11 Third-Party Risk Management Best Practices in 2025

The simultaneous proliferation of outsourcing and increased interconnectedness of modern businesses has caused the third-party risk management (TPRM) landscape to evolve significantly over the last few years. Establishing a robust TPRM program is no longer just about managing risk across your organization’s third-party ecosystem or gaining an edge over your competitors. Third-party risk management is now a required component of many compliance regulations and the foundation of maintaining trust with stakeholders and customers. 

Whether you’re looking to comply with industry regulations such as the EU’s General Data Protection Regulation (GDPR) or the Health Insurance Portability & Accountability Act (HIPAA) or reduce your organization’s overall cyber resilience to third-party security risks, calibrating your TPRM program is essential to your organization’s success. This article outlines 11 best practices your organization can follow to ensure its TPRM program is fit to tackle the security, compliance, and reputational risks of 2025. 

1. Align board with third-party risk management plans

Third-party risk management requires a comprehensive approach, starting with an organization’s C-suite and board of directors. Since the security risks presented by third-party partnerships can impact all parts of an organization, an organization’s executive team must understand the importance of third-party risk management and how particular strategies help prevent third-party data breaches and mitigate other potential risks.

If your organization employs a chief risk officer (CRO), educating the executive team on TPRM should be their responsibility. However, if your organization does not employ a CRO, this task will likely fall to the chief information security officer (CISO). Your organization’s CISO should walk the executive team through the TPRM process, highlighting the need for robust risk intelligence and how third-party security risks can lead to poor business continuity, regulatory fines, and reputational damage.  

2. Ensure your third-party inventory is accurate

An organization needs visibility over all third-party vendors and partnerships to identify and manage all third-party risks effectively. After all, third parties may have different security controls or standards than the primary organization. While these sentiments may seem obvious, developing and maintaining an accurate third-party inventory can be challenging, even for large organizations with expansive security budgets. 

Ensuring your organization’s third-party inventory is accurate involves two main steps: reviewing contractual agreements and financial statements to identify partnerships that have not been added to your inventory risk and deploying a third-party risk management software to track changes in a third-party’s security posture through their lifecycle. 

UpGuard Vendor Risk uses quantitative security ratings to assess a third party’s security posture, providing an aggregate view of vendor performance and the critical risks shared across your vendor portfolio. 

3. Create effective, efficient risk assessment processes

Third-party risk assessments are an essential TPRM process, and the best risk assessment workflows will involve three stages: due diligence, conducting periodic cybersecurity risk assessments, and refining risk assessment strategy. 

Here are the steps your organization should follow to establish an effective, efficient risk assessment process: 

• Establish a due diligence workflow to evaluate the security risks of prospective third-party vendors before onboarding or forming a partnership.
• Choose a criticality rating system to distinguish between third parties and prioritize risk assessments for high-risk vendors. 
• Set up a third-party risk assessment management system to track risk assessment progress and catalog security questionnaires.
• Choose a risk management framework to support efficient remediation efforts and waive detected risks that do not apply to your objectives or concerns.
• Develop a robust risk assessment review process to design risk management strategies for specific vendors and provide visibility to stakeholders.

UpGuard's third party risk assessment tool provides security teams with a complete risk assessment toolkit, including comprehensive security ratings, in-depth risk assessments, a library of editable questionnaire templates, and vendor tiering and criticality functions. 

Related reading: Implementing A Vendor Risk Assessment Process in 2025

4. Combine point-in-time assessments with continuous attack surface monitoring

While risk assessments and continuous monitoring are great tools organizations utilize to appraise the health of their third-party attack surface, security teams must coordinate these mechanisms to provide comprehensive attack surface awareness. Security ratings and vulnerability monitoring tools can provide visibility between scheduled assessments. In contrast, point-in-time risk assessments offer in-depth insights, exposing additional security flaws and providing more context to known risks and vulnerabilities.

UpGuard has helped many organizations, including Built Technologies, improve their attack surface visibility by streamlining risk assessment processes and introducing continuous monitoring strategies.

Built Technologies conducts holistic reviews of all current and prospective vendors using UpGuard. In addition to the risks surfaced by UpGuard’s scans, the Built team also uses the platform to add their own insights, supplementing vendor ratings with additional evidence and personal notes and documents provided by vendors. The Built team also schedules and calibrates third-party risk assessments based on UpGuard’s Vendor Tiering feature. 

UpGuard’s security ratings, continuous scans, and risk assessments help Built Technologies comprehensively appraise its third-party attack surface. 

