How do you manage third-party risk?

Most organisations have a good understanding of their internal risks. They know which systems are critical, where sensitive data is stored and which controls protect their most important assets. The challenge is that many of today’s biggest risks sit outside the organisation.

Whether it’s a cloud provider, software vendor, outsourced IT partner or payroll provider, third-party vendors often have access to systems, customer data and critical business processes. A weakness in one of these relationships can quickly become your problem. In recent years, some of the most significant threats have originated not from direct attacks on organisations themselves, but through vulnerabilities, data breaches and security incidents within their supply chains.

This is why third-party risk management has become a priority for boards, risk teams and security leaders. Managing third-party risk is not about avoiding external partnerships. It’s about understanding where the risks lie, determining which vendors matter most and ensuring appropriate safeguards remain in place throughout the relationship.

If you are reading this because your organisation has experienced a cyber incident and is unsure how to respond, contact Zensec immediately.

Third-party risk starts long before a vendor breach

When people think about third-party risks, they often think about a cyber attack or a high-profile data breach. In reality, risk exposure begins much earlier.

A supplier could experience financial difficulties that threaten service delivery. They may fail to meet regulatory compliance requirements. Their security controls might not keep pace with evolving threats, or they could rely heavily on fourth parties that introduce additional weaknesses into the supply chain.

Any of these scenarios can create operational risk, compliance risk, financial risk or reputational risk for your organisation.

The problem is that many businesses only start examining these risks once a contract is ready to be signed. By that point, commercial pressures often outweigh security concerns. A more effective approach is to build risk management into vendor selection from the outset.

Focus on the vendors that matter most

One of the most common mistakes in vendor risk management is treating every supplier the same.

Not all vendors create significant risk. A supplier with no access to sensitive data and no connection to internal systems warrants a very different level of scrutiny than a cloud platform supporting a core business function.

An effective third-party risk management programme starts by categorising vendors based on their risk profile. This should consider factors such as:

• Access to customer data
• Access to internal systems
• Involvement in critical business processes
• Regulatory obligations
• Reliance on subcontractors and fourth parties
• Impact on business continuity if services become unavailable

This allows organisations to identify high risk vendors and focus resources where they will have the greatest impact.

Without this prioritisation, security teams can quickly become overwhelmed by assessments that consume time but deliver little value.

Look beyond vendor risk assessment questionnaires

Vendor risk assessment questionnaires remain a key component of third-party risk assessment, but they should never be the entire process.

Questionnaires and security questionnaires can provide useful insight into a vendor’s security programme, governance structure and compliance practices. They can help identify potential risks and highlight areas that require further investigation.

The challenge is that questionnaires often reflect what a vendor says its controls are, rather than how effective those controls actually are.

This is where thorough due diligence becomes essential.

Security assessments, independent audit reports, certification reviews and evidence-based validation can provide a much clearer picture of a vendor’s security posture. Reviewing previous security incidents, regulatory actions and public security disclosures can also reveal risks that may not appear in a standard assessment.

The goal is not to create more paperwork. It’s to understand whether a vendor’s security practices are genuinely capable of protecting your organisation from unacceptable risk.

Assess the vendor’s security posture in context

A strong security posture looks different depending on the service being provided.

For example, a marketing platform processing large volumes of customer data should be subject to different expectations than a facilities management supplier with no digital access to critical systems.

Effective security assessments should evaluate whether controls are appropriate for the risks involved.

This may include reviewing:

• Access controls and identity management
• Vulnerability management processes
• Incident response procedures
• Business continuity arrangements
• Data protection controls
• Security monitoring capabilities
• Physical security controls

Organisations should also consider how security is governed across the vendor’s business. Security controls are important, but culture, leadership commitment and accountability often determine whether those controls work effectively in practice.

A vendor’s security posture should be evaluated against the risks they introduce, not against a generic checklist.

Continuous monitoring is where many organisations fall short

The reality is that risk assessments only provide a snapshot in time.

A vendor may successfully complete an assessment today, then experience organisational changes, staff reductions, technology migrations or emerging security weaknesses six months later.

Yet many organisations conduct a review during onboarding and revisit the supplier only when the contract is due for renewal.

This creates a dangerous blind spot.

Continuous monitoring and ongoing monitoring help organisations maintain visibility throughout the vendor lifecycle. Changes in ownership, financial stability, regulatory status and cyber security performance can all alter a vendor’s risk profile.

Modern party risk management programmes increasingly rely on automated tools that provide ongoing insight into vendor compliance, security posture and potential exposure to emerging threats.

The organisations that manage risks most effectively are not those that perform the largest number of assessments. They are the ones that maintain visibility after onboarding has been completed.

Prepare for security incidents before they happen

No party risk management programme can eliminate risk completely.

Even vendors with mature security controls and strong governance can experience security incidents. The real test is how quickly organisations can respond when those incidents occur.

A third-party breach can affect everything from customer trust and regulatory compliance to operational performance and brand reputation. The impact becomes even greater when critical vendors are involved.

Organisations should establish clear response procedures for third-party data breaches and other security incidents long before they become necessary.

This includes understanding:

• Notification requirements
• Escalation processes
• Roles and responsibilities
• Access to forensic evidence
• Recovery expectations
• Communication procedures

Many organisations develop detailed incident response plans for their own environments but fail to consider how external vendors fit into those plans. When a third-party breach occurs, that oversight can significantly delay recovery efforts.

Strengthen governance through contracts and accountability

Risk management should not sit solely with the security team.

Managing third-party risk requires collaboration between procurement, legal, compliance, technology and senior management. Strong governance ensures risks are understood, tracked and addressed throughout the relationship.

Vendor contracts play an important role in this process. They establish expectations around security controls, breach reporting, audit rights and regulatory responsibilities.

However, contracts alone do not reduce risk.

The most effective organisations treat vendor relationships as ongoing partnerships rather than purely commercial arrangements. Regular engagement, performance reviews and risk discussions often provide earlier warning signs than formal reporting mechanisms ever could.

Third-party risk management works best when accountability is shared across the business rather than delegated to a single team.

Regulatory expectations are continuing to evolve

Regulators increasingly expect organisations to understand and manage risks throughout their third-party ecosystem.

Frameworks such as the Digital Operational Resilience Act have reinforced the importance of assessing third-party providers, maintaining oversight of critical vendors and demonstrating effective governance around outsourcing risks.

For many organisations, compliance is no longer simply about their own controls. Regulators want assurance that risks introduced by external vendors are being identified, assessed and managed appropriately.

This shift means third-party compliance can no longer be treated as a procurement exercise. It has become a core element of organisational resilience.

Effective third-party risk management is an ongoing process

The most successful organisations recognise that third-party risk management is not a project with a defined end date. It is an ongoing discipline that evolves alongside the business, its suppliers and the threat landscape.

A strong programme combines due diligence, risk assessments, security assessments, vendor compliance reviews and continuous monitoring. More importantly, it focuses effort where the greatest risks exist rather than attempting to treat every supplier equally.

Third-party relationships are essential to modern business. They create opportunities for growth, innovation and operational efficiency. The challenge is ensuring those relationships do not introduce unnecessary risk.

By understanding your third-party risks, evaluating vendor’s security practices and maintaining oversight throughout the relationship, organisations can reduce risk exposure, strengthen resilience and build greater confidence across their entire third-party ecosystem.