10 Reasons Why Shifting from TPRM to TPGRC is Crucial for Modern Businesses
The world of third-party risk management (TPRM) is evolving. It’s no longer just about identifying and mitigating risks—organizations today face growing regulatory scrutiny, escalating cybersecurity threats, and increasing pressure to uphold ethical and ESG standards. Simply put, risk management alone isn’t enough anymore.
That’s where Third-Party Governance, Risk, and Compliance (TPGRC) comes in. This broader framework expands existing standard risk management practices with additional governance and compliance practices. In this blog, we’ll explore 10 key reasons why shifting from TPRM to TPGRC is essential for modern businesses.
1. Regulatory Pressure & Compliance Obligations
Regulatory expectations for third-party risk management are higher than ever, especially in industries like finance, healthcare, and technology. Compliance frameworks such as GDPR, CCPA, DORA, NIS2, ISO 27001, SOC 2, and PCI-DSS mandate stricter oversight of vendor relationships.
Non-compliance isn’t just a checkbox issue—it can lead to fines, legal liabilities, and reputational damage. With a strong focus on governance and compliance in companies’ third-party risk management frameworks, ensures organizations stay ahead of evolving regulations while reducing exposure to penalties and disruptions.
✅ Example: A global fintech company faced a €3 million fine after one of its vendors improperly handled customer data, violating GDPR. In response, the company implemented a TPGRC framework that included continuous compliance checks, automated risk assessments, and mandatory vendor audits to prevent future breaches.
2. Increased Cybersecurity & Data Privacy Risks
Third parties are a prime target for cybercriminals, making cybersecurity governance a critical priority. Supply chain attacks, ransomware, and data breaches pose significant threats, and without proper oversight, vendors can become weak links in security.
A governance-driven approach ensures vendors align with best practices like NIST, CIS Controls, and ISO 27001, helping to protect sensitive customer and company data from unauthorized access, breaches, and operational disruptions.
✅ Example: In 2023, a major U.S. healthcare provider suffered a data breach because a third-party billing vendor was compromised. Millions of patient records were leaked, leading to lawsuits and regulatory scrutiny. Had the provider enforced ISO 27001 compliance and required real-time monitoring of vendor security controls, they could have detected vulnerabilities earlier and mitigated the breach.
3. Proactive Risk Management & Business Continuity
Organizations can no longer afford to be reactive when it comes to third-party risk. A well-governed TPRM program enables early detection of vendor financial instability, operational failures, and security vulnerabilities.
By integrating governance into risk management, businesses can proactively mitigate supply chain disruptions, geopolitical risks, and vendor insolvency—ensuring continuity in an unpredictable landscape.
✅ Example: A pharmaceutical company suffered production delays when a key supplier suddenly declared bankruptcy. To prevent future disruptions, they implemented automated financial health monitoring of vendors, flagging potential insolvencies 6 months in advance—allowing them to onboard backup suppliers before any disruptions occurred.
4. Reputation & Brand Protection
A single third-party failure—whether it’s a data breach, unethical business practices, or operational disruptions—can have lasting damage on an organization’s reputation.
Stronger governance helps enforce due diligence and continuous monitoring, preventing associations with non-compliant or unethical vendors. In today’s transparent business environment, safeguarding brand trust is a competitive advantage.
✅ Example: A fashion brand faced public backlash when an investigative report exposed that one of its textile suppliers used child labor. To rebuild trust, the company enforced stricter governance protocols, requiring third-party audits, ESG compliance reports, and automated adverse media monitoring to flag high-risk suppliers in real time.
5. Strengthened Contractual & Legal Safeguards
A structured TPGRC framework ensures vendor contracts go beyond surface-level risk assessments. Well-defined SLAs, security clauses, and compliance terms help organizations enforce accountability and liability provisions.
By embedding governance into contracts, businesses can reduce financial and legal exposure, ensuring third parties meet both operational and regulatory expectations.
✅ Example: A large cloud service provider suffered downtime due to a vendor’s failure to patch a known security vulnerability. Due to weak SLAs, they couldn’t recover damages. Afterward, the company updated its vendor contracts to mandate specific response times, financial penalties for breaches, and real-time security monitoring to prevent future failures.
