10 Critical Third-Party Risk Management Challenges and How to Mitigate Them

Every vendor relationship can introduce potential vulnerabilities to your business, and in today’s hyperconnected business landscape, it only takes one missed gap to compromise your entire security chain. The numbers tell a sobering story:

• According to the Global Cybersecurity Outlook 2024 report by the World Economic Forum, a staggering 98% of organizations report having at least one third-party partner that has suffered a data breach in the last two years.
• More than 50% of organizations have indirect relationships with over 200 fourth parties that have been breached in the same timeframe, as cited in the same report.
• The IBM Cost of a Data Breach Report 2024 shows that the global average cost of a data breach has hit a record $4.88 million.

For risk management professionals, these statistics underscore the importance of establishing a robust third-party risk management solution for your business.

The Growing Importance of Third-Party Risk Management Solutions

Your organization’s security perimeter now extends far beyond your own walls. Each vendor relationship introduces new risks — cybersecurity vulnerabilities, operational dependencies, compliance challenges, and reputational exposure.

The stakes have never been higher: a single third-party security breach can cascade into devastating consequences for your organization, from regulatory penalties and financial losses, to damaged customer trust. Yet, many organizations still treat vendor risk management as a checkbox exercise, leaving themselves exposed to threats that could cripple their operations.

Forward-thinking companies recognize robust third-party risk management isn’t just about defense — it’s about building resilient business partnerships that drive growth while protecting core assets.

Let’s explore the ten most critical third-party risk management challenges organizations face today and how to address them effectively.

Top 10 Third-Party Risk Management Challenges and How to Mitigate Them Effectively

1. Evolving (and Maturing) Cybersecurity Threats

Supply chain attacks have risen as threat actors increasingly target vendor access credentials and APIs. Since third-party vendors often operate outside your direct security controls, while maintaining privileged system access, they can cause significant exposure to data breaches, malware attacks, and unauthorized system access if not thoroughly assessed.

How to mitigate:

• Implement comprehensive due diligence before onboarding new vendors, verifying their cybersecurity certifications (e.g. ISO 27001 or NIST).
• Deploy continuous monitoring tools to detect and mitigate threats in real time.
• Establish cybersecurity training programs for all third-party vendors.

2. Third-Party Risk Oversight

Most enterprises now manage thousands of third-party relationships, each bringing its own unique risk profile and potential downstream vulnerabilities. Traditional oversight methods fail to capture the individual complexity of modern vendor networks, especially when vendors themselves rely on fourth parties, or operate across multiple jurisdictions. This lack of visibility becomes particularly acute in areas like financial stability, operational resilience, and subcontractor management.

How to mitigate:

• Use a combination of standardized frameworks like NIST or ISO 27001 and customized assessments to properly assess vendors based on their exposure impact to your organization.
• Deploy a centralized third-party risk dashboard for real-time monitoring.

3. Regulatory Compliance

The regulatory landscape has grown increasingly complex with frameworks like DORA, APRA, and ABAC taking shape. Organizations face overlapping compliance obligations across multiple jurisdictions, with each demanding specific data-protection requirements and risk reporting.

How to mitigate:

• Create a compliance checklist for vendors including applicable data protection regulations.
• Conduct regular audits to ensure vendors meet regulatory compliance requirements.
• Collaborate with legal experts to stay updated on new or evolving data protection laws.

4. Vendor Risk Classification

Vendor use cases span various service types and risk levels. Without proper classification, organizations either waste resources over-monitoring low-risk vendors or dangerously under-monitor critical ones.

How to mitigate:

• Use a vendor risk scoring system to classify vendors into tiers based on criticality and risk level.
• Automate vendor classification using AI and pre-completed assessments to reduce errors and inconsistencies.
• Allocate resources strategically, focusing enhanced monitoring and audit efforts on high-risk vendors.

