How to Assess Third-Party Risks in Digital Scaling

Third-party risks can severely impact your organization’s security, compliance, and operations. As businesses expand their digital presence, they increasingly rely on external vendors for critical services, such as cloud computing or SaaS platforms. This reliance introduces vulnerabilities that, if unmanaged, can lead to data breaches, operational disruptions, or financial losses.

Key Takeaways:

• Third-party risks: Include data breaches, compliance failures, and operational issues.
• Digital scaling amplifies risks: With companies managing up to 175 IT vendors, risks extend to subcontractors ("nth-party" relationships).
• Early assessment is critical: Proactive risk evaluation prevents costly incidents and ensures compliance with regulations like GDPR or HIPAA.
• Steps to mitigate risks:
  1. Identify and categorize vendors.
  2. Conduct initial risk screenings using automated tools.
  3. Perform detailed evaluations of vendor security and compliance.
  4. Strengthen contracts with clear clauses for liability and performance.
  5. Continuously monitor vendors using real-time tools.

Quick Tip:

Use tools like Bitsight or SecurityScorecard for automated risk scoring and real-time monitoring to streamline vendor oversight.

Managing third-party risks isn’t optional - it’s a necessity for safeguarding your business as you scale digitally.

Third-Party Risk Assessments: How Responsive Are Your Vendors?

Digital Asset Discovery and Vendor Mapping

Mapping digital assets and their connected vendors is a key step in assessing risks effectively. By doing this, you not only gain clarity about your operational assets but also enhance your ability to manage third-party risks. In 2023, IT assets saw a 133% increase, while security vulnerabilities skyrocketed by 589% - making a thorough approach to asset discovery more critical than ever.

Finding Digital Assets and Vendors

Discovering digital assets isn’t just about keeping a list of systems in a spreadsheet. Today’s digital environments include domains, IP addresses, cloud services, SaaS platforms, and other devices - often with shadow IT lurking in the background. Shadow IT refers to the use of unauthorized tools or services that haven’t been officially approved.

Start by cataloging all the tools, platforms, and services your organization uses. Make sure to document who has access to these systems and who is responsible for maintaining them. This process will reveal the true scope of your digital footprint, including those hidden shadow IT elements.

To get a complete picture, asset discovery tools use both active methods, like ping sweeps, and passive techniques, such as DNS log analysis. These tools provide real-time visibility into your hardware, software, and cloud services.

"Think you know every asset in your IT stack? Think again. From untracked cloud services to rogue devices, most environments are riddled with blind spots. And those blind spots lead to overspending, compliance risks, and security vulnerabilities." – CloudEagle.ai

Once your assets are identified, the next step is to explore tools that map out vendor relationships.

Tools and Methods for Vendor Mapping

Mapping vendor relationships in today’s complex ecosystems requires specialized tools. These tools use techniques like WHOIS record analysis, SSL certificate mapping, subdomain enumeration, and DNS traffic analysis to create detailed vendor maps. For example, Lansweeper offers both agent-based and agentless options to collect real-time data or gather information remotely.

Here are some categories of tools that can help with vendor mapping:

• IT Asset Management Tools: Platforms like CloudEagle.ai (rated 4.7/5 on G2) specialize in SaaS management with integrations for over 500 applications. InvGate Asset Management combines agent-based and agentless discovery for a comprehensive approach.
• External Asset Discovery Tools: Tools like CyCognito and Censys focus on mapping internet-facing assets using techniques such as subdomain enumeration and certificate transparency logs.
• Vendor Management Platforms: Solutions like Panorays and UpGuard Vendor Risk (starting at $1,599 per month) combine asset discovery with continuous third-party risk monitoring, offering dynamic risk scoring and automated assessments.

"The way Armis can find out about devices in all corners of our network and reference integrations to make accurate Risk Assessments on our devices is extremely invaluable." – Armis Centrix User Review

The most effective strategies combine various discovery methods. Rob Gurzeev, CEO and Co-Founder of CyCognito, advises focusing on shadow IT discovery, implementing continuous adaptive discovery, and setting customized alert thresholds based on asset importance.