6. ESG & Ethical Considerations
Environmental, Social, and Governance (ESG) compliance is no longer optional—it’s a core factor in vendor selection and ongoing monitoring. Investors, customers, and regulators expect organizations to ensure their third parties adhere to ethical labor, environmental, and anti-corruption standards.
A governance-driven approach aligns vendors with corporate social responsibility (CSR) goals while preventing reputational damage and regulatory penalties tied to ESG violations. An example of a way in which companies can improve their ESG frameworks is by integrated AI-powered adverse media monitoring.
✅ Example: A multinational consumer goods company faced investor pressure to reduce its carbon footprint. By implementing AI-powered ESG risk monitoring, they identified high-risk suppliers with poor environmental track records and replaced them with sustainable alternatives—ultimately boosting investor confidence and regulatory compliance.
7. Increased Complexity of Supply Chains
Modern supply chains are intricate, with organizations relying on a vast network of third-party providers, subcontractors, and cloud services. This complexity increases risk exposure, making governance essential for proper risk classification, continuous monitoring, and automated risk-scoring models.
A structured approach ensures businesses can manage these complex relationships effectively, minimizing cascading risks and improving overall resilience.
✅ Example: A global electronics manufacturer discovered that a fourth-tier supplier was using unapproved raw materials, violating regulatory standards. By mapping dependencies across their supply chain and requiring suppliers to disclose their own third-party relationships, the company reduced hidden supply chain risks and improved product compliance.
8. Cost Savings Through Risk Reduction
Ignoring governance and compliance in third-party risk management can be costly. Vendor-related fraud, security breaches, regulatory fines, and contract failures all add up.
By proactively embedding governance into risk management, businesses can reduce financial exposure, prevent hidden risks, and avoid costly operational disruptions—leading to significant long-term savings. Curious for an example of how this could look like? Check out this case study of Payment Service Provider Adyen, that leverages Owlin to reduce chargeback risk.
✅ Example: A payment service provider (PSP) saw chargeback fraud increase due to poor oversight of merchant partners. By leveraging Owlin’s AI-driven risk intelligence, the company identified high-risk merchants before onboarding, cutting fraud-related losses by 40% and avoiding regulatory penalties.
9. Strengthened Internal Controls & Risk Culture
Risk management shouldn’t exist in a silo. Embedding governance frameworks across procurement, legal, and IT teams fosters a risk-aware culture and encourages cross-functional collaboration.
This approach ensures that risk is a business priority, rather than just a compliance checkbox, and supports continuous improvements in vendor oversight and risk mitigation.
✅ Example: A large bank suffered a compliance failure when an IT vendor mishandled customer data, leading to a regulatory fine. The company responded by creating a cross-functional third-party governance team—involving legal, IT security, and procurement—ensuring vendors met compliance and cybersecurity standards before approval.
10. AI & Automation Governance
As organizations integrate AI-driven risk assessment and monitoring into TPRM, governance is crucial for ensuring transparency, fairness, and accountability.
Without proper oversight, AI models can lead to inaccurate risk scoring, bias, and compliance issues. A strong governance framework helps mitigate risks associated with AI model drift, false positives/negatives, and ethical concerns—ensuring automated decisions remain explainable and aligned with regulatory expectations.
✅ Example: A regulatory technology firm implemented an AI model to detect fraudulent vendors, but it mistakenly flagged low-risk businesses due to biased data. To prevent compliance failures, they established AI governance policies, requiring periodic bias audits, explainability tests, and human oversight before making automated risk decisions.
A More Proactive, Resilient, and Cost-effective Risk Approach?
To wrap it up, adopting Third-Party Governance, Risk, and Compliance (TPGRC) is no longer a luxury but a necessity in today’s fast-paced, regulation-driven business environment. TPGRC helps organizations proactively identify vulnerabilities, enforce contractual obligations, and maintain transparency across their vendor ecosystem. This holistic strategy enhances resilience, protects brand reputation, and fosters stronger, more trustworthy partnerships with third parties.
Is your organization ready to embrace TPGRC? Let’s discuss how Owlin can support your TPGRC strategy. We’re here to help you stay ahead of risks and safeguard your organization’s future.