Third-party Risk Management Market Trends

Growth Driver

• Rising demand from the healthcare sector: The third party risk management sector is positioned to exhibit profitable growth by leveraging the rising demand from the healthcare sector. The increasing adoption of electronic health records (EHS) drives demand for third party vendors to manage sensitive data. Additionally, the advent of cloud solutions for healthcare boosts demand for third party risk management to ensure data privacy along with operational continuity. For instance, in February 2024, Health 3PT announced advancements in solving TPRM issues in the healthcare sector, and are poised to help organizations reduce vendor risk and streamline their vendor risk process.
  
  Furthermore, ransomware attacks on healthcare systems have jeopardized treatments, leading to significant financial losses. The healthcare sector is investing proactively to mitigate such risks through third party risk management frameworks, and TPRM solutions provider can benefit from the rising demand by expanding their solutions portfolio. For instance, in June 2024, CORL announced the release of the CORL Companion, which is an AI-powered assistant for healthcare vendors to automate and enhance security assessment responses.
• Environmental, Social, and Governance (ESG) compliance and AI risk management demands: The rising ESG regulations imposed on corporations are a pivotal factor in driving demand for third-party risk management. TPRM solutions can access vendors for their alignment in ESG goals to create a sustainable supply chain. The rising consumer scrutiny of major corporations and their environmental impact has necessitated the adoption of TPRM solutions. Additionally, corporations are actively seeking to mitigate greenwashing risks to avoid incurring penalties. For instance, in October 2024, the Securities and Exchange Commission charged the advisory firm Wisdom Tree for failing to adhere to investment criteria for ESG-marketed funds.
  
  Furthermore, the rising proliferation of AI solutions globally in various sectors has necessitated robust AI risk management solutions and TPRM companies can leverage the emerging segments by forwarding innovative solutions. For instance, in November 2024, Mitratech launched AI and ESG added capabilities for its third party risk management platform.
• Technological innovations in risk management: The third party risk management market is set to benefit from the technological innovations in risk management. Integration of AI-powered analytics in third party risk management software is poised to improve the quality and accuracy of services. For instance, in November 2024, Diligent announced the launch of AI-powered due diligence reports that will offer organizations easy access to comprehensive third-party agreements.
  
  Additionally, TPRM service providers are set to leverage demand from multiple end users to offer advanced solutions and expand their revenue share. An emerging driver of the market is the rise of blockchain with the potential to provide a tamper-proof way to verify vendor credentials while mitigating data manipulation risks. For instance, in November 2024, Arxiv published a study on the efficacy of a blockchain-enhanced framework for secure third-party vendor risk management and found a significant reduction in identified vulnerabilities within the vendor assessment process. The positive findings of the research hold the potential for increasing the prevalence of blockchain-enhanced frameworks in TPRM solutions.

Challenges

• Blind spots in periodic risk management: The periodic vendor assessments can limit real-time assessment, and instead be reliant on static snapshots of risks. Additionally, periodic assessments can create blind spots that can undermine risk management strategies and affect the sector’s growth. The periodic approach can cause challenges in volatile industries such as the BFSI sector.
• Complex management of fourth- and fifth-party vendors: Challenges may arise in effectively managing risks associated with fourth and fifth-party vendors that can cause supply chain entanglements. Overlooking the extended supply chain network can create vulnerabilities that are prone to breaches. For instance, the SolarWinds cyberattack is indicative that insufficient scrutiny of upstream vendors can lead to catastrophic consequences for government and businesses alike.