To effectively manage third-party risk, organizations must first understand what it entails and why it is essential to prioritize vendor security in their cybersecurity programs.

Third-party risk refers to the potential threats and vulnerabilities introduced by external entities—such as vendors, contractors, suppliers, and partners—that have access to an organization’s systems, data, or networks. These risks can arise from inadequate security controls, poor data handling practices, or malicious intent within the vendor’s environment.

Common types of third-party risks include:

• Data breaches due to insecure vendor systems
• Supply chain attacks where threat actors compromise software or hardware before it reaches the organization
• Regulatory non-compliance resulting from vendor mishandling of sensitive data
• Operational disruptions caused by vendor outages or cyber incidents

Vendors often have privileged access to critical systems or sensitive data, making them attractive targets for cybercriminals. According to the IBM Cost of a Data Breach Report, nearly 20% of breaches in 2023 involved a third party. Vendor security is essential because a single compromised supplier can expose an entire organization to significant financial, reputational, and legal consequences.

Strong third-party risk management practices help organizations:

• Reduce the likelihood of supply chain attacks
• Ensure compliance with evolving regulations (e.g., GDPR, CCPA, NIS2)
• Maintain customer trust and business continuity

The cyber threat landscape in 2025 is shaped by rapid technological advancements, increased interconnectivity, and the growing sophistication of threat actors. Third-party risk management must adapt to these changes to remain effective.

Attackers are increasingly exploiting the weakest links in the supply chain. Some of the most pressing threats in 2025 include:

• Software supply chain attacks: Threat actors inject malicious code into legitimate software updates or open-source components, as seen in incidents like SolarWinds and Kaseya (CISA Advisory).
• Ransomware-as-a-Service (RaaS): Cybercriminals target vendors with ransomware, knowing that the impact will cascade to their clients. Learn more about Ransomware‑as‑a‑Service (RaaS) in 2025.
• Credential stuffing and phishing: Attackers use stolen credentials or social engineering to gain access to vendor systems, then pivot to the primary organization.
• IoT and OT vulnerabilities: Vendors supplying connected devices may introduce exploitable weaknesses into critical infrastructure. Explore IoT security trends and emerging risks.

The ENISA Threat Landscape for Supply Chain Attacks highlights a 38% increase in supply chain attacks from 2022 to 2024, underscoring the urgency of robust vendor security measures.

Regulatory bodies worldwide are tightening requirements for third-party risk management. Key developments in 2025 include:

• NIS2 Directive (EU): Expands obligations for critical infrastructure and their suppliers to implement risk-based security controls and report incidents (European Commission).
• SEC Cybersecurity Rules (US): Public companies must disclose material cybersecurity incidents, including those involving vendors (SEC Press Release).
• ISO/IEC 27036: Updated standards for managing ICT supply chain security (ISO).

Non-compliance can result in hefty fines, legal action, and reputational damage. Organizations must ensure their vendor security programs align with these evolving requirements. For additional compliance guidance, see GDPR Compliance 2025: Essential Checklist.

A comprehensive third-party risk management program is essential for identifying, assessing, and mitigating risks associated with vendors. The following steps outline best practices for establishing a resilient framework.

Start by establishing clear, risk-based security requirements for all vendors. Considerations include:

• Data classification: What type of data will the vendor access or process?
• Access privileges: What level of system or network access is necessary?
• Regulatory obligations: Which laws and standards apply to the vendor relationship?

Use frameworks such as NIST SP 800-161 and CIS Controls to define minimum security baselines. Document these requirements in vendor security policies and communicate them clearly during procurement.

Effective vendor selection involves rigorous due diligence to assess potential partners’ security posture. Key steps include:

• Security questionnaires: Use standardized assessments (e.g., SIG, CAIQ) to evaluate vendor controls.
• Risk scoring: Assign risk levels based on the vendor’s access, data sensitivity, and business impact.
• Evidence review: Request and review certifications (e.g., ISO 27001, SOC 2), penetration test reports, and security policies.

During onboarding, ensure vendors understand and agree to your security requirements. Provide them with onboarding materials and conduct initial security training if necessary.

Contracts are a critical tool for enforcing vendor security. Essential clauses include:

• Data protection obligations: Specify encryption, data retention, and breach notification requirements.
• Right to audit: Reserve the right to audit the vendor’s security controls and processes.
• Incident response cooperation: Define roles, responsibilities, and timelines for incident reporting and remediation.
• Termination and data return/destruction: Ensure secure data handling at the end of the relationship.

Consult legal and cybersecurity experts to ensure contracts reflect current best practices and regulatory requirements. For guidance, refer to ISACA’s guidance on contractual clauses.

Third-party risk management is not a one-time activity. Continuous monitoring and assessment are vital to detect changes in vendor risk profiles and respond proactively.

Implement ongoing risk assessment processes, such as:

• Periodic security reviews: Schedule annual or semi-annual reassessments based on vendor risk tier.
• Automated threat intelligence: Monitor for vendor-related breaches, vulnerabilities, and threat actor activity using platforms like Unit 42 or CrowdStrike.
• External attack surface management: Use tools to scan vendor-exposed assets for misconfigurations or vulnerabilities.
• Performance metrics: Track vendor compliance with SLAs and security KPIs.

