Third-party risk assessment is crucial for identifying and mitigating risks that external entities may pose to an organization. It helps protect against cybersecurity threats, compliance issues, financial instability, and other potential disruptions.

The frequency of assessments depends on factors such as the nature of the business relationship, the criticality of the services provided, and the dynamic nature of risks. Assessments may be conducted annually or more frequently for high-risk relationships.

Regulatory compliance ensures that third-party relationships align with industry-specific regulations and standards. Organizations must ensure that their third parties comply with relevant laws and regulations to avoid legal and financial consequences.