Vendor (third-party) risk assessment management checklist in 2025

How confident are you in your third-party vendors? In today’s financial landscape, regulatory pressure and cyber threats are escalating, making vendor risk management more than just a compliance exercise—it’s a business necessity.

With DORA (Digital Operational Resilience Act) now in force, financial institutions must ensure that third-party providers meet stringent ICT risk management, cybersecurity, and resilience requirements. A structured vendor risk assessment checklist helps mitigate risks, enforce compliance, and maintain operational stability.

This guide provides an actionable checklist, risk categories, and a free audit template to help you assess and manage vendor risks efficiently.

The core pillars of vendor risk assessment

A vendor risk management checklist must cover multiple domains to ensure full protection against security, operational, financial, and compliance risks. The table below outlines key evaluation areas for effective third-party risk management.

Domain	Criteria	What to check
1. Cybersecurity & data protection	Security standards & certifications	Verify adherence to ISO 27001, SOC 2 Type II, NIST CSF, or other industry frameworks.
	Vulnerability & patch management	Ensure regular penetration testing, frequent vulnerability scans, and timely patching of security flaws.
	Access & identity controls	Evaluate use of multi-factor authentication (MFA), privileged access management (PAM), and role-based access policies.
	Incident response & breach notification	Confirm that vendors have a documented incident response plan and will notify you promptly in case of a cybersecurity event.
	Data encryption & privacy	Assess data handling and storage, encryption in transit and at rest, and compliance with GDPR, PCI DSS, and relevant regulations.
2. Operational resilience & business continuity	Business continuity & disaster recovery (BCP/DR)	Verify that vendors have a documented, tested recovery plan aligned with your institution’s resilience strategy.
	Service Level Agreements (SLAs)	Ensure vendors meet uptime and response time requirements, with penalties for SLA breaches.
	Resilience testing	Require high-risk vendors to participate in stress tests, disaster simulations, and DORA-mandated resilience exercises.
	Change & incident management	Confirm vendors have structured processes for managing IT system changes and security incidents to prevent operational disruptions.
3. Regulatory compliance & contractual obligations	DORA-mandated risk oversight	Ensure vendors meet ICT third-party risk governance and incident reporting requirements under DORA.
	Right to audit & regulatory access	Contracts must grant your institution and regulators the right to audit vendor security controls.
	Sub-outsourcing governance	If vendors outsource services further, assess fourth-party risks, monitoring, and contract provisions.
	Exit strategy & termination rights	Require contractual exit plans to ensure smooth service transition or replacement for critical vendors.
4. Financial stability & concentration risk	Financial audits & stability	Review annual reports, credit ratings, and financial statements to gauge long-term viability.
	Cyber liability insurance	Confirm vendors carry adequate insurance to cover data breaches, legal fines, and operational disruptions.
	Dependency & concentration risk	Avoid over-reliance on a single vendor for critical operations; diversify to mitigate systemic failures.

Understanding the core pillars of vendor risk assessment is just the first step. To ensure consistent oversight and regulatory compliance, financial institutions need a structured approach to evaluating vendors.

Vendor risk management audit checklist

A vendor risk management audit checklist provides a clear framework for assessing, documenting, and mitigating risks across key domains like cybersecurity, operational resilience, regulatory compliance, and financial stability. By systematically scoring risks, collecting evidence, and tracking remediation efforts, organizations can ensure vendors meet compliance mandates while maintaining service continuity and security

Vendor risk assessment template

Risk category	Assessment criteria	Risk score	Evidence collected	Remediation plan	Status
Cybersecurity	ISO 27001 / SOC 2 certification	Low (1/5)	Certification & audit report	N/A	✅ Compliant
Cybersecurity	Patching of critical vulnerabilities < 30 days	Medium (3/5)	Vulnerability scan results	Reduce patch cycle to 15 days	🔄 In Progress
Data privacy	GDPR-compliant Data Processing Agreement (DPA)	Low (1/5)	Signed DPA (2025) on file	N/A	✅ Compliant
Operational resilience	Annual DR drill recovery < 4 hours	High (4/5)	DR test report (exceeded RTO)	Vendor to improve recovery time	🔄 In Progress
Financial stability	Positive financial audit (2024)	Low (1/5)	Audited financials reviewed	N/A	✅ Verified
Regulatory compliance	PCI DSS compliance for payment processing	Medium (3/5)	PCI DSS attestation provided	Address compliance gaps by Q4 2025	🔄 In Progress

How to use this template:

1. Assess vendors: Identify relevant criteria based on the vendor’s risk level and service criticality.
2. Score risks: Use a standardized rating system (Low/Medium/High or a numerical scale).
3. Collect evidence: Gather certifications, compliance reports, SLAs, security assessments, and financial audits.
4. Document remediation: If gaps are identified, outline corrective actions and set deadlines for resolution.
5. Track ongoing compliance: Regularly update the checklist to reflect changes in vendor risk posture.

By integrating this vendor risk management audit checklist into your third-party risk assessment process, your organization can proactively identify risks, ensure regulatory compliance, and strengthen vendor security and resilience.

Best practices for continuous vendor risk management

A vendor risk management checklist is not a one-and-done task—it requires ongoing oversight to adapt to emerging threats, regulatory changes, and vendor performance shifts. Here’s how to build a resilient and compliant third-party risk management program:

Practice	Description
Maintain a vendor inventory with risk tiering	Categorize vendors into Tier 1 (critical), Tier 2 (important), and Tier 3 (low risk) based on their impact on your operations. This ensures prioritized oversight and resource allocation.
Conduct periodic risk assessments	Reevaluate vendors annually or whenever significant changes occur, such as ownership shifts, security incidents, or new regulatory requirements.
Monitor SLAs and performance metrics	Track vendor uptime, security incidents, and compliance deviations against contractual agreements to ensure ongoing reliability.
Integrate vendors into incident response planning	Require vendors to participate in joint cyber exercises, disaster recovery drills, and resilience testing to verify their ability to withstand disruptions.
Develop exit strategies for critical vendors	Identify alternative providers or contingency plans in case a vendor fails, ensuring a seamless transition and avoiding operational disruptions.

These proactive risk management practices, help organizations enhance vendor oversight, ensure regulatory compliance, and strengthen operational resilience in an ever-evolving risk landscape.

From risk identification to structured evaluation

Understanding the core pillars of vendor risk assessment is just the first step. To ensure consistent oversight and regulatory compliance, financial institutions need a structured approach to evaluating vendors.

A vendor risk management audit checklist provides a clear framework for assessing, documenting, and mitigating risks across key domains like cybersecurity, operational resilience, regulatory compliance, and financial stability. By systematically scoring risks, collecting evidence, and tracking remediation efforts, organizations can ensure vendors meet compliance mandates while maintaining service continuity and security.

The following audit checklist serves as a practical tool for monitoring vendor risks and ensuring ongoing due diligence.