Vendor risk assessment in 2025: A complete guide to security, cyber risks, and best practices

Not long ago, vendor risk assessment was seen as a checkbox exercise—companies would issue a standardized questionnaire, collect responses, and assume they had mitigated third-party risks. That approach no longer works. As supply chains grow more complex and businesses expand their digital footprint, vendor relationships introduce new challenges in cybersecurity, compliance, and business continuity. Understanding and mitigating these risks requires a structured, ongoing vendor risk assessment process. In this article I provide a full guide to vendor risk assessment to help your organization stay ahead of the evolving cyber threat landscape.

The growing importance of vendor risk assessment

Organizations depend on third-party cloud providers, SaaS platforms, IT service providers, and supply chain vendors more than ever. While this outsourcing boosts efficiency, it introduces new security risks. Cybercriminals recognize that smaller vendors often lack robust defenses, making them prime attack vectors. Once compromised, these vendors become stepping stones for attackers to infiltrate larger enterprises. At the same time, regulators worldwide are tightening third-party security mandates. Laws like GDPR (Europe), CCPA/CPRA (California), and PIPL (China) impose strict requirements on organizations that share data with vendors. In the financial sector, frameworks like the European Banking Authority’s (EBA) Outsourcing Guidelines, the Monetary Authority of Singapore’s (MAS) Technology Risk Management Guidelines, and the Digital Operational Resilience Act (DORA) in the EU demand greater transparency and security in vendor relationships. With digital transformation accelerating, cloud adoption further complicates security oversight. While cloud providers follow a shared responsibility model, many organizations struggle to determine who is responsible for which aspects of security. This uncertainty can create security gaps that attackers exploit. A modern vendor risk assessment process must account for these factors, ensuring that third-party relationships enhance security rather than introduce vulnerabilities.

Key cyber threats affecting vendor risk assessment

Cyber threats targeting vendors are evolving rapidly, and organizations can no longer rely on outdated security assessment models. The most pressing risks include supply chain attacks, ransomware, AI-driven cyber threats, insider risks, and vulnerabilities in IoT/OT environments. Understanding the top vendor security threats in 2025

Threat category	Description	Potential impact
Supply chain attacks	Cybercriminals exploit vendor vulnerabilities to infiltrate multiple organizations	Large-scale data breaches, regulatory fines, operational disruptions
Ransomware & extortion	Attackers encrypt vendor data and threaten to expose stolen information unless a ransom is paid	Financial losses, reputational damage, legal liabilities
AI-driven threats	Attackers use AI to create highly convincing phishing emails, automate reconnaissance, and exploit vulnerabilities faster	Increased phishing success rates, harder-to-detect attacks
Insider threats & social engineering	Vendors’ employees may unintentionally or maliciously compromise security	Data leaks, unauthorized access, fraud risks
IoT & OT vulnerabilities	Many vendors manage connected devices that lack proper security controls	Network breaches, infrastructure downtime, compliance failures

Understanding these vendor security assessment risks is only the first step. Organizations must also adopt a comprehensive vendor risk assessment process to mitigate these evolving threats.

How to perform vendor risk assessment: a structured process

A strong vendor risk assessment process is more than just a one-time evaluation—it requires pre-contract diligence, contractual protections, continuous monitoring, and proactive incident response planning. Businesses must assess vendors before, during, and after the partnership to ensure ongoing security compliance. Key phases of vendor risk assessment

Phase	Key activities	Expected outcome
Pre-contract risk assessment	Review vendor security policies, compliance certifications, incident history, and financial stability	Identify high-risk vendors before signing contracts
Contractual security requirements	Define breach notification clauses, right-to-audit provisions, and data protection policies	Ensure legal and regulatory protections are in place
Ongoing monitoring and risk intelligence	Conduct regular security audits, use third-party risk scoring tools, and track vendor incidents	Detect emerging threats in real time
Incident response coordination	Establish breach escalation paths, conduct joint security drills, and review response plans	Ensure fast, coordinated response to cyber incidents
Vendor offboarding	Revoke access, ensure secure data disposal, and reassess risks	Prevent lingering security vulnerabilities

Each of these phases plays a critical role in reducing vendor-related security and compliance risks. However, compliance alone is not enough—organizations must align their vendor cyber risk assessment strategies with globally recognized security frameworks.