Keeping these inventories updated is critical as your environment evolves.

Keeping Inventories Current and Accurate

In fast-changing digital environments, static inventories quickly become outdated. According to the 2025 CloudEagle.ai IGA report, poor asset tracking leads to 15% of IT budgets being wasted. To avoid this, rely on continuous monitoring and automated updates instead of manual reviews.

Real-time monitoring is essential. Cloud instances, SaaS tools, and devices change too frequently to rely on periodic audits. Automated asset discovery tools can integrate with existing IT systems like Configuration Management Databases (CMDBs), IT Service Management (ITSM) platforms, and security operations centers to ensure seamless updates.

Here are some strategies to keep inventories accurate:

• Continuous Scanning: Replace manual audits with tools like NinjaOne (rated 4.7/5 on G2), which provide automated updates and live tracking of asset lifecycles.
• System Integration: Sync asset data with business systems like ERP and procurement platforms to reduce discrepancies between what’s purchased, deployed, and recorded.
• Automated Alerts: Set up notifications for new assets or changes in existing ones to address high-priority updates immediately.
• Validation Processes: Combine automated discovery with human oversight to identify and remove outdated or untracked assets.

"Keeping track of our inventory is so easy now, and the product is very customizable. I love being able to add fields and automations whenever I want to." – InvGate Asset Management User Review

Accurate inventory management doesn’t just reduce risks - it saves money. One tech company saved $40,000 by optimizing software licenses based on asset discovery data. Meanwhile, a retailer avoided a costly breach by identifying an unmonitored device early through real-time alerts.

Key Frameworks and Tools for Third-Party Risk Assessment

When it comes to third-party risk assessment, the right frameworks and tools can transform your approach from reactive to proactive. By combining structured methodologies with automated solutions, you can monitor your vendor ecosystem more effectively and efficiently.

Risk Assessment Frameworks

The NIST Cybersecurity Framework (CSF) stands out for its adaptable and outcome-driven approach. It helps organizations align their cybersecurity efforts with business objectives, whether by refining existing strategies or creating new ones from scratch.

ISO 27001:2022 takes a structured path with its Information Security Management System (ISMS). The 2022 update introduces 11 new controls tailored for modern security challenges and emphasizes continuous improvement, particularly through Clause 10.2.

"If a vendor has ISO 27001 certification, it's a good indication that they're doing things right when it comes to securing their data." – Bitsight

For vendor-focused risk management, Third-Party Risk Management (TPRM) frameworks provide specialized methods that go beyond cybersecurity. These frameworks address financial, operational, and compliance risks across the vendor lifecycle. Additionally, the Fair Institute methodology helps organizations quantify risks in financial terms, making it easier to communicate these risks across teams.

While frameworks are essential, overloading your organization with too many can create governance challenges - what some call "framework crazy." A streamlined, well-chosen framework setup is often more effective, especially in decentralized organizations.

Once the foundation is set with these frameworks, tools can bring these strategies to life through continuous assessment and monitoring.

Third-Party Risk Management Tools

The landscape of TPRM tools has evolved, with many leveraging AI and machine learning to automate processes and provide real-time insights. Organizations using these tools often report a 75% reduction in vendor assessment time and a 3x return on investment within six months.

Here’s a closer look at some leading tools:

• Bitsight Cyber Risk Intelligence: Known for its AI-driven analysis and global risk visibility, Bitsight excels in continuous monitoring, covering both third- and fourth-party ecosystems.
• SecurityScorecard Platform: With patented rating technology, this platform offers instant cyber risk ratings across 17 categories. Its MAX service provides 24/7 monitoring and expert support, while its Supply Chain Detection and Response (SCDR) framework reduces vendor-related incidents by up to 75%.
• Black Kite Third Party Risk Intelligence Platform: This tool provides a comprehensive evaluation of vendor risk by covering technical, financial, and compliance dimensions.
• ComplyScore® by Atlas Systems: Designed for speed, ComplyScore® completes vendor risk evaluations in under 10 days - significantly faster than the industry average of 30–45 days. It also achieves up to 95% vendor coverage and slashes onboarding time to less than 10 days.

