This is the second stage of the Third-Party Risk Management cycle. It involves a thorough due diligence process and verification of third-party service providers. The aim of this step is to assess the potential risks associated with engaging a third-party service provider. The level of due diligence required may vary depending on the nature of the third-party service provider. For instance, a third-party service provider that will have access to sensitive information may require more extensive due diligence compared to one that will not. This approach, known as proportionality of approach, is considered a good risk management practice.

Choice A is incorrect. Remediation or termination is a step in the Third-Party Risk Management cycle that occurs after a risk has been identified and evaluated. It involves taking corrective action to mitigate the risk or terminating the relationship with the third-party service provider if necessary. This step does not involve due diligence process and verification of third-party service providers.

Choice B is incorrect. Continuous monitoring refers to ongoing oversight of third-party relationships to ensure they continue to meet contractual obligations and compliance requirements, as well as manage any changes in their risk profile over time. While it's an important part of managing third-party risks, it doesn't necessitate a thorough due diligence process and verification which are typically conducted before engaging with a third party.

Choice D is incorrect. The business model decision stage involves deciding whether to outsource certain functions or processes based on strategic considerations such as cost, efficiency, expertise, etc., rather than conducting due diligence on potential service providers.

Things to Remember

• Third-Party Risk Management (TPRM) involves identifying, assessing, and controlling risks associated with outsourcing to third-party service providers.
• Due diligence is the process of investigating and verifying the information provided by a third-party service provider to assess their reliability, reputation, and ability to meet contractual obligations.
• Proportionality of approach in risk management refers to tailoring the level of due