Why Third-Party Risk Management Matters In Compliance

What does third-party mean? Whom does it cover?

Existential philosopher Jean-Paul Sartre's famous quote "L'enfer, c'est les autres” can be translated as “hell is other people”. In a global economy working with third parties is a matter of reality and, if not managed properly, their transactions can create hell. In order to understand third-party risk management, we should first concentrate on the definitions.

In Anglo-Saxon law, the term "third-party" means real and legal persons representing a company in a business relationship and legally binding that company with its transactions on behalf of the company. Generally, the company is the “first party”, the customer and employees can be deemed as “second party”, and the providers of products and/or services, such as suppliers, consultants or intermediaries, that help the parent company achieve its sales, marketing and company goals are described as “third-parties”.