Setting Up Real-Time Monitoring Tools

While frameworks and periodic assessments are important, real-time monitoring tools are crucial in today’s fast-paced cybersecurity environment. These tools provide continuous visibility, adapting to emerging threats as they arise.

"Cybersecurity is organic. It's fast moving. It's fast-changing. These traditional assessment methods are not keeping up. So Max steps in and provides not just that point-in-time assessment, but we can provide continuous monitoring at a faster pace than traditional cybersecurity ratings companies do." – Larry Slusser, global vice president of Cyber Risk Solutions for SecurityScorecard

Evidence-based scoring is a game-changer, replacing self-assessment questionnaires with objective verification of security measures. This includes checks on patch management, malware scans, and SSL certificate validity, reducing inaccuracies from self-reporting.

Automated alerts and responses allow organizations to detect vulnerabilities, unusual activities, or compliance issues in real time. This proactive approach ensures that risks are addressed before they escalate into major incidents.

Recent cybersecurity incidents underscore the need for such tools. In 2024, the CDK Global ransomware attack disrupted 15,000 automotive dealerships, while a Change Healthcare breach caused widespread service interruptions. Even trusted vendors like CrowdStrike faced significant disruptions due to a faulty update that affected thousands of systems globally.

To implement real-time monitoring effectively, integrate these tools with your existing cybersecurity systems. Clearly define roles and responsibilities across security, procurement, and compliance teams to ensure smooth operation.

With the average organization granting access to 181 vendors weekly, adopting real-time monitoring tools with automated workflows is no longer optional. These tools are essential for maintaining visibility and control as your vendor network grows.

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Step-by-Step Third-Party Risk Assessment Process

Once you've mapped your digital assets and vendors, it's time to dive into assessing third-party risks in detail. A structured process makes risk assessment consistent and repeatable. Considering that 84% of businesses have faced operational disruptions due to third-party risk oversights and 33% have encountered regulatory actions tied to these issues, a well-planned approach is not just smart - it's essential for maintaining business operations.

With your vendor map in place, the next step is evaluating the inherent risks associated with each partner.

Step 1: Vendor Identification and Categorization

Identifying your vendors is the first step in effective risk assessment. This includes not just the obvious ones but also those hidden deeper in your supply chain.

Start by creating a comprehensive vendor inventory. This list should include every third-party relationship, no matter how minor it seems. Don't overlook peripheral service providers who might have access to your systems or facilities. The 2024 CDK Global ransomware attack serves as a reminder that even seemingly minor vendors can cause significant disruptions.

"Many companies struggle to identify their fourth to Nth party vendors, who can easily rest unnoticed deep in the supply chain. Knowing your vendors' vendors means you have total visibility into every organization that could access your company data." - Panorays

Next, establish clear criteria for categorization by considering factors like access to sensitive data (e.g., personal or proprietary information), their importance to your operations, the potential impact of their failure, and their vulnerability to disruptions such as geopolitical events or natural disasters.

To streamline this process, implement a risk triaging system. Use simple yes/no questions to sort vendors into low, medium, and high-risk categories. Questions might include: "Does the vendor have access to sensitive data?", "Do they operate offshore?", or "Are their services cloud-based?". This step is critical for focusing your resources where they're most needed. For example, vendors with Bitsight Security Ratings below 500 are nearly five times more likely to face cybersecurity attacks than those with ratings above 700.

Once vendors are categorized, proceed to an automated risk screening to establish baseline scores.

Step 2: Initial Risk Screening

After categorizing your vendors, automated tools can help establish baseline risk scores quickly and consistently.

Leverage automated risk scoring systems to analyze a wide range of data points. These tools can process information like security ratings, financial stability, and compliance certifications to create initial risk profiles. The goal is to identify vendors that require further scrutiny.