“Our vendor security risk assessments are now a well-oiled machine from where we started using UpGuard.” - Adam Vanscoy, Senior Security Analyst at Built Technologies

For an illustration of how to track vendor regulatory compliance with a TPRM program, refer to this Third-Party Risk Management example.

5. Ensure organizational-wide adoption of your TPRM strategy

An organization’s TPRM program can only be truly effective when all departments and employees adopt prevention strategies and abide by best practices. When all employees buy into an organization’s TPRM strategies and practice preventative measures, it can quickly nullify phishing attempts and other cyber attacks. 

Here’s how various departments in your organization can adopt TPRM strategies to improve your TPRM program’s overall effectiveness: 

• Information technology: Collaborate with internal employees and external third parties to establish security protocols, protect sensitive data, and prevent unauthorized access.  
• Compliance and legal: Include clauses in third-party contracts that address compliance, liability, and risk mitigation and ensure all vendors are offboarded safely after contract expiration. 
• Procurement: Ensure vendor selection criteria are based on rigorous assessments, compliance checks, and alignment with business needs.  
• Operations: Identify and mitigate supply chain risks and ensure continuity during a third-party disruption.
• Finance: Incorporate TPRM costs into budgeting and forecasting to accurately assess a third-party vendor's net financial impact on the business. 

By breaking down TPRM responsibilities and obligations by departmental functions, your organization will have an easier time ensuring each area of the business is efficiently calibrated and preventing visibility gaps from arising. 

6. Adopt a continuous improvement mindset

Modern third-party risk management takes a proactive approach to risk identification and mitigation rather than relying on reactive remediation procedures after a security incident. To pursue proactive TPRM, security teams need to stay up-to-date on best practices and evolving threats. The best methods for staying updated include continuous education and TPRM training programs, industry-specific networks, and communication channels with regulatory agencies. 

Your organization should establish an information-sharing system to foster a culture of consistent feedback and process improvement and ensure that all departments and employees are informed about TPRM trends and risks. In this system, the security team evaluates the information and then shares it with department heads and executive leadership. These leaders should then disseminate the information throughout their teams and departments. When introducing new TPRM processes or preventative measures, your security team should provide periodic adoption updates and progress reports. 

7. Define TPRM performance metrics

Tracking key performance indicators (KPIs) is essential for assessing and enhancing your organization's third-party risk management program. By monitoring specific metrics consistently, your risk management team can gauge your TPRM program's overall health and identify areas for improvement.

Calibrating your program with KPIs to measure four specific areas—third-party risk, threat intelligence, compliance management, and overall TPRM coverage—provides a comprehensive approach to evaluating all phases of effective TPRM. Here’s an example of a few KPIs that organizations can track to assess each area: 

• KPIs to measure third-party risk: Percentage of vendors categorized by tier, average security rating, percent of third parties who fail initial assessment
• KPIs to measure threat intelligence: Mean time to action after risk trigger, number of incidents reported, number of false positives reported
• KPIs to measure compliance management: Number of third parties under regulatory scope (by regulation), number of outstanding regulatory requirements
• KPIs to measure overall TPRM coverage: Mean time to onboard, percent of third parties not monitored 

By aligning KPIs with these four specific areas of TPRM, your organization can gain valuable insights into the effectiveness of its risk management efforts, identify areas for improvement, and ensure comprehensive coverage of third-party risks across its supply chain.

Related Reading: 15 KPIs & Metrics to Measure the Success of Your TPRM Program

8. Monitor fourth-party service providers

Since modern business is synonymous with interconnected organizations and services, the risk of data breaches and severe cyber attacks extends to an organization’s fourth-party attack surface. Fourth-party risk management (FPRM) is just as vital as TPRM because a compromised fourth-party vendor could also result in a data breach. 

To understand how a fourth party could expose your organization, imagine this scenario. Your company partners with an online transaction processor. This processor then shares customer payment information with a third-party credit card processor (your fourth party). If cybercriminals infiltrate this credit card processor, your customer’s data could be compromised, resulting in financial and reputation consequences for your organization. 

Built Technologies and other UpGuard customers use Vendor Risk’s built-in fourth-party analysis feature to drill down into their fourth-party attack surface. This feature allows UpGuard users to learn which solutions and services each third-party vendor uses and further contextualize their third-party risk assessment process.

