Understanding Third-Party Risk: Identifying and Mitigating External Threats

Why Third-Party Risk Is Critical

Businesses are increasingly dependent on an ever-expanding ecosystem of vendors, software platforms, and service providers. These relationships power everything from invoicing and authentication to cloud storage and customer engagement—but every connection expands the attack surface, and bad actors know it.

In the last year, 35.5% of all data breaches stemmed from third-party compromise—a 6.5% increase from the prior year. Attackers have learned that breaching your vendor is often easier than breaching you. It’s no longer enough to secure your perimeter if your vendors remain exposed.

Third-Party Breach Trends

SecurityScorecard’s 2025 breach data highlights five key trends among attacks and breaches that stem from third-party compromise:

• File transfer software: The most common vector for third-party breaches, especially when tools like Cleo remain unpatched
• Clop: This hacking crew is the most active user of third-parties for its attack campaigns.
• Chinese-linked threat actors: Hackers with ties to China are frequent abusers of third-party access across North America, Europe, and Asia
• Foreign subsidiaries: Foreign subsidiaries are two times as likely to be breach sources than domestic ones.
• Economic factors: More affluent countries, such as The Netherlands, Singapore, and Japan, are more likely to be victims of third-party breaches.

These statistics underline that third-party breach patterns are evolving, so there is no static way to manage third party risk. These breach patterns continue to evolve in part because hackers will always find your weakest link, and in part because vendors often operate with less scrutiny than internal systems around the globe, despite handling sensitive workflows and data.

Fourth-Party Risk: A Cascade Effect

Third-party risk rarely ends with your direct vendors. Many breaches now originate from fourth parties—your vendors’ vendors. In the past year, 4.5% of all breaches involved this extended supply chain layer, according to recent SecurityScorecard research.

Examples include:

• SaaS tools
• Subcontracted hosting or IT support vendors
• Offshore development teams connected to critical platforms

Once compromised, these entities create cascading effects across entire ecosystems. A single breach can impact dozens of downstream clients.

How to Identify High-Risk Vendors

Not all vendors carry equal risk. Focus on those that:

• Handle sensitive customer or employee data
• Integrate directly with your production systems
• Fall under regulatory frameworks such as HIPAA or PCI DSS
• Have a history of breaches or incomplete security programs

SecurityScorecard enables risk-based vendor prioritization by continuously scoring third parties across DNS health, network security, and breach exposure metrics.

Key Third-Party Risk Management Actions

To reduce breach exposure, organizations should:

• Inventory all third parties with access to sensitive systems
• Categorize risk by level of access, data sensitivity, and business criticality
• Use targeted security questionnaires, not generic checklists
• Monitor vendor health continuously, rather than relying on annual reviews
• Add breach notification and data protection clauses to contracts
• Remediate vendor weaknesses rapidly, especially after a breach or significant score change
• Track ransomware attacks, which increasingly involve compromised vendors and data leaks. 41.4% of ransomware breaches now stem from third parties, SecurityScorecard research found.

SecurityScorecard’s Supply Chain Detection and Response (SCDR) platform tracks suspicious infrastructure, third-party exposure, and known breach indicators tied to your ecosystem.

Signs a Vendor May Be Compromised

Stay alert to these warning signs:

• Unexpected system behavior, API errors, or failed integrations
• Breached credentials tied to vendor domains appear on dark web forums
• The vendor shows up on ransomware leak sites
• DNS or SSL certificate changes in vendor infrastructure
• Lateral phishing attempts impersonating known partners

Final Thoughts

Third-party risk isn’t hypothetical. It’s a surging cause of breaches, and attack patterns are changing constantly. Attackers know they can compromise an entire sector by breaching one vendor. And while you can outsource services, you can’t outsource responsibility. Managing third-party risk in real time is now just a cost of doing business.

SecurityScorecard enables this shift by delivering continuous insights into third-party infrastructure, breach signals, and ransomware exposure—helping you manage the vendors who matter most.

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SecurityScorecard’s MAX is a fully managed service that combines our advanced platform with expert driven remediation. We handle the complexities of supply chain cybersecurity, allowing you to focus on your strategic business operations.

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