The Hub and Spoke Governance Model for VRM
VRM Governance That Scales — The Hub and Spoke Model
The Governance Challenge
The complexity of organizational structures and the multiple stakeholders involved in the management of third party risk remains a key challenge to management teams . Inefficiencies in TPRM programs can expose organizations to reputational risk .
The Hub and Spoke Model
To respond to an increasingly complex risk environment, firms should utilize a multidisciplinary approach to TPRM by adopting a hub and spoke model .
The Hub
The TPRM function would function as a hub with a central leadership team responsible for :
Setting policies and standards
Defining reporting requirements
Establishing risk appetite of its operation
Overseeing the TPRM program
The Spokes
The central hub would be supported by subject matter experts ("spokes") from relevant risk domains :
Privacy
Cyber security
Business Continuity
Disaster Recovery
Legal
Compliance
IT Security
Procurement
Lines of Defense
The hub and spoke model enables setting up a Lines of Defense model :
First Line (Business Owners) : Manage day-to-day vendor relationships and operational risks.
Second Line (Risk and Compliance) : Establish policies, standards, and risk appetite. Provide oversight and challenge.
Third Line (Internal Audit) : Provide independent assurance on the effectiveness of VRM.
Benefits of the Hub and Spoke Model
Benefit
Description
Comprehensive risk identification
Multiple risk domains are considered
Holistic risk mitigation
Risks are addressed from multiple angles
Consistent practices
Consistency in risk management and compliance practices
Flexibility
Flexibility to address specific business needs
Clear accountability
Roles and responsibilities are clearly defined
Cross-Functional Collaboration
Collaborating with the other business functions adds value as they understand the full scope of the potential geopolitical risks and their impact considering their expertise on international law, sanctions and local regulations that may impact vendor relationships .
Governance Reporting
As part of the governance process, organizations should adopt and establish stringent process controls, which need to be validated per timelines mutually agreed upon with vendor organizations .
Areas of focus for the governance report :
Documented evidence of vendors' security policies/procedures
Contracts documenting the vendor's commitment
Periodic management review reports
Intervention based on internal and external audits findings
Data privacy input based on scope of services
Application security (secure development life cycle, vulnerability and penetration test reports)
Governance reporting mechanism for key risk areas and action plans
Conclusion
The hub and spoke model provides a scalable governance framework for VRM. By establishing a central leadership hub supported by subject matter experts, organizations can achieve comprehensive risk identification and mitigation while maintaining consistency and flexibility .
Action Items for Your Organization
Establish a central TPRM leadership hub
Identify subject matter experts for each spoke
Define Lines of Defense
Create governance reporting mechanisms
Establish cross-functional collaboration
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18 Mar 2025