Use security ratings platforms to assess vendor security postures objectively. These platforms evaluate factors like patch management, network security, and web application vulnerabilities, providing standardized scores for easy comparison.

Additionally, automate data collection from external sources such as regulatory filings, news reports, and financial records. This "outside-in" approach can uncover risks that vendors might not disclose, giving you an early warning system for potential issues.

Set thresholds to flag vendors for immediate review. For instance, vendors with low security ratings, recent breach mentions, or financial distress signals should be prioritized for a detailed evaluation.

Step 3: Detailed Risk Evaluation

This phase involves a thorough examination of vendor capabilities, security controls, and potential vulnerabilities, pulling together information from various sources.

Request key documentation from vendors, such as SOC 2 reports, penetration test results, and compliance certifications. Look for details on technical measures like multi-factor authentication, data encryption, and vulnerability management.

Compare vendor controls against established frameworks like NIST Cybersecurity Framework or ISO 27001. This ensures a consistent evaluation process and highlights any gaps in their security measures.

Don't stop at the vendor level - research their downstream dependencies. Identify which cloud providers, software vendors, or other partners they rely on. The 2023 MOVEit attack, which impacted over 2,700 customers and led to 144 lawsuits, shows how vulnerabilities in widely-used third-party tools can ripple through entire ecosystems.

Examine public records such as SEC filings, litigation history, and media reports. These sources often reveal financial, legal, or reputational risks that vendors might not disclose.

Finally, evaluate both the vendor as a company and their specific products or services. Consider their financial health, business practices, and geographic risks, as well as the security and compliance features of their offerings.

"Cybersecurity is organic. It's fast moving. It's fast-changing. These traditional assessment methods are not keeping up." - Larry Slusser, Global Vice President of Cyber Risk Solutions, SecurityScorecard

Step 4: Contract Protection Measures

Strong contracts are your safety net when vendor issues arise. They set clear expectations, assign responsibilities, and outline remedies if problems occur.

Include key clauses that address compliance, data protection, indemnification, and termination procedures. With increasing regulatory scrutiny - such as the EU's NIS2 Directive and New York Department of Financial Services requirements - these clauses are more critical than ever.

Define indemnification terms to shield your organization from losses caused by vendor security failures or compliance violations. For example, the December 2022 breach at 365 Data Centers, which exposed over 271,000 patient records, highlights the importance of clear liability agreements.

Set performance standards through service level agreements (SLAs). Specify metrics, monitoring requirements, and penalties for non-performance. Include right-to-audit clauses to verify vendor controls and compliance.

Finally, outline termination procedures to protect your operations if the relationship ends unexpectedly. This includes requirements for data return or destruction, transition assistance, and intellectual property safeguards.

Step 5: Continuous Monitoring and Updates

Risk assessment doesn't end with onboarding. With 29% of data breaches linked to third-party vendors and 61% of companies experiencing incidents in 2023 (a 49% increase from the previous year), ongoing monitoring is essential.

Automate monitoring workflows to track vendor risk postures in real time. These systems can alert you to changes in security ratings, new vulnerabilities, or financial distress.

Continuously scan vendor-facing assets for issues like outdated software, open ports, or weak encryption. This complements periodic self-assessments with objective, real-time data.

Adjust monitoring frequency based on risk tiers. High-risk vendors may require continuous tracking, while lower-risk ones might only need periodic reviews. For instance, one Bitsight customer improved the security posture of over half their vendors in just six months by sharing security rating data with them.

Automate compliance monitoring to ensure vendors meet regulatory and internal standards. Set up alerts for compliance breaches and predefined response actions.

Lastly, create feedback loops to refine your assessment process. Incorporate lessons from vendor incidents, regulatory updates, and emerging threats to keep your methodology current.

This ongoing monitoring framework ensures your third-party risk management remains effective and adaptable to new challenges.

Best Practices for Managing Third-Party Risks

Building a strong third-party risk management (TPRM) program requires more than just assessments. Organizations with advanced TPRM strategies often see notable benefits, such as better user experiences (56%), improved understanding of risks during decision-making (52%), and more accurate and complete data (51%). By refining these practices, you can strengthen your vendor management approach and better safeguard your operations.

