What is Third Party Risk Management & How to Get It Right

Third-party risk management (TPRM) is too often considered as a mere compliance and box-ticking excercise. Instead, it should be seen as an integral part of security operations and a critical component in any incident response plan.

In the video below, you will learn why the rise in supply chain attacks, driven by increased outsourcing and evolving threat tactics, demands a new "defend-as-one" approach. Discover how building strong relationships with suppliers' security teams and leveraging threat intelligence can significantly enhance your organisation's ability to respond to and mitigate risks. Join us as we discuss practical strategies for making TPRM more effective and collaborative, ensuring a robust defence across the entire supply chain ecosystem.
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Vendor Risk Management: Why Cybersecurity Leaders Must Shift from Governance to Operational Resilience

In a world where attackers consistently go after the weakest link, supply chains have become prime targets. More businesses are outsourcing than ever before, but the increase in third-party relationships has brought with it a rise in supply chain attacks. Many suppliers fall outside the direct control of their clients, which makes understanding and managing risk in the supply chain a persistent and complex challenge.

This blog explores how vendor risk management (VRM) needs to evolve—from a compliance tick-box exercise to a core part of your operational security strategy. We’ll explain the VRM process, the key types of vendor risk, and how CISOs can embed collaboration, real-time insights and resilience into their third-party risk programmes.

What is Vendor Risk Management (VRM)?

Vendor Risk Management is the process of identifying, assessing, mitigating and monitoring risks associated with third-party service providers, suppliers, and partners. It helps organisations understand how external relationships could impact their business across areas such as cybersecurity, compliance, financial stability, reputation and operations.

Traditionally, VRM has been treated as a governance function led by procurement or compliance teams. But that mindset is no longer fit for purpose. As threats grow more complex and fast-moving, organisations need to bring VRM into the operational security fold.

What are the Types of Vendor Risk?

Vendor risk spans multiple domains, each of which can impact an organisation in different ways:

• Cybersecurity risk: Vulnerabilities in a vendor’s IT systems that could allow attackers to gain access to your network.
• Financial risk: The risk of a vendor going bankrupt or failing to deliver services due to financial instability.
• Regulatory and legal risk: Non-compliance with laws such as GDPR or sector-specific regulations like DORA.
• Ethical and reputational risk: Risks from unethical practices, such as modern slavery or data misuse, that could damage your brand.
• Environmental risk: Suppliers failing to meet sustainability standards.
• Geopolitical risk: Changes in global politics affecting supply continuity, such as sanctions or conflicts.

Why Most VRM Programmes Are Broken

In many organisations, VRM has become a compliance exercise something you do to prove you’re doing due diligence. It’s often siloed from the operational security team, focused on periodic reviews and spreadsheet checklists. This approach creates a vicious cycle: because the process is seen as low-value, it receives less attention, which in turn makes it less useful.

The result? When a real incident happens like MOVEit, SolarWinds or Log4j security teams don’t have the tools, data or relationships they need to respond quickly. They’re forced into a reactive posture, chasing suppliers for information and working blind while attackers take advantage.

The Vendor Risk Management Process: A Modern Framework

To build a proactive, risk-ready programme, organisations need to move beyond questionnaires and one-off reviews. Here’s a modern, security-led VRM framework:

1. Identification
   • Map your suppliers and service providers
   • Include 4th-party relationships and critical dependencies
2. Assessment
   • Conduct risk-based assessments that go beyond tick-box compliance
   • Consider sector, access levels, and threat landscape
3. Mitigation
   • Work with suppliers to remediate gaps in controls
   • Align on shared risk reduction goals
4. Monitoring
   • Use external threat intel, compromise monitoring and real-time alerts
   • Maintain open communication channels for faster response
5. Collaboration
   • Build ongoing relationships with supplier security teams
   • Share threat data and recovery plans ahead of time

Real-World Risk Scenarios

• A marketing platform used by your team has a critical zero-day vulnerability. It takes weeks to get a response from the supplier due to legal delays.
• Your finance department outsources payroll to a third party hit by ransomware. There is no pre-agreed incident communication plan.
• Your supplier in a politically sensitive region is suddenly sanctioned. There’s no risk diversification plan.

Each of these risks could have been managed more effectively with stronger collaboration, better data, and faster response mechanisms.

Regulatory Context: GDPR, NIST, and Beyond

Modern VRM should align with security and privacy frameworks, including:

• GDPR: Requires organisations to ensure vendors handle personal data appropriately.
• NIST Cybersecurity Framework: Encourages third-party risk management as part of a broader risk-based approach.
• DORA (Digital Operational Resilience Act): Mandates stronger third-party ICT risk management for financial services in the EU.

Embedding these standards into VRM processes helps satisfy legal requirements while also supporting operational security goals.

Operational Benefits Beyond Cybersecurity

An effective VRM programme supports more than just security:

• Business continuity: Minimises disruptions from vendor failures
• Compliance: Supports ongoing audit readiness
• Cost control: Reduces the impact of reactive spend following supplier incidents

This makes VRM relevant not only to security leaders, but also to procurement, legal and finance teams.

What are the 5 Stages of Risk Management?

1. Identify: Catalogue all third-party relationships
2. Assess: Determine risk levels based on vendor access and impact
3. Control: Define and implement mitigation actions
4. Monitor: Track changes in vendor risk posture over time
5. Review: Regularly update the process to reflect business and threat changes

What are the 9 Steps to Conduct a Vendor Risk Assessment?

1. Identify the vendor and service
2. Understand the data and systems they can access
3. Map criticality and business impact
4. Review security documentation and certifications
5. Send a tailored security questionnaire
6. Validate answers with evidence where needed
7. Conduct follow-up interviews if required
8. Document the risk level and any required mitigations
9. Feed into an ongoing monitoring process

The Shift from Compliance to Collaboration

Third-party risk management should not begin and end with a questionnaire. Every supplier onboarding, every assurance review, is an opportunity to build a more complete picture of your risk ecosystem and to prepare for future incidents.

Build your network diagrams. Strengthen your connections. Make sure you know who to speak to when something happens—and that they’re willing to pick up the phone. The security of your supply chain depends on it.

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