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Oct 1, 2025
Vendor Risk Management: Closing the Gaps in Third-Party IT Security
Hemanth Kumar Kooraku
Vice President of Technology, Zazz Inc.
Why Vendor Risk Management Cannot Be Ignored
In today’s interconnected business landscape, organizations rely heavily on external service providers, cloud platforms, and IT security vendors to keep operations running smoothly. While these partnerships create efficiency and scale, they also introduce new risks. Every vendor connected to your systems represents a potential entry point for cybercriminals.
This is where vendor risk management becomes essential. Companies must ensure that their third-party partners meet the same security and compliance standards they enforce internally. Without proper oversight, one vendor’s vulnerability can compromise an entire ecosystem, leading to data breaches, regulatory fines, and reputational damage.
The real challenge lies not just in identifying risks but in closing the gaps in third-party IT security before they evolve into crises.
The Rising Importance of Third-Party Risk Management
A decade ago, security conversations revolved primarily around firewalls and internal systems. Today, the focus has shifted. More than half of security breaches now involve a third-party vendor. Organizations increasingly understand that their security posture is only as strong as the weakest link in their vendor network.
Third party risk management TPRM provides a structured approach to evaluating, monitoring, and mitigating risks associated with vendors, contractors, and external IT providers. It is no longer optional. For highly regulated industries like finance, healthcare, and government, a robust third party risk management TPRM framework is now a compliance requirement.
Imagine this scenario:
A company outsources its payroll system to a trusted vendor. On the surface, the vendor meets compliance standards, but internally, their servers are not regularly patched. If attackers exploit this oversight, they gain access not only to payroll data but potentially to other systems connected through integrations. This illustrates how a seemingly minor vendor gap can cascade into a major security crisis.
Key Challenges in Vendor Risk Management
Despite growing awareness, organizations still face challenges when implementing third party vendor management programs:
- Complex Vendor Ecosystems – Large enterprises often work with hundreds of vendors across different geographies, making oversight difficult.
- Inconsistent Risk Assessments – Vendor risk assessment frameworks vary widely, leading to gaps in evaluation.
- Limited Transparency – Vendors may resist sharing detailed security practices, leaving blind spots in compliance.
- Dynamic Threat Landscape – Threat actors constantly evolve tactics, requiring continuous monitoring rather than one-time checks.
- Resource Constraints – Many businesses lack dedicated teams to conduct thorough vendor security assessments.
Consider this situation:
A company hires a small vendor to manage building access systems. Since this vendor doesn’t handle customer data, they are classified as low-risk. However, the vendor is granted access credentials to the corporate network for maintenance. A breach in their system could open a pathway for attackers to access sensitive information, despite the vendor being initially seen as harmless.
The Vendor Risk Management Process: A Step-by-Step Approach
Building a mature vendor risk management process requires structure, consistency, and clear accountability. The process typically includes:
- Vendor Inventory and Classification
Identify all vendors and classify them by the level of access they have to sensitive data or systems. For example, a vendor providing cloud hosting or data storage services would be classified as high risk compared to a vendor supplying basic IT hardware such as monitors or peripherals. - Vendor Risk Assessment
Conduct a structured vendor risk assessment to determine each vendor’s security posture. This involves evaluating compliance certifications, data handling practices, and incident response capabilities. - Vendor Compliance Verification
Verify that vendors adhere to industry standards such as ISO 27001, SOC 2, HIPAA, or GDPR. Vendor compliance should move beyond paperwork to reflect active enforcement of policies. - Vendor Security Assessment
Perform deeper evaluations like vulnerability scans, penetration testing, or reviewing internal policies. Assigning a vendor risk score at this stage helps quantify potential exposure. - Ongoing Monitoring
Risks are fluid. A vendor secure today could be vulnerable tomorrow. Continuous monitoring and real-time alerts ensure emerging threats are detected early. - Incident Response and Remediation
Establish a clear protocol for escalation and remediation when vendor issues are identified. This ensures vulnerabilities are resolved before they can be exploited.
Closing Security Gaps with Third-Party Risk Management Solutions
The days of one-time audits are over. Modern businesses need third-party risk management solutions that combine automation, analytics, and continuous monitoring.
