The Future of Third-Party Risk Management: What CISOs Need to Know

In today’s interconnected business world, third-party relationships have become essential to operations—whether it’s cloud service providers, contractors, or suppliers. However, as businesses grow their ecosystem of external vendors, the risk of third-party data breaches and non-compliance grows as well. This is why third-party risk management (TPRM) has become a critical priority for Chief Information Security Officers (CISOs) in 2025.

With an increasing reliance on vendors and service providers, organizations need to understand how to effectively manage these risks. This blog outlines the future of third-party risk management and provides CISOs with actionable insights to mitigate potential vulnerabilities and protect their organization’s data and assets.

Why Third-Party Risk Management is Critical in 2025

Third-party vendors can expose an organization to a variety of risks:

• Data breaches due to compromised vendor security
• Regulatory violations due to non-compliance in vendor operations
• Operational disruptions if a third party fails to meet agreed-upon terms
• Reputational damage stemming from vendor-related incidents

As cyberattacks become more sophisticated, the relationship between businesses and their third-party providers must be managed with a proactive, strategic approach. In 2025, the stakes are higher than ever, especially as organizations increasingly adopt cloud services, IoT, and other technologies that expand their external vendor footprint.

The Rise of Cybersecurity Risks in Third-Party Relationships

Today’s vendors often have access to critical systems, sensitive data, and intellectual property, which makes them an attractive target for cybercriminals. In fact, according to a report by Ponemon Institute, 59% of organizations have experienced a third-party data breach in the last 12 months.

The Top Third-Party Risks for 2025

1. Cybersecurity vulnerabilities: Third-party vendors with weak security postures can provide a gateway for cyberattacks.
2. Compliance issues: Third parties may fail to comply with relevant privacy and security regulations, exposing you to fines or litigation.
3. Outdated technology: Vendors that use legacy systems may expose you to security gaps, including unpatched vulnerabilities and poor encryption.
4. Operational risks: Dependence on third-party services for critical functions can cause significant disruptions if those services are unavailable or compromised.
5. Reputational risk: A breach or compliance failure at a vendor can negatively affect your brand image, even if the incident was beyond your control.

As a result, the need for comprehensive third-party risk management strategies is no longer optional—it’s a necessity for maintaining business continuity, compliance, and data security.

The Future of Third-Party Risk Management: Key Trends to Watch

As we move deeper into 2025, here are some key trends that CISOs should pay attention to as they navigate the evolving landscape of third-party risk management:

1. Increased Focus on Continuous Monitoring

Traditional risk assessments often involved periodic vendor evaluations or annual reviews. However, this method is becoming outdated as new risks arise regularly.

In 2025, organizations will need to implement continuous monitoring of third-party vendors. This includes using advanced tools to:

• Track vendors' security posture and compliance status in real-time
• Monitor vendor performance and uptime
• Detect emerging threats based on vendor activity and industry trends

This shift will require CISOs to deploy automated third-party risk management solutions that continuously evaluate the security and compliance posture of all vendors.

2. Integration of Artificial Intelligence (AI) and Machine Learning (ML)

As the complexity of third-party risk management increases, organizations are turning to AI and machine learning to enhance their vendor risk analysis. AI can assist in:

• Identifying patterns and predicting potential risks based on historical data and vendor behavior
• Automating vendor risk assessments and remediation actions
• Analyzing vast amounts of data from vendors, including security logs, compliance certifications, and contract terms

AI and ML technologies are enabling CISOs to make more informed decisions about their third-party relationships and reduce human errors in risk assessments.

3. Supply Chain Risk Management

Supply chain risks are now at the forefront of third-party risk management strategies. The increasing interconnectedness of supply chains means that a breach or disruption at one vendor can cascade through the entire ecosystem.

CISOs will need to adopt a holistic approach that includes:

• Assessing not only direct vendors but also their subcontractors and supply chain partners
  
• Identifying single points of failure in the supply chain that could leave your organization vulnerable
• Monitoring supply chain disruptions and their potential impact on business continuity

Supply chain risk management is a critical element of TPRM in 2025, especially in industries like manufacturing, healthcare, and finance.

4. Compliance with New Regulations

With the global shift toward stronger data privacy and security laws, businesses will need to manage the compliance risks posed by their third-party vendors. For example:

• The GDPR requires companies to ensure that their third-party vendors comply with stringent data protection requirements when processing European Union (EU) residents’ data.
• The California Consumer Privacy Act (CCPA) and California Privacy Rights Act (CPRA) place similar requirements on businesses operating in California.
• New regulations like the EU Digital Markets Act (DMA) and Data Governance Act impose additional third-party risk management responsibilities for organizations operating in the EU.

CISOs must ensure that their vendors comply with all relevant regulations and data protection laws to avoid hefty penalties and reputational damage.

Best Practices for Effective Third-Party Risk Management

1. Implement a Vendor Risk Management Program

Develop a comprehensive vendor risk management framework that includes policies, procedures, and tools for assessing, onboarding, and monitoring third-party vendors. Regular assessments should be done to ensure vendors continue to meet security, compliance, and performance standards.

2. Define Clear Security and Compliance Requirements

Establish clear security and compliance expectations with your vendors from the outset. Ensure that contracts contain robust provisions on data protection, breach notification, and compliance with relevant laws and frameworks.

3. Continuously Monitor and Assess Vendor Performance

Utilize automated monitoring tools to assess vendors' security posture on an ongoing basis. Regular assessments should include reviewing their incident response plans, data encryption policies, and disaster recovery capabilities.

4. Foster Strong Vendor Relationships

Maintain strong, open lines of communication with your third-party vendors. Regularly check in on their cybersecurity efforts and ensure that they understand your organization's security priorities.

Conclusion: Future-Proofing Your Third-Party Risk Management Strategy

In 2025, third-party risk management is more important than ever. With increasing reliance on external vendors, cyber threats, and evolving compliance requirements, CISOs must implement proactive, continuous, and intelligent third-party risk management strategies.

By embracing AI, continuous monitoring, and holistic supply chain management, CISOs can reduce risks, protect data, and ensure compliance while safeguarding their organization’s long-term security and reputation. The future of third-party risk management requires integrated technology, clear governance, and strong vendor relationships—all working together to ensure business continuity and data protection.