Why Third-Party Risk Management Matters for Property Management Companies

Property management companies have a lot on their plate. Between managing tenant relations, handling maintenance requests, and keeping track of all the paperwork, it’s easy to get bogged down in the day-to-day tasks. But there's one thing that should never fall by the wayside: third-party risk management (TPRM). 

By implementing effective TPRM processes, property management companies can reduce the likelihood of data breaches, reputational damage, and legal liability that can occur because of their relationships with third-party vendors and service providers.

Which Third Parties Should You Be Managing? 

Among the third parties who require risk management in the property management industry are vendors and suppliers who provide products and services such as:

• Maintenance and repair contractors – plumbing, electrical work, and HVAC maintenance services
• Landscaping companies – lawn care, tree trimming, and snow removal services
• Security companies – security services such as access control, surveillance, and monitoring
• Cleaning companies – janitorial services and building maintenance
• Insurance providers – insurance coverage for property management companies and their clients
• Financial institutions – banking, lending, and payment processing services
• Software providers – software and technology solutions necessary for property management companies' operations

These are just a few examples of the many third-party vendors and service providers that you may rely on to operate your property management company. There are various risks associated with each product or service type, and you should identify and manage these risks through an effective TPRM program.

6 Potential Third-Party Risks 

The following are third-party risks that property management companies may be exposed to and why:

1. Cybersecurity breaches – Property management companies collect and store sensitive personal information from tenants, such as their names, addresses, Social Security numbers, and financial information. Third-party vendors such as software providers, payment processors, and data storage providers may have access to this information, making cybersecurity breaches a significant risk.
2. Property damage – Third-party vendors, such as maintenance contractors and landscaping companies, may cause damage to properties while providing their services, leading to financial losses and damage to your property management company’s reputation.
3. Legal and regulatory compliance – Property management companies are subject to various laws and regulations, such as the Fair Housing Act and the Americans with Disabilities Act. Third-party vendors may fail to comply with these laws and regulations, exposing property management companies to legal and financial risks.
4. Financial risks – Insurance providers and financial institutions may pose financial risks to your property management company if they fail to meet contractual obligations or perform poorly.
5. Reputation risks – Third-party vendors may cause reputational damage to your property management company if they provide poor service, fail to meet contractual obligations, or engage in unethical or illegal behavior.
6. Service interruptions – Third-party vendors may experience service interruptions, such as downtime or system failures, that can disrupt property management operations and cause financial losses.
   
   

How TPRM Can Protect Your Property Management Company 

Third-party vendors are an essential part of the property management industry, but they also pose a significant risk. TPRM helps you identify and mitigate these risks before they become problematic, protecting your company from financial loss and reputational damage.

However, TPRM isn't just about protecting your company… It's also about protecting your tenants. As a property management company, you're responsible for the safety and security of your tenants' homes. 

Suppose a third-party vendor causes a security breach or data leak. In that case, it's not just your company that's at risk – it's your tenants' personal information and safety. TPRM ensures that your third-party vendors have the necessary security risk practices and controls to keep your tenants’ information and property safe .

Speaking of property, TPRM can also help you protect your physical assets. From HVAC maintenance to landscaping services, third-party vendors play a critical role in maintaining and improving the properties you manage. But what happens if one of these vendors causes damage to a property? TPRM helps you ensure that your vendors have the necessary insurance and liability coverage to cover any damages they may cause.

Of course, it's not just about avoiding problems – TPRM can also help you build a better company. By identifying and mitigating third-party risks, you can build a stronger, more reliable network of vendors. This, in turn, can help you provide better service for your tenants and differentiate yourself from your competitors.

But don’t forget the most important reason of all: TPRM is just good business sense. In today's fast-paced, constantly evolving environment, being proactive and vigilant about risk management is more important than ever. 

By prioritizing TPRM, you're showing your tenants that you’re a responsible, trustworthy property management company that takes safety and security seriously.