For a comprehensive approach, align your assessments with NIST Cybersecurity Framework and ISO/IEC 27001 standards. To further improve your vendor assessment process, consider reviewing risk assessment templates and quick start guides.

Modern third-party risk management leverages technology to streamline oversight:

• TPRM platforms: Centralize vendor risk data, automate assessments, and track remediation actions.
• Security ratings services: Obtain continuous, external risk scores for vendors (e.g., BitSight, SecurityScorecard).
• Integration with SIEM/SOAR: Correlate vendor activity with internal security events for real-time detection.
• Automated alerts: Receive notifications of vendor-related incidents or compliance lapses.

For more on leveraging technology, see Gartner’s TPRM insights.

Despite best efforts, vendor-related incidents can and do occur. Effective incident response and breach management are crucial for minimizing impact and restoring trust.

Preparation is key to effective response:

• Incident response plans: Include vendor-specific scenarios in your IR plans, detailing escalation paths and communication protocols. See Incident Response Plan 2025: Build & Test for actionable tips.
• Tabletop exercises: Regularly test response plans with internal teams and key vendors to identify gaps and improve coordination.
• Contact lists: Maintain up-to-date contact information for vendor security teams and escalation points.

Refer to FIRST’s incident response resources for best practices in multi-party incident management.

When a vendor breach occurs:

• Immediate notification: Require vendors to notify you of incidents within a defined timeframe (e.g., 24 hours).
• Joint investigation: Collaborate with the vendor to determine the scope, impact, and root cause.
• Regulatory reporting: Assess whether the incident triggers mandatory reporting under laws like GDPR or NIS2.
• Remediation and follow-up: Ensure the vendor implements corrective actions and updates security controls.

Clear, transparent communication with stakeholders—including customers, regulators, and partners—is essential for maintaining trust and meeting legal obligations. For guidance, see CIS Incident Response Planning.

Implementing best practices in third-party risk management ensures long-term resilience and continuous improvement in your vendor security program.

A strong security culture is foundational to effective vendor security. Key elements include:

• Leadership commitment: Executives must prioritize third-party risk and allocate necessary resources.
• Security champions: Appoint individuals responsible for vendor oversight in each business unit.
• Shared responsibility: Make it clear that everyone, from procurement to IT, plays a role in managing vendor risk.

For more on building a security culture, consult SANS Institute’s guidance.

Equip your teams with the knowledge to identify and manage third-party risk:

• Regular training: Provide annual or biannual training on vendor risk, phishing, and secure procurement practices.
• Role-based education: Tailor training for procurement, legal, IT, and executive teams.
• Simulated exercises: Use phishing simulations and tabletop exercises to reinforce learning.

Effective training reduces the likelihood of human error and strengthens your overall vendor security posture. See CISA’s training resources for materials and exercises.

Collaboration is essential for effective third-party risk management. Best practices include:

• Security workshops: Host joint workshops to align on security expectations and share threat intelligence.
• Information sharing: Participate in industry ISACs or threat intelligence exchanges to stay informed about vendor-related threats.
• Continuous improvement: Encourage vendors to adopt new security technologies and best practices.

Strong partnerships foster transparency, trust, and mutual accountability. For more on collaboration, see MITRE’s collaborative defense research.

The future of third-party risk management is shaped by emerging technologies and evolving business models. Staying ahead of these trends is vital for maintaining effective vendor security.

Automation and AI are transforming third-party risk management by:

• Automating assessments: AI-driven tools can analyze vendor responses, flag anomalies, and prioritize risks.
• Threat intelligence: Machine learning models detect patterns in vendor-related threats faster than manual methods.
• Predictive analytics: AI forecasts potential vendor risks based on historical data and emerging trends.

Adopting these technologies can reduce manual workloads, improve accuracy, and enable faster response to vendor threats. For more, see CrowdStrike on AI in cybersecurity or review AI Cybersecurity 2025: How Machine Learning Defends.

Cyber insurance is increasingly seen as a critical component of third-party risk management. In 2025:

• Coverage for vendor breaches: Policies often include provisions for losses resulting from third-party incidents.
• Risk transfer: Insurance can offset financial losses, but does not replace the need for strong security controls.
• Underwriting requirements: Insurers may require evidence of robust TPRM practices as a condition for coverage.

For a deeper dive, review ISACA’s analysis of cyber insurance and TPRM.

Third-party risk management is a dynamic, ongoing process that requires vigilance, collaboration, and adaptation to new threats and regulations. By prioritizing vendor security, organizations can protect their assets, maintain compliance, and build resilient digital ecosystems in 2025 and beyond.

Implementing the best practices outlined in this guide—from defining security requirements to leveraging automation and fostering a security-first culture—will position your organization to effectively manage third-party risk and respond to the evolving cyber threat landscape.

• NIST SP 800-161: Supply Chain Risk Management Practices for Federal Information Systems and Organizations
• ENISA Guidelines for Securing the Internet of Things
• OWASP: Supply Chain Attacks
• ISO/IEC 27001: Information Security Management
• CIS Controls List
• SEC Cybersecurity Disclosure Rules
• SANS Institute: Building a Security Awareness Program
• CISA Cybersecurity Training & Exercises
• ISACA: Contractual Clauses for TPRM
• Unit 42 Threat Intelligence