Third-Party Risk Management Market Analysis

Third-Party Risk Management Market Analysis

Based on component, the market is divided into solution and services. In 2023, the solution segment accounted for a market share of around 65%. The growth towards comprehensive and automated solutions is accelerating in response to complex risk landscapes. Businesses are increasingly investing in advanced software integrating AI, ML, and IoT to streamline risk assessment, mitigation, and detection processes. These solutions offer real-time analytics, enhanced visibility, and predictive capabilities, crucial for managing the growing complexity of third-party interactions effectively.
 

For instance, in June 2024, FIS introduced its Climate Risk Financial Modeler, a Software-as-a-Service (SaaS) solution tailored to aid clients in assessing, mitigating, and disclosing risks associated with climate change. This offering is geared towards optimizing risk management practices across various industries by utilizing FIS' expertise in risk modeling and insurance analytics. By amalgamating client data with third-party climate data sourced from PwC US, including details concerning a firm's physical assets such as buildings and contents, alongside global climate data, the modeler enhances businesses' ability to manage their exposure to the physical risks of climate change.
 

Based on end user, the third-party risk management market is categorized into IT & telecom, BFSI, healthcare, retail, manufacturing, energy & utility, and othersThe BFSI segment accounted for a market share of around 26% in 2023. The BFSI sector makes significant investments in risk management solutions to meet tight regulatory requirements, minimize financial risks, and prevent fraud. Advanced analytics and AI-powered solutions are extensively used to assure compliance, strengthen cybersecurity, and efficiently manage credit and market risks.
 

In May 2024, Ethixbase360, a leading provider of third-party risk management solutions, announced an extended partnership with Moody's aimed at bolstering AI and advanced data integration within its platform. This enhancement is particularly beneficial for the fintech sector, enhancing capabilities in third-party risk management by leveraging cutting-edge technology to ensure robust and secure operations.
 

North America dominated the global third-party risk management market with a major share of over 36% in 2023. The market is expanding significantly in the region, owing to rapid digitalization, integration of cutting-edge technology, and rising frequency of sophisticated data breaches/cyberattacks. Most of the businesses in countries such as U.S. and Canada are quickly implementing digital transformation programs, which frequently entail collaborating with outside partners to improve operational effectiveness and creativity. Robust risk management solutions are necessary as the vulnerabilities linked to third-party connections grow with these digital ecosystems, thus driving the adoption of risk management solutions.
 

The market has grown significantly in Europe and the Asia-Pacific region as a result of growing cyber risks, regulatory challenges, and the expansion of digital transformation projects. Stricter data protection laws such as the General Data Protection Regulation (GDPR) in Europe have mandated businesses in a variety of industries to improve their third-party risk management procedures. Risk mitigation is a major concern for industries such as banking, healthcare, and manufacturing that outsource vital processes to outside contractors, thus driving the market growth.      
             

Overall, the third-party risk management market is growing in Europe and Asia-Pacific as a result of both areas embracing cutting-edge technologies such as artificial intelligence (AI), machine learning (ML), and predictive analytics to strengthen their resilience against emerging threats.