Some effective strategies include:
- Automated Vendor Risk Scoring – Platforms that generate dynamic risk scores based on real-time vendor data.
- Centralized Risk Dashboards – Unified views of vendor risks across business units.
- Continuous Threat Intelligence – Proactive monitoring of vendor ecosystems for vulnerabilities.
- Integrated Compliance Tools – Automated checks that adapt to evolving regulations.
Beyond reducing manual effort, these solutions provide a more predictive approach to security, enabling organizations to identify risks before they escalate. They also make it easier to demonstrate regulatory compliance, improve vendor accountability, and streamline communication between security, legal, and procurement teams.
Modern third party vendor management is not just about managing vendors reactively but about embedding risk intelligence into daily operations to create a more resilient and adaptive security posture.
Vendor Risk Scores: Turning Data into Action
A vendor risk score is a powerful way to simplify complex risk assessments. Instead of evaluating all vendors equally, organizations can prioritize oversight and resources.
Risk scoring frameworks allow businesses to segment vendors into categories such as high, medium, and low risk. The classification is based on factors like data access, compliance maturity, and incident history. This structured approach ensures that high-risk vendors, such as those managing financial transactions or sensitive customer information, receive deeper scrutiny. Low-risk vendors, on the other hand, are monitored at appropriate intervals.
By transforming raw assessment data into clear, actionable metrics, vendor risk scores give organizations the ability to focus resources where they matter most. This improves efficiency while also strengthening overall security resilience.
The Human Element: Building Strong Vendor Relationships
Technology plays a critical role in vendor risk management, but it cannot replace human collaboration. Building trust and fostering transparency with vendors is essential for long-term success.
Organizations that position vendor compliance as a shared responsibility, rather than a rigid checklist, achieve better outcomes. Instead of dictating requirements, they actively engage vendors through training sessions, shared guidelines, and clear communication channels.
This approach encourages vendors to align with security goals, enhances accountability, and reduces resistance to audits or assessments. Ultimately, a collaborative culture ensures that vendors become proactive contributors to the organization’s overall security posture, rather than reluctant participants.
Real-World Impacts of Poor Vendor Risk Management
The consequences of weak oversight in third party vendor management can be severe and far-reaching. Organizations that fail to implement robust controls may face:
- Regulatory penalties and legal action for failing to meet compliance standards
- Operational downtime and productivity loss due to disrupted vendor services
- Damage to customer trust and brand reputation following a vendor-related breach
- Increased pressure from stakeholders and investors demanding stronger governance
These impacts highlight why third party risk management TPRM must be treated as a strategic priority, not just a compliance exercise. Strong governance frameworks reduce vulnerabilities, safeguard business continuity, and strengthen stakeholder confidence in the organization’s ability to manage complex vendor ecosystems.
Best Practices for Strengthening Vendor Risk Management
To close the gaps in third-party IT security, organizations should adopt the following best practices:
- Standardize vendor onboarding with integrated risk assessments.
- Continuously monitor vendors handling critical data or systems.
- Use risk-based segmentation to focus on high-risk vendors.
- Integrate third party risk management TPRM into enterprise governance.
- Train teams on vendor risk awareness and escalation procedures.
- Regularly review and refine the vendor risk management process as threats evolve.
Conclusion: Closing the Gaps in Vendor Security
Vendor ecosystems are expanding rapidly, and with them, the risks of cyberattacks, compliance failures, and reputational harm. A structured vendor risk management process, supported by modern tools and collaborative vendor relationships, is the best way to mitigate these threats.
Organizations that prioritize third party vendor management and embrace modern third party risk management TPRM frameworks are not only protecting themselves from potential breaches but also building more resilient networks of trust.
The future of cybersecurity will be defined not just by how organizations secure themselves, but by how effectively they manage and secure their vendors.
Hemanth Kumar is an agile delivery leader focused on driving enterprise-scale transformation through cloud-native, AI-powered, and secure digital solutions. Hemanth oversees global engineering and delivery operations, ensuring high performance, reliability, and continuous innovation for Zazz’s enterprise clients.
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