's business landscape, enabling organizations to catalog, categorize, and effectively manage their third-party relationship risks. Beyond internal employees and stakeholders, any associations with vendors, suppliers, contractors, and other business partners that exist outside the organization fall under the realm of third-party relationships.

The primary objective of TPRM is to detect and mitigate risks throughout the entire lifespan of these external relationships, ensuring the firm's compliance, revenue, and reputation are safeguarded from potential hazards associated with third-party engagements. By implementing robust TPRM strategies, organizations gain greater influence and visibility over regulatory processes, cyber risks, supply chain operations, privacy concerns, and various other third-party risks.

TPRM enables organizations to develop and implement an ongoing and enterprise-wide risk management strategy that safeguards their infrastructure from potential vulnerabilities posed by third-party providers. Within the realm of third-party risk, organizations face various significant risks, including performance & quality, data breach, regulatory/compliance, cybersecurity, financial, environmental, security, and reputational risks. These risks have become even more prominent as the frequency of breaches and vulnerabilities in the network ecosystem continues to rise.

Organizations recognize that their security measures are only as strong as their weakest link, and third-party providers can introduce vulnerabilities that compromise the entire system. By proactively managing third-party risks, organizations can mitigate potential threats and protect their sensitive data, financial stability, regulatory compliance, and reputation. Moreover, an effective third-party risk management strategy fosters trust and transparency in the relationships between organizations and their external partners.

What is Third Party Risk Management Market?

Overview and Key Insights

The detailed report compiled by team of consultants indicates that the Global Third Party Risk Management Market is poised for significant growth. Global third party risk management (TPRM) market is projected to achieve a Compound Annual Growth Rate (CAGR) of approximately 15% during the forecast period from 2023 to 2030.

In terms of revenue, the global third party risk management market (including software/platforms, and services) reached a valuation of about USD 5 Billion in 2022. Looking ahead, TPRM Market is projected to expand further, reaching a valuation of approximately USD 19 Billion by the year 2030.

As organizations become increasingly aware of the significance of managing risks associated with external partnerships, the demand for comprehensive risk management solutions is expected to fuel the exponential growth of third party risk management market in the forecast period. The forecasted growth in the third party risk management market signifies the need for businesses to prioritize and invest in effective third party risk management strategies to mitigate potential risks and safeguard their assets, operations, reputation, customer trust, and overall success.

The escalating adoption of advanced technologies across various industry verticals has led to a growing demand for robust cybersecurity measures. This, in turn, has led to an increased need for third party risk management solutions and services, consequently driving the expansion of the third party risk management market. The implementation of stringent compliance policies, coupled with the rising prevalence of data breaches and cyber-attacks, has further emphasized the significance of comprehensive third party risk management solutions.

Moreover, the growing adoption of hybrid work environments has presented new challenges in ensuring the security of sensitive data and systems, highlighting the importance of effective risk management practices. Additionally, companies across different sectors heavily rely on third-party partnerships for innovation, growth, and digital transformation, amplifying the demand for robust third party risk management solutions and services to safeguard their operations.

Different Types and Incidents in Third-Party Risks

Recent surveys conducted among organizations that experienced third-party risk incidents reveal that "performance & quality" issues accounted for approximately 45% of the cases. This category encompasses situations where third-party vendors or service providers failed to meet service level agreements, adhere to delivery timelines, or deliver products and services of the expected quality. Other significant incidents comprised "data breach," "regulatory/compliance," and "cybersecurity," representing 22%, 20%, and 19% respectively.

Data breaches represented the second most notable category, accounting for 22% of the incidents. These incidents involved unauthorized access, exposure, or theft of sensitive data due to security breaches within third-party systems or networks. Around 20% of the incidents were related to regulatory compliance. This category comprises instances where third-party vendors failed to comply with industry regulations, data protection laws, or other compliance requirements.

Cybersecurity incidents accounted for 19% of the reported cases. These incidents highlight security breaches within the implemented security measures by third-party vendors, potentially resulting in data leaks or other cybersecurity vulnerabilities.

