Understanding the Differences Between GRC and Third-Party Risk Management
Governance, Risk, and Compliance (GRC) and Third-Party Risk Management (TPRM) are often mentioned together, but they serve distinct purposes within an organization. While GRC provides a broad framework for managing internal policies, risks, and regulatory requirements, TPRM focuses specifically on assessing and mitigating risks that arise from external vendors and service providers.
Understanding the differences between these two disciplines helps businesses build stronger risk management strategies and ensure compliance with industry regulations. A well-structured approach to both can improve decision-making, reduce exposure to threats, and create greater operational resilience.
What is GRC?
Governance, risk, and compliance, or GRC, is a structured approach that helps organizations align their operations with regulations, manage risks, and uphold internal policies. It integrates governance, which ensures accountability and decision-making structures; risk management, which identifies and mitigates potential threats; and compliance, which ensures adherence to legal and industry standards.
What is it designed to do?
GRC is designed to create a unified framework that improves how organizations make decisions, manage uncertainty, and meet external and internal requirements. By centralizing efforts across these three areas, it helps reduce duplication of tasks, supports consistent reporting, and promotes responsible business practices across all levels of the organization.
What is Third-Party Risk Management?
Third-party risk management concentrates on evaluating and controlling risks associated with external entities such as suppliers, contractors, and service providers. It involves assessing security practices, financial stability, and regulatory compliance of third parties to prevent potential disruptions or liabilities. While both frameworks contribute to risk reduction, TPRM specifically addresses external dependencies that could impact business continuity and security.
What is it designed to do?
It is designed to identify, monitor, and mitigate risks introduced by third-party relationships across the lifecycle, from onboarding to offboarding. The core components typically include due diligence, contract management, ongoing monitoring, and risk assessment. These elements help ensure that third parties meet the organization’s standards for privacy, data protection, operational resilience, and legal compliance.
How is Third-Party Risk Management Related to GRC?
Third-party risk management is a critical extension of an organization’s broader governance, risk, and compliance (GRC) framework. While GRC focuses on setting internal policies, ensuring accountability, and managing enterprise-wide risks, TPRM applies those principles to external relationships. It ensures that third parties align with the same standards expected internally, whether related to data handling, regulatory obligations, or ethical conduct.
Credible TPRM platform like Auditive helps unify TPRM within the GRC space by providing a structured approach to tracking third-party performance, automating compliance checks, and maintaining audit-ready documentation. This connection enhances oversight, supports informed decision-making, and reduces the chances of exposure due to third-party failures or misalignments.
Having both in place enables businesses to manage risk holistically, internally through GRC, and externally through TPRM. As operations scale and dependencies increase, the need to maintain visibility and control across both dimensions becomes essential to avoid gaps that could lead to financial, operational, or reputational setbacks.
Key Differences Between GRC and Third-Party Risk Management
Although GRC and third-party risk management share the common goals of minimizing risk and ensuring compliance, their focus areas and implementation differ significantly. GRC takes a comprehensive approach, addressing internal governance structures, organizational policies, and regulatory adherence. In contrast, TPRM narrows its scope to evaluating and mitigating risks associated with external vendors and partners.
The table below highlights key differences between these two frameworks:
| Aspect | Governance, Risk, and Compliance (GRC) | Third-Party Risk Management (TPRM) |
|---|---|---|
| Scope | Covers internal governance, risk, and compliance across the organization | Focuses exclusively on risks related to external vendors and service providers |
| Primary Objective | Establishes policies, controls, and frameworks for overall risk management | Identifies, assesses, and mitigates risks arising from third-party relationships |
| Risk Focus | Internal risks such as operational, financial, and regulatory compliance | External risks including data security, financial stability, and contractual obligations |
| Stakeholders | Compliance teams, risk officers, and executives | Vendor management teams, procurement, and security professionals |
| Regulatory Compliance | Ensures the organization meets industry and legal requirements | Ensures third parties comply with relevant regulations and contractual terms |
| Process Involvement | Includes risk assessment, policy enforcement, and audit management | Involves due diligence, continuous monitoring, and third-party risk assessments |
| Tools & Technologies | GRC platforms for policy management, risk assessments, and reporting | Trustes TPRM platforms like Auditive for automated vendor risk assessments and compliance tracking |
| Impact on Business | Strengthens internal controls and corporate governance | Reduces vulnerabilities from external partnerships and supply chain risks |
8 Key Strategies to Successfully Implement GRC & TPRM
Implementing GRC and TPRM effectively requires a structured approach that aligns internal risk management with external vendor oversight. While each framework has its distinct focus, integrating best practices from both can enhance overall security, compliance, and decision-making. Below are key strategies for successfully implementing GRC and TPRM:
Establish clear policies and guidelines: Define risk management policies that apply to internal operations and third-party engagements, ensuring consistency in governance and compliance.
Conduct comprehensive risk assessments: Regularly evaluate internal and external risks, identifying vulnerabilities within the organization and potential threats from vendors.
Implement a centralized risk management system: Incorporate noteworthy TPRM platforms like Auditive to streamline compliance tracking, automate assessments, and maintain a unified risk management process.
Ensure continuous monitoring: Regularly review and update risk management practices, keeping track of regulatory changes and vendor performance.
Enhance cross-department collaboration: Build communication between compliance, IT security, procurement, and executive teams to create a cohesive risk strategy.
Provide ongoing training: Educate employees and stakeholders on evolving risks, regulatory changes, and best practices for maintaining compliance.
Develop incident response plans: Establish protocols for managing risk events, whether they originate internally or from third parties, to minimize disruptions.
Regularly audit and improve processes: Conduct periodic reviews of risk management strategies to identify gaps and implement necessary improvements.
By integrating these practices, organizations can strengthen both internal governance and third-party risk management, reducing exposure to threats while ensuring regulatory compliance.
Conclusion
Understanding the differences between GRC and Third-Party Risk Management is essential for building a comprehensive risk strategy. While GRC provides a structured framework for internal governance and compliance, TPRM ensures that external vendors and partners do not introduce unnecessary risks. Together, they create a strong foundation for operational resilience, regulatory adherence, and long-term business success.
Incorporating the right tools can simplify the process of managing both internal and third-party risks. Auditive offers automated tools like Vendor Risk Management and Trust Center to streamline vendor assessments, monitor compliance, and enhance risk visibility. By adopting a proactive approach and integrating best practices, organizations can minimize potential threats and strengthen their overall security posture.
Want to optimize your risk management strategy? Schedule a free demo to explore how Auditive can help you stay ahead of compliance challenges and third-party risks.