5. Onboarding Cycles

Vendor onboarding processes typically involve multiple departments and can stretch across months, often creating significant business delays. This extended timeline often pressures teams to cut corners in security assessments and due diligence reviews to appease their peers, leading to rushed security assessments and increased exposure to threats.

How to mitigate:

• Standardize pre-contract due diligence templates to eliminate redundancies and clearly state risk assessment needs.
• Automate onboarding workflows to streamline data collection and analysis.
• Use a centralized vendor portal to simplify document submissions, avoid duplicate requests, and streamline communication with third parties.

6. Real-Time Monitoring

Organizations must track both immediate risks, like security breaches, and gradual issues, like deteriorating vendor performance. Traditional point-in-time assessments fail to capture the dynamic nature of vendor risk, while real-time monitoring solutions often generate overwhelming amounts of data without clear prioritization or context.

How to mitigate:

• Implement continuous monitoring tools that provide real-time updates on vendor risks.
• Conduct periodic assessments to ensure ongoing regulatory compliance and alignment with your organization’s security standards.
• Integrate targeted vendor intelligence to streamline due diligence reviews and stay on top of emerging risks.

7. AI and Automation

As vendor networks expand beyond what human teams can effectively manage, manual processes become increasingly unsustainable. Traditional approaches can also introduce consistency problems in risk assessments and monitoring.

How to mitigate:

• Use AI-driven risk management tools to predict and prioritize assessment responses more accurately.
• Embed automation in workflows to accelerate processes and reduce human error.
• Combine AI insights with human expertise to enhance decision-making.

8. Threat Prioritization and Response

Organizations receive a constant stream of alerts about third-party risks, but often lack structured frameworks for distinguishing between critical and routine vulnerabilities. This alert fatigue, combined with siloed response processes across departments, creates dangerous delays in addressing serious threats.

How to mitigate:

• Implement a vendor risk scoring system to prioritize threats based on impact and likelihood.
• Automate threat detection and response processes to eliminate inefficiencies and accelerate mitigation.
• Establish clear escalation protocols to ensure rapid response to high-risk threats.

9. Vendor Assessment Gaps

Standard assessment templates often fail to capture industry-specific risks or unique vendor relationships, creating dangerous blind spots in risk evaluation. These gaps become particularly problematic with vendors who operate in emerging technology sectors or provide novel services that don’t fit traditional risk categories.

How to mitigate:

• Utilize customizable assessment templates to cover key risk areas, while allowing for individual vendor risk data.
• Automate assessment workflows to ensure thorough and timely evaluations.
• Leverage a risk assessment exchange to assess large or complex vendors, and verify vendor assessment data with previously completed responses.

10. Contract Lifecycle Management

Modern vendor contracts contain numerous risk and compliance obligations that require ongoing monitoring and periodic validation. Without systematic management, critical contract provisions — like security requirements, performance metrics, and compliance obligations — become effectively unenforceable.

How to mitigate:

• Standardize risk-based contract templates to streamline pre-contract due diligence and enforce security requirements.
• Centralize contract management to ensure visibility into vendor agreements and performance.
• Automate contract tracking and renewals to prevent lapses and missed compliance updates.

Turn Challenges into Opportunities with an All-in-One TPRM Platform

Every vendor risk challenge highlights an opportunity to strengthen your security posture — if you have the right tools. A comprehensive third-party risk management platform doesn’t just help you manage risks — it transforms your entire approach to vendor relationships.

A comprehensive third-party risk management platform can help you:

• Automate risk assessments and monitoring
• Streamline vendor onboarding
• Ensure continuous TPRM compliance
• Scale your risk management program efficiently

The right third-party risk management solution isn’t just another tool in your security arsenal — it’s a strategic advantage that protects your business while improving operational efficiency.

Take control of your third-party security today.
Explore how a comprehensive third-party risk management solution provider helps you take a proactive approach to protecting your organization.

Ready to transform your third-party risk management program? See how ProcessUnity can help you overcome these 10 common challenges with our comprehensive TPRM Program.