The third party risk management industry is witnessing a remarkable surge in cybersecurity concerns, making it one of the fastest-growing risks. This trend can be attributed to a multitude of key factors. The dynamic and ever-evolving threat landscape poses significant challenges as cyber threats continue to advance at a rapid pace. Secondly, the increasing complexity of supply chains adds another layer of vulnerability, demanding comprehensive risk management strategies. Additionally, sharing sensitive data introduces potential risks, necessitating robust security measures. The imperative of regulatory compliance further emphasizes the need to address cybersecurity concerns in third-party relationships.

What are the Major Growth Drivers, Restraints, and Opportunities in Third Party Risk Management Market?

Trends and Dynamics

Rapid Integration of AI, ML, and IoT Technologies Enhances Third Party Risk Management Solutions: Driving TPRM Market Growth

Artificial intelligence and machine learning techniques have been transformational in changing how third party risk management is carried out. Integrating ongoing continuous monitoring into Third Party Risk Management (TPRM) can prove highly advantageous, especially when utilizing external datasets. By harnessing the power of Artificial Intelligence (AI) and Machine Learning (ML) through Natural Language Processing (NLP) and Optical Character Recognition (OCR) capabilities, the TPRM assessment process can be significantly strengthened and expedited. This combination of technologies empowers organizations to enhance their risk management practices, ensuring comprehensive monitoring and efficient evaluation of third-party risks.

AI and Machine Learning have played a pivotal role in providing warning signals to larger finance markets, detecting insider and customer fraud, and enhancing compliance and reducing model risks. Rapid digitization of systems across various industry verticals and demand for advanced security solutions that can significantly reduce risks for businesses have further bolstered demand for third party risk management software.

Adoption of Cloud-based Infrastructure Further Propels the TPRM Market Growth

Rapid adoption of cloud-based infrastructure across various verticals and growing reliance on third-party network providers have further increased the need for active and robust cyber risk management services. Medium- and large-scale companies often prefer third-party risk management software as it enables them to access a one-stop shop for identification, analysis, and elimination of risks that interfere with the smooth functioning of a supply chain. In addition, increasing advancements in third-party risk management software due to rising demand for these solutions and growing incidence of sophisticated cyber attacks are some other factors that can further propel market growth over the coming years.

The Surging Third-Party Ecosystem: Thriving Despite the Russia-Ukraine Conflict

The ongoing conflict between Russia and Ukraine has had a profound impact on the global economic recovery following the COVID-19 pandemic, especially in the short term. This ongoing war has triggered economic sanctions on multiple countries, causing a surge in commodity prices and disrupting supply chains. As a result, markets worldwide have experienced significant disruptions across various sectors and industries.

Despite initial expectations of reduced outsourcing, the third-party ecosystem continues to expand. However, it is important to recognize that smaller vendors and suppliers are highly susceptible to cybersecurity threats, while the global regulatory landscape continues to evolve, imposing new requirements on businesses. Disruptions in the value chain have become more frequent, posing challenges to organizations. Nonetheless, for vendors and service providers specializing in Third Party Risk Management (TPRM), this situation presents a valuable opportunity as companies are prioritizing investments in security and risk management, demonstrating a departure from the cautious approach observed in the years following the Great Recession.

Managing Risks in Third Party Relationships: FDIC, Federal Reserve, and OCC's Final Guidance and Impact on the TPRM Industry

On June 6, 2023, Federal Deposit Insurance Corporation (FDIC), Board of Governors of the Federal Reserve System, and Office of the Comptroller of the Currency (OCC) jointly released their final guidance on effectively managing risks associated with third-party relationships. This guidance was formulated after taking into account the feedback from stakeholders on the proposed guidance published in July 2021. It outlines a risk-based approach that entails evaluating, negotiating, and monitoring third-party partnerships, with an increased focus on partnerships that are more complex, risky, or operationally critical. While recognizing the significant advantages of such collaborations, especially with fintech companies, the regulators emphasized the potential risks involved in third-party relationships. Additionally, they highlighted that employing third-party services does not exempt banking organizations from their obligation to adhere to existing laws and regulations. This comprehensive guidance supersedes the previous guidelines provided by each regulatory agency regarding third-party relationships.

