Why Vendor Risk Management Is Now a Business Imperative

Your biggest cyber risk might not live inside your network—it might be lurking inside your vendor ecosystem. As organizations adopt more third-party services and platforms, they inherit risk they can’t directly control. According to SecurityScorecard’s 2025 Global Third-Party Breach Report, more than 35% of breaches stem from third-party access. Vendors often don’t know about vulnerabilities until attackers exploit them.

Annual assessments no longer match the pace of threats. Effective vendor risk management (VRM) must be continuous, intelligence-driven, and integrated across business units.

What Is a Vendor Risk Management Program?

A vendor risk management (VRM) program identifies, assesses, monitors, and mitigates cybersecurity risks introduced by third-party suppliers, partners, and service providers.

Effective VRM programs typically include:

• Risk-based onboarding

• Tiered vendor classification

• Contractual security obligations

• Continuous cyber posture monitoring

• Defined remediation and escalation workflows
  

Step 1: Define Scope and Risk Tolerance

Start by inventorying every vendor relationship across IT, operations, HR, and facilities. Any party with digital or physical access must be included. Clarify your risk appetite by determining acceptable exposure levels for each tier of vendor. Risk classification should consider:

• Type and sensitivity of data accessed (if any personally identifiable information (PII), protected health information (PHI), or financial data, for instance, is involved, pay special attention to compliance needs)

• Degree of network integration

• Business impact in the event of compromise (will this be a material event?)

Engage procurement, legal, compliance, and security teams early to ensure alignment.

Step 2: Assess Vendors at Onboarding

Integrating cybersecurity into procurement workflows from the start is a best practice every organization should adopt in 2025. Key onboarding activities can include:

• Issuing standardized questionnaires (such as SIG)

• Validating against frameworks such as NIST Cybersecurity Framework or ISO 27001

• Requiring third-party audit evidence (such as SOC 2 reports)

Questionnaires alone don’t uncover risk. Supplement self-attestations with objective sources—such as breach history, external cybersecurity ratings, and threat intelligence.

Step 3: Establish a Baseline with Cybersecurity Ratings

Continuous ratings provide a more accurate picture than a yearly assessment. Tools like SecurityScorecard offer telemetry-based insights into:

• DNS health
• Patching cadence
• IP and domain reputation
• Social engineering susceptibility
• Endpoint security
• Application security

Use this data to adjust vendor tiers in real time and make faster, informed decisions when security performance declines.

Step 4: Embed Security Requirements in Contracts

Contracts should define security expectations and hold vendors accountable. Strong clauses can include, but are not limited to:

• Minimum acceptable security rating (such as maintaining a “B” or higher at all times)

• Mandatory breach reporting timelines (such as mapping to certain regulatory frameworks or designating a 24-72 hour timeframe)

• Right to audit or demand remediation evidence

• Maintenance of certifications like ISO 27001 or SOC 2 Type II

When issues arise, contract clarity helps eliminate ambiguity and accelerate response.

Step 5: Monitor the Vendor Ecosystem Continuously

Vendor risk is dynamic, just as threat actors change their behaviors. Even trusted partners can become liabilities overnight due to new vulnerabilities or lapses in security practices as well.

SecurityScorecard’s Supply Chain Detection and Response (SCDR) solution provides alerts tied to security rating changes, breach intelligence, and threat actor campaigns. This enables faster identification of risk before it escalates.

Step 6: Establish an Escalation and Remediation Workflow

When a vendor’s risk rating falls below your defined threshold:

• Automatically notify the vendor and relevant internal teams

• Open a case to track remediation steps

• Temporarily restrict access or data exchange if necessary

Step 7: Address Fourth-Party Risk

A breach at your vendor’s vendor can be just as damaging as a breach at your vendor or in your own organization. Recent research from SecurityScorecard found that 4.5% of breaches involved fourth parties—creating chain-reaction failures across entire ecosystems.

To reduce this exposure, consider requiring vendors to maintain their own VRM programs and monitor critical fourth parties with vendor disclosures and rating tools. Using solutions like SCDR to map these relationships and track risk inheritance can also significantly reduce your risk.

Step 8: Share Risk Intelligence with Leadership

Third-party risk isn’t just a cybersecurity issue—it’s a board-level concern. Reporting should include:

• Total number of vendors by risk tier

• Vendors with rating declines over time

• Active remediation cases

• Industry and regional risk trends

This data can help elevate risk posture discussions and secures investment in more resilient vendor management practices, all with board-level buy-in. This turns risk into a shared responsibility across the business, not just IT.

What Sets Mature VRM Programs Apart

Mature vendor risk programs share several traits:

• Continuity: Monitoring occurs in real time, not just annually

• Context: Cyber ratings are enriched with breach intelligence

• Collaboration: Cross-functional coordination is embedded from day one

• Clarity: Reporting is structured and consumable by leadership

Lacking any of these could leave your organization vulnerable to blind spots and delays in detection or context-rich understanding of vendor cybersecurity issues.

How SecurityScorecard Supports Vendor Risk Programs

SecurityScorecard provides:

• Automated discovery of third- and fourth-party relationships

• Transparent scoring across several risk factors

• Continuous breach data

• Real-time alerts, remediation tracking, and reporting that supports audit-readiness

Together, these tools offer a continuous view of your external attack surface and help prioritize vendor actions by risk, not guesswork.

Transform Third-Party Risk into a Supply Chain Resilience
With SecurityScorecard’s Supply Chain Detection and Response (SCDR), gain actionable insights into your vendors’ security postures. Our platform empowers you to make informed decisions, ensuring compliance and strengthening your supply chain’s cybersecurity.

🔗 Explore SCDR