Key steps include setting clear policies, leveraging automation, and maintaining open communication. Scalable systems that can handle a growing vendor network are critical to ensuring long-term success.

Creating Clear Vendor Policies

A well-defined vendor management policy (VMP) is the cornerstone of effective third-party risk management. This policy isn't just a set of guidelines - it’s a strategic framework that ensures consistency in how your organization selects, monitors, and manages vendor relationships across all departments. It should include clear risk categorization, security requirements, and compliance standards.

"The policy defines key risk management workflows and task owners across cross-functional teams to ensure all VRM processes are documented for better tracking and accountability."
– Vanta

Vendors should be categorized based on data sensitivity and operational importance. Contracts must outline expectations, particularly for high-risk vendors, such as requiring SOC 2 attestations, implementing end-to-end encryption for sensitive data, and conducting annual compliance audits. Collaboration with legal and compliance teams is essential to address risks, including those posed by subcontractors (fourth parties). For instance, in 2024, 99.41% of HITRUST-certified environments reported no security incidents, emphasizing the importance of proper certifications.

"A comprehensive and carefully written contract that outlines the rights and responsibilities of all parties can help you better manage third-party relationships."
– MetricStream

Define Key Performance Indicators (KPIs) like uptime, security controls, incident response times, and compliance rates. Regularly review these metrics, using automated reporting tools to identify risks before they escalate.

Using AI for Scalable Risk Management

Artificial Intelligence (AI) is revolutionizing risk management by enabling continuous, real-time monitoring. With 31% of organizations identifying AI/ML capabilities as a top driver for future TPRM investments, its role in managing vendor risks is becoming increasingly prominent.

AI allows organizations to handle more vendors without significantly increasing workloads. It enhances accuracy by cross-referencing data from multiple sources, validating information, and spotting patterns that might go unnoticed by human analysts.

AI-driven automated risk assessments can simplify repetitive tasks such as data collection, initial screenings, and vendor onboarding. For example, the University of Kentucky’s IT Services used AI in 2025 to summarize lengthy SOC 2 reports, dramatically improving efficiency.

"It used to take us 50 hours per vendor to perform a security review - a process my team had to repeat across more than 50 vendors annually. Vanta's VRM solution cut that to only a few hours a week for each vendor, freeing up time for us to focus on more strategic security objectives."
– George Uzzle, Chief Information Security Officer, Vibrent Health

Start small by implementing AI in high-impact areas, then scale based on measurable returns. Choose platforms that integrate seamlessly with your existing TPRM, CRM, and ERP systems, while ensuring strong data governance practices.

Human oversight remains crucial for critical decisions. Regularly review AI-generated insights and apply frameworks like the National Institute of Standards and Technology (NIST) AI Risk Management Framework to address AI-related risks.

"LLMs are good at coming up with plausible-sounding answers with confidence – even if they are incorrect."
– Michael Howell, Head of Risk Research and Knowledge, Protecht

Establish an internal AI governance committee to enforce transparency, privacy, and ethical AI use. Rigorous testing should also be conducted to detect and mitigate bias.

Reporting and Communicating Risks

Once risk assessments are automated, the next step is to present findings clearly. Effective communication transforms raw data into actionable insights that support decision-making. With 92% of organizations with centralized TPRM programs investing in improving their capabilities, clear reporting is vital for demonstrating value and maintaining stakeholder trust.

Develop reporting frameworks tailored to different audiences. Senior leadership often needs high-level summaries with financial impact assessments, while operational teams benefit from detailed findings and actionable recommendations. Standardized templates can ensure consistent presentation of risk levels, impacts, and solutions.

Real-time dashboards are invaluable for continuous visibility into vendor risks. These tools can highlight critical indicators, monitor performance, and flag new threats. Automated alerts can notify teams when risks exceed acceptable thresholds.

Set up clear escalation procedures to ensure issues are promptly brought to senior management's attention, along with the necessary details for swift decision-making.