The issued guidance sets forth a risk-based approach that outlines clear expectations for evaluating, negotiating, and monitoring third-party partnerships, with a specific focus on complex, risky, or operationally critical arrangements. As a result of this guidance, the banking industry might intensify its emphasis on TPRM, prompting banks to enhance their risk management practices and processes concerning third-party relationships. This, in turn, is anticipated to drive the demand for TPRM solutions and services, including risk assessment tools, due diligence services, compliance monitoring, and vendor management software.

Fintech companies, in particular, will face increased compliance obligations and oversight due to banks' efforts to effectively manage the risks associated with these partnerships. TPRM solution providers will need to develop tailored offerings to address the unique requirements arising from fintech collaborations. The guidance is expected to fuel the growth of the TPRM market, as banking organizations prioritize risk mitigation and compliance in their third-party relationships. This scenario presents lucrative opportunities for TPRM vendors to expand their market presence and offer innovative solutions that cater to the evolving needs of banks and financial institutions.

What are the Third Party Risk Management Market Segmentations and Bifurcations?

Third Party Risk Management Market based on Component

The component category is further segmented into two types and further sub-segments:

• Solutions (Software/ Platforms)
  • Financial Control Management
  • Contract Management
  • Operational Risk Management
  • Audit Management
  • Compliance Management
  • Others
• Services
  • Professional Services
  • Managed Services

Based on component, the solution segment is expected to hold the largest market share and is expected to continue to do so going ahead during the forecast period. Major factors contributing to the revenue growth of this segment are convenient and easy implementation and interface, availability of cost-effective solutions, and robust and stringent cyber security policies based on new and emerging technologies. Increasing implementation of TPRM by medium and large-scale organizations to assist in reducing risks that are associated with outsourcing certain operations is further expected to drive the growth of this segment over the forecast period.

Third Party Risk Management Market based on Deployment Mode

The deployment mode category is further segmented into two types:

• On-premise
• Cloud

Based on deployment type, cloud segment is expected to register the highest revenue growth over the forecast period. The rapid adoption of cloud-based applications and growing demand for multi-layered software that can identify and assess potential risks in a shorter response time are key factors contributing to the growth of the segment.

Third Party Risk Management Market based on End-User Industry

The end-use industry category is further segmented into:

• BFSI
• IT & Telecom
• Retail & Consumer Goods
• Healthcare & Lifesciences
• Manufacturing
• Education
• Government
• Aerospace & Defense
• Energy & Utilities
• Others

Based on end-user, the BFSI segment dominates the market share in the current period and is expected to account for the largest market share during the forecast period. The growth of this segment can be contributed to the large-scale adoption of TPRM solutions in the BFSI sector to adhere and comply with the stringent regulatory environments and reduce the surface for cyber-attacks to protect the highly sensitive information stored in the network. In addition, growing digitalization, increasing incorporation of emerging advanced technologies in the sector, and increasing reliance on cloud infrastructure are some other factors that can drive the segment’s growth during the forecast period.

Some of the major enterprises including Astellas, AVEVA, Ford, General Electric, Herman Miller, Michael Kors, Microsoft, NASA, Schneider Electric, and Unilever are end-users of TPRM solutions.

Third Party Risk Management Market based on Organization Size

The organization size category is further segmented into two types:

• Large Enterprises
• SMEs

By organization size, the third party risk management market is bifurcated into large enterprises and small & medium-sized enterprises (SMEs). The large enterprises segment is projected to hold the leading market share during the forecast period. This is due to the larger number of third-party relationships and the greater complexity of these external relationships in large enterprises.

What are the Regional and Country trends in Third Party Risk Management Market?

