Risk Trends 2025 and Beyond: Third-Party Risk Management

Have you risk assessed you third-party vendors and mitigated the risks through contracts?

You think you know your third-party partners, but do you really? 

Managing third-party risk is critical to protecting an organization’s security and compliance. Yet, some businesses are still playing it fast and loose. 

An October 2021 Statista survey of Canadian tech and security executives found that only about half of the organizations audited or verified their third-party service providers’ security and compliance. A mere 43 percent refined their criteria for onboarding and ongoing risk assessments of outside vendors and partners. Only 27 percent terminated partnerships so they could improve their risk management framework.

When it comes to regulations and industry standards, it’s not enough for a business to ensure its own compliance — third parties must comply as well. If not, the organization could face legal penalties and reputational damage. Regular audits and compliance checks can help confirm that your partners are adhering to necessary regulations.

Say an organization partners with an IT provider who, due to a lapse in their security measures, suffers a data breach. This breach could expose sensitive information and compromise the systems of any of the companies relying on the third-party IT provider. Every risk a business faces also applies to its third parties, making their vulnerabilities shared vulnerabilities.

Operational hiccups and talent gaps

Operational risks arise when third parties face disruptions that affect service delivery. Think about issues like bankruptcy, business interruptions, or performance failures. For instance, if a vendor goes out of business, your organization might face unexpected fees or lose an important service, impacting its financial health. Assessing the operational stability and financial well-being of vendors ensures a reliable partnership.

Third-party risks extend beyond the typical concerns. For example, if a vendor lacks proper training for emergency scenarios, like wildfire response for a pipeline project, the consequences could be catastrophic. Or consider the impact of using a third party to support your digital needs. If that partner fails to retain top talent, it could mean a loss of valuable knowledge and expertise, affecting the company’s innovation and growth.

Outsourcing can also leave a business without a pipeline of young leaders to develop into future executives. Relying heavily on third parties might mean that the next generation of talent is not being groomed within an organization, creating a leadership vacuum down the line.

A proactive approach to third-party risk management trends goes a long way in protecting your business. Regular risk assessments, clear contracts, and ongoing open communication are key. Remember, the integrity of operations depends on the reliability of an organization and its partners. So, even if you think you know your third parties well, it’s worth getting to know them even better.

Why stop there? Here are other risks to consider:

• Ethics, fraud, and reputation risk driven by third parties
• ESG data and project risk due to unreliable third-party information
• Insider cyber risk driven by third parties with access to systems
• Procurement risk driven by suboptimal decisions made by third parties
• Quality risk due to third parties not meeting standards

Questions to consider:

• Do you have the right framework and tools to assess the risk associated with all your vendors and business partners?
• Do you currently do background checks on vendors and their key resources based on risk (e.g., vendors with access to confidential data and critical systems should be considered high risk)?
• What strategies do you have in place to mitigate a disruption to your business due to a third-party outage and do you know what they are doing to minimize the disruption to you?
• Do you have a vendor code of conduct and mandatory training third parties must review annually?