"A centralized approach to TPRM allows an organization to connect dots across verticals and see the big picture."
– Rohit Mathur, EY Global Risk Consulting Strategy Leader and EMEIA Risk Consulting Leader

Regular communication with vendors is equally important. Quarterly meetings, training sessions, and updates on security policies can reinforce the shared responsibility of maintaining security.

Document lessons learned from vendor-related incidents and incorporate these insights into your reporting processes. A cross-functional Vendor Risk Management committee can centralize oversight of policies, assessments, and compliance efforts.

"Effective third-party vendor risk management is more than just a compliance checkbox. It is an essential safeguard against operational disruptions, reputational harm, and legal pitfalls."
– HITRUST

Conclusion

Managing third-party risks has become a critical priority for any organization expanding its digital footprint. With 59% of data breaches involving third-party vendors and 60% of companies working with over 1,000 vendors, the need for robust risk assessment practices has never been more pressing. The move from occasional, reactive assessments to ongoing, proactive monitoring marks a significant shift in safeguarding businesses during periods of rapid growth.

This guide's five-step approach - covering vendor identification, initial screening, detailed evaluation, contract safeguards, and continuous monitoring - offers a practical framework that scales alongside your organization. By incorporating automation, companies can cut assessment times by up to 70%, enabling rigorous oversight even as vendor networks grow. This efficiency helps close compliance gaps and reduces vulnerabilities.

Organizations that adopt these practices early on reap considerable benefits. They experience fewer breaches, faster responses to incidents, and stronger compliance records. Additionally, they enjoy smoother vendor relationships, streamlined processes, and greater confidence from stakeholders.

The rise of AI and machine learning is reshaping risk assessment by introducing real-time threat detection and adaptable risk scoring systems. When paired with standardized evaluations and collaboration across departments, these tools provide a robust defense against third-party risks. These advancements pave the way for even more sophisticated solutions to emerge.

For those ready to take the next step, tools like The B2B Ecosystem Risk Analyzer offer a comprehensive solution. With features like automated risk scoring, real-time monitoring, and AI-driven analytics, these platforms simplify vendor oversight and help businesses mature their risk management strategies without adding unnecessary manual work.

Ultimately, the question isn't if third-party risks will affect your digital growth - it's whether you'll be ready to handle them. Start your risk assessment now to ensure your vendor partnerships become assets, not liabilities, in your journey toward growth.

FAQs

What are the best tools for monitoring third-party risks during rapid digital growth?

To keep up with third-party risks in today’s fast-moving digital world, tools such as SecurityScorecard, Bitsight, and RiskRecon can be incredibly helpful. These platforms offer real-time insights, use AI-driven analytics, and integrate with external data sources to pinpoint and address potential vulnerabilities.

Using these tools allows businesses to take a proactive approach to risk management, helping them maintain strong security measures and compliance as they expand their digital operations.

How can businesses keep vendor risk assessments accurate as their digital operations grow?

To keep vendor risk assessments accurate in today’s fast-changing digital world, businesses should rely on AI-powered tools and automation. These technologies allow for real-time monitoring of vendor performance and cybersecurity practices, ensuring updates are timely and aligned with emerging risks.

It's also important to conduct regular reviews - ideally, at least once a year - and initiate additional evaluations when major changes occur, such as shifts in operations or new security threats. Using centralized data collection and automated risk scoring can simplify this process, making it easier for organizations to adapt and maintain relevant assessments as their digital footprint grows.

What should a strong contract with third-party vendors include to address security and compliance risks?

When working with third-party vendors, having a well-structured contract is essential. It should clearly spell out security requirements, compliance responsibilities, and data protection protocols to help reduce potential risks. Key areas to cover include vendor security controls, encryption standards, access limitations, incident response plans, and regular security audit provisions.

The agreement should also include clauses requiring vendors to adhere to all relevant legal and regulatory standards while maintaining strong governance practices. These measures not only help shield your business from breaches and compliance issues but also establish a secure and reliable framework for collaboration.

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