Define "third-party risk management".

Third-party risk management refers to the systematic approach of identifying, assessing, and mitigating risks that may arise from relationships with suppliers, service providers, and other external partners. This practice is crucial because organizations often rely on external entities for various services, and these partnerships can introduce vulnerabilities, compliance issues, and operational risks.

By controlling risks associated with outsourcing and other external partnerships, organizations can ensure that their data and operations are protected from potential breaches, fraud, or non-compliance with regulations. This involves conducting thorough due diligence on third parties, monitoring their compliance and security postures, and developing risk management strategies to address any identified vulnerabilities.

The other choices do not capture the essence of third-party risk management. Reviewing employee performance is focused on internal human resources, while enhancing internal security protocols pertains more to a company’s internal processes. A framework for auditing internal departments does not address the external relationships that third-party risk management is concerned with. Thus, the correct answer emphasizes the significance of managing external risks effectively.