Josh specializes in developing, implementing, and maturing vendor management programs. He has worked with organizations of all sizes – in industries ranging from NGOs to financial services to healthcare to nonprofits – helping them take a more informed and disciplined approach to vendor management.There’s no question that third-party risk management (TPRM) software has come a long way. Today’s platforms are powerful, offering automation, dashboards, workflows, artificial intelligence, and more.
But in the time I’ve spent helping clients implement these systems, I’ve seen the same issue arise time and time again: companies rush to buy TPRM software without first doing two critical things — defining their internal procedures and identifying functional requirements. The result? Confusion, misalignment, extended implementation timelines, and underutilized technology.
It’s understandable. With so many vendors promising rapid implementation and out-of-the-box functionality, it’s easy to assume that the software is the solution. Software is only as strong as the TPRM program it supports. Without internal processes in place or a clear vision of the functionality you want out of a TPRM system, that powerful platform you just invested in may end up sitting half-used, delayed, or misaligned with your organization’s actual needs.
In this blog, I’ll walk through:
- 1. Why internal procedures and workflows must be defined before software selection
- 2. How defining functional requirements sets a level playing field for evaluating vendors
- 3. The risks of skipping these steps — and the benefits of getting them right
- 4. A path to a smoother software selection and implementation
Why You Need the Process Before the Platform
Many organizations view software as the solution to their TPRM challenges. And while software can certainly help, it can’t compensate for a lack of internal clarity. Software won’t tell you:
- Who is able to submit requests for new third parties
- What your risk tiers are and how they’re defined
- What due diligence questions you need to ask vendors
- Who is responsible for reviewing vendor due diligence responses
If these fundamentals aren’t already defined, your software implementation is likely to stall. For example, I’ve seen clients mid-way through implementation get asked by the software vendor, “What does your due diligence process look like?” Too often, the response is: “We’re still figuring that out.”
This creates a domino effect — implementation delays, scope creep, and an inability to configure the tool to your actual needs.
Functional Requirements: Your Blueprint for Success
In parallel to defining internal procedures, it’s equally important to define your functional requirements — the specific capabilities the software must support.
Think of functional requirements as the translation layer between your process and your technology. Without them, your vendor evaluation becomes a guessing game. You’re relying on flashy demos and vendor promises instead of matching actual needs to specific functionality.
Here are just a few examples of questions your functional requirements should answer:
- Does the system need to support automated risk tiering based on inherent risk assessment results?
- Should due diligence questionnaires automatically be scoped based on an assigned risk tier (or information contained within a vendor request) to include relevant, risk-based questions?
- Do you need integration with your contract management system or other complementary tools used in the vendor management process (e.g., risk intelligence platforms)?
- Should AI perform an initial screen of vendor’s due diligence responses to quickly call attention to items that require further scrutiny?
- Do you need configurable dashboards for reporting or are you okay using out-of-the box reports and exports?
By defining these needs before evaluating vendors, you:
- Create a level playing field by comparing vendors against the same checklist
- Avoid being swayed by features that sound great but aren’t relevant to your needs
Align stakeholders internally around what the system is supposed to do
Real-World Consequences of Skipping These Steps
Here are just a few issues I’ve seen firsthand when organizations select software before defining procedures and requirements:
- Implementation Delays: Without finalized workflows or clarity around who owns which steps in the process, system configuration stalls. Teams end up having to pause implementation sessions to answer basic operational questions, wasting time and momentum.
- Redundant Features: When requirements aren’t documented, teams may select a system with capabilities they don’t need, leading to unused or underutilized technology. For example, paying for a contracting module when the organization already uses and maintains a separate contract management system.
- Customization Overload: Organizations often try to bend the tool to fit their undefined or inconsistent workflows. This leads to excessive customization, often resulting in administrative headaches managing workarounds vs leveraging purpose-built functionality to improve workflows.
- Low User Adoption: If stakeholders aren’t consulted early and the system feels unintuitive or misaligned with daily workflows, they’re unlikely to engage. This erodes trust in the tool and can push people back to manual workarounds.
These consequences not only increase costs and timelines but also jeopardize the overall success and sustainability of the third party risk management program.
The Path to a Smoother Selection and Implementation
- Map Your Current-State Processes Identify how vendor risk is currently managed, where gaps exist, and who owns what.
- Define Your Future-State Procedures Establish how you want vendor requests, risk assessments, due diligence, escalations, and ongoing monitoring to work moving forward.
- Document Functional Requirements Translate your procedures into specific system capabilities. Engage stakeholders to validate these needs.
- Align Stakeholders Socialize the future-state process and requirements with key groups to ensure shared understanding.
- Select the Right Software Now you’re ready to evaluate vendors with confidence and objectivity.
- Implement with Confidence Your vendor now has a roadmap to configure the tool to support your process — not the other way around.
Final Thoughts
Third-party risk management software is a powerful tool — but only when paired with the right foundation. If you select a system before defining how your program works or what you need it to do, you risk wasting time and money, potentially ending up with an unused system sitting on the shelf.
Define your procedures first. Clarify your functional requirements. Align your stakeholders. Then, and only then, begin your software selection process.
It’s not just about buying a system. It’s about building a program that works — and software is only one piece of that puzzle.