Aligning vendor risk assessments with global security frameworks

To strengthen vendor security assessment, organizations must follow industry-leading security frameworks. These frameworks provide structured methodologies to assess and mitigate third-party risks effectively. Security frameworks and their role in vendor risk assessment

Framework	Focus area	Relevance to vendor risk assessment
NIST Cybersecurity Framework (CSF)	Cyber risk management	Provides structured vendor risk governance
ISO/IEC 27001	Information security management	Ensures vendors follow structured security policies
SOC 2 Type II	Security, availability, confidentiality	Demonstrates vendor security control effectiveness
PCI DSS	Payment card security	Required for vendors processing credit card transactions
HIPAA	Healthcare data protection	Ensures vendor compliance with patient data security standards
DORA (Digital Operational Resilience Act)	ICT and third-party risk management	Requires financial institutions to assess and manage vendor cyber risks

DORA, in particular, plays a significant role in financial sector vendor risk management. It mandates that organizations conduct rigorous vendor risk assessments, real-time security monitoring, and resilience testing to prevent disruptions from third-party failures. By integrating these frameworks into their vendor risk assessment process, organizations can ensure that third-party vendors maintain strong security controls and comply with industry regulations. However, even with strong frameworks in place, continuous risk monitoring and proactive security measures are essential.

Best practices for strengthening vendor risk assessments

As cyber threats targeting vendors grow more sophisticated, businesses must move beyond outdated risk management models. Traditional, static assessments no longer provide adequate protection against evolving threats like supply chain attacks, ransomware, and insider risks. Instead, organizations should adopt a proactive, data-driven approach that integrates security throughout the vendor lifecycle. A strong vendor security assessment process includes centralized risk management, continuous threat intelligence, and contractual safeguards. The following best practices can help organizations build a more resilient vendor risk management strategy: Key strategies for strengthening vendor risk assessments

Best practice	How it strengthens vendor security
Adopt centralized vendor risk management (VRM) platforms	Use Governance, Risk, and Compliance (GRC) tools to streamline vendor onboarding, automated security assessments, and compliance tracking. A centralized system improves visibility and reduces administrative burdens.
Segment vendors based on risk levels	Not all vendors pose the same risk. Categorizing vendors into high, medium, and low-risk tiers allows security teams to allocate resources efficiently. High-risk vendors require frequent audits and continuous monitoring, while lower-risk vendors can undergo periodic reviews.
Leverage real-time threat intelligence	Traditional assessments provide a snapshot in time, but cyber risks are dynamic. Automated monitoring tools track vendor vulnerabilities, leaked credentials, and dark web activity, allowing organizations to identify emerging threats before they escalate.
Embed security clauses into vendor contracts	Strengthen agreements with right-to-audit provisions, strict data encryption policies, and breach notification timelines. Well-defined contracts ensure vendors comply with cybersecurity best practices and regulatory requirements like DORA, GDPR, and PCI DSS.
Require ongoing vendor cybersecurity training	Many security breaches stem from human error. Organizations should mandate that vendors provide regular cybersecurity training for employees, reducing the risk of phishing attacks, insider threats, and credential misuse.

By integrating these strategies into their vendor risk assessment process, organizations can significantly reduce third-party cyber risks while ensuring compliance with evolving regulatory frameworks. However, effective vendor security management is not a one-time effort—it requires continuous oversight, collaboration, and adaptability to stay ahead of emerging threats.

The road ahead: making vendor risk assessment a strategic priority

Vendor risk assessment is no longer just a compliance exercise—it is a core component of cybersecurity strategy. As cyber threats become more sophisticated, organizations must shift from static, point-in-time assessments to continuous monitoring and proactive risk management. Businesses can build resilient, secure, and compliant vendor ecosystems by leveraging real-time threat intelligence, aligning with global security frameworks, and embedding security into vendor relationships. The future of vendor security assessment depends on constant vigilance, adaptive security policies, and strategic partnerships that prioritize cybersecurity at every stage