TPRM Market Regional Segmentation Analysis

The geography category is further segmented into:

• North America
• Europe
• Asia Pacific
• Middle East & Africa
• South America

North America is the largest shareholder of the global third party risk management market attributed to the increasing adoption of advanced technologies such as Artificial Intelligence (AI) and cloud-based applications and the rising need for risk management solutions due to the rapid increase in the incidence of cyber-attacks such as ransomware and data breaches of sensitive information. Asia Pacific region is expected to register rapid growth over the forecast period due to increasing sales of risk management solutions due to rising security concerns.

How is the Competition Scenario in the Third Party Risk Management Market?

Competitive Landscape

The competitive landscape of the third-party risk management market is fragmented owing to the presence of a large number of small, medium, and large enterprises. Some of the major vendors and players in the TPRM market include Aravo Solutions, Archer Technologies, BitSight Technologies, Black Kite, Coupa, Deloitte, Diligent, DVV Solutions, E&Y, Genpact, KPMG, LogicGate, LogicManager, MetricStream, NAVEX, OneTrust, Panorays, Prevalent, ProcessUnity, PwC, Resolver, SAI Global, SecurityScorecard, ServiceNow, Supply Wisdom, and Venminder, among other players. Mergers, acquisitions, partnerships, and collaborations have led to the development of new security and risk management solutions. An increase in distribution channels and market opportunities have further led to companies introducing upgraded and convenient-to-use software with added layers of security layer.

Third Party Risk Management Market: Recent Developments

In April 2023, Aravo, one of the leading providers of third-party risk and resilience solutions, announced the launch of its Strategic Alignment Framework™. This methodology, built on proven best practices, aimed to empower internal teams in procurement, supply chain, sustainability, compliance, IT, and other areas to develop, implement, and measure their third-party risk management (TPRM) programs. Aravo recognized the evolving landscape where enterprises faced increasing responsibility and liability for unethical and unsustainable practices of their third parties. The Strategic Alignment Framework provided organizations with a cohesive approach, leveraging 22 years of industry expertise, to align internal teams and achieve their business objectives through effective TPRM.

In April 2023, the Health 3rd Party Trust Initiative, also known as Health3PT, made an important announcement regarding its efforts to address third-party cyber risk management (TPRM) in the healthcare industry. Backed by a growing membership of influential healthcare leaders, Health3PT unveiled its initial deliverables aimed at establishing new industry standards, automated workflows, and robust assurance models to effectively manage risks associated with third-party relationships. The Health3PT council, composed of esteemed security and risk executives from prominent organizations like HCA Healthcare, Humana, UPMC, Walgreens, and CVS, played a pivotal role in shaping this initiative. Notably, healthcare Chief Information Security Officers (CISOs) actively engaged with over 15,000 third-party vendors to promote the adoption of standardized risk assessments.

In January 2023, Censinet, one of the leading providers of TPRM solutions in healthcare, secured an additional USD 9 million in new funding from various investors, bringing the company's total funding to more than USD 22 million. Censinet's risk exchange platform offerings empower providers, vendors, and payers to collaboratively manage third-party and enterprise risk, continuously improve risk posture in real time, and strengthen cybersecurity across all healthcare organizations.

In November 2022, NAVEX, one of the global leaders in integrated risk and compliance management software, introduced its new product, NAVEX IRM (integrated risk management) Out-of-the-Box solutions that are designed to help organizations implement IT and third party risk management programs to minimize the risk of incidence of ransomware attacks.

In March 2021, Mirato, a provider of TPRM platform, unveiled its advanced solution aimed at providing unparalleled visibility into risk for financial institutions. The platform, which automated and orchestrated the entire TPRM lifecycle, became available for U.S. financial services institutions. It featured a comprehensive operations dashboard and the Mirato Risk Hunter, which offered real-time visibility into concentration risk. By leveraging artificial intelligence (AI), natural language processing (NLP), and sophisticated data harvesting, Mirato continuously collected and analyzed data from chosen sources to generate valuable insights for customers.