“We now have a lot more visibility to what we couldn't see before, including fourth-party vendors, which is excellent for our overall security posture.”  - Adam Vanscoy, Senior Security Analyst at Built Technologies

9. Form a dedicated TPRM committee

A TPRM committee is crucial to developing a culture of security awareness and effectively identifying, assessing, and mitigating risks associated with third-party relationships. By convening experts from various departments, such as risk management, procurement, legal, and compliance, the committee ensures a comprehensive approach to third-party risk oversight and holistically safeguards the organizations from third-party security risks. 

Key roles on a TPRM committee may include:

• Executive sponsor or chairperson: Provides leadership and direction to the committee, ensuring alignment with organizational objectives
• Chief risk officer or chief compliance officer: Offers expertise in risk management and compliance and guides the development of policies and procedures.
• Chief information security officer (CISO): Focuses on cybersecurity risks, evaluating vendor security controls, and safeguarding sensitive data
• Chief procurement officer: Manages vendor relationships, oversees procurement processes, and ensures vendor performance meets organizational standards

Your organization’s TPRM committee should provide governance, oversight, and strategic direction to effectively manage third-party risks and integrate them into your overall risk management framework.

10. Establish a streamlined TPRM performance communication pathway with stakeholders

While an organization’s TPRM committee will likely create a communication pathway between its risk management team and the board, the organization’s CISO should help disseminate information upwards to the board and down throughout departmental stakeholders and employees. 

To establish a straightforward TPRM communication process in your organization, your board must understand your third-party risk landscape, including all categories of inherent risks your organization’s third-party partnerships present. Security ratings are an excellent metric for simplifying security posture and risk exposure. Consider providing cybersecurity reports and graphical representations of your security posture (such as your security rating over time) to your board to help members quickly identify and understand TPRM concepts and procedures. 

A comprehensive cybersecurity solution like UpGuard is a great way to remove the manual work of drafting third-party risk management reports. Risk management teams can instantly generate cybersecurity reports through the UpGuard platform, pulling risk insights about specific vendors and holistic third-party risk data that reveal the overall status of your organization’s TPRM program and health. 

“The management report from the UpGuard platform was very useful during my quarterly reporting to the executive team. They see it as a good external validation of how our organization is going and how we rank against our competitors.” - Martin Heiland, CISO at Open-Xchange

Another benefit of UpGuard’s reporting features is the ability to quickly customize the design and style of cybersecurity reports to meet the unique needs of your stakeholders. Once generated, your reports can be easily exported to Microsoft PowerPoint, significantly reducing preparation time. 

11. Implement scalable TPRM workflows 

Automating processes and workflows is vital when scaling your TPRM program to align with business growth. It’s commonplace for security teams to become overwhelmed and inundated with manual third-party risk management tasks and initiatives, but this manual work is no longer necessary. 

The UpGuard platform includes automation tools to streamline several essential TPRM processes, including risk monitoring and identification, evidence gathering, security questionnaires, risk assessments, reporting, and more. UpGuard designed these automation tools to eliminate the hassle of manual work and make robust TPRM attainable for security teams of all sizes. Here’s how UpGuard’s automation tools help security teams with specific tasks: 

• Risk identification: UpGuard’s automated cyber risk scanning and mapping features automatically detect security risks and vulnerabilities in real-time across a user’s third—and fourth-party ecosystem. 
• Evidence gathering: In addition to UpGuard’s automatic attack surface scanning feature, the platform also automatically assigns public trust and security pages to vendors, collects known certifications, and searches for completed questionnaires.
• Security questionnaires: The UpGuard platform helps security teams scale their security questionnaire process by 10x through its industry-leading questionnaire library and flexible questionnaire templates. 
• Risk assessments: UpGuard’s automated risk assessments help security teams eliminate their use of lengthy, error-prone, spreadsheet-based manual risk assessments and reduce the time it takes to assess a new or existing vendor by more than half.

“UpGuard has saved us significant time with its automation process. I would say it saves us a few personnel days per month. For example, initial research that would have taken me 1-2 hours, I can get that answer in 5-10 minutes.” - Juris Smits, IT Security Manager at Rimi Baltic‍

Automate your TPRM program with UpGuard Vendor Risk

UpGuard's Vendor Risk Management software is an industry-leading third-party and supplier risk management solution ranked #1 by G2 for seven consecutive quarters. The UpGuard platform monitors over 10 million companies daily and has helped 1,000s of customers streamline and improve the efficiency of their TPRM programs. 

• “In terms of pure security improvement across our company, we now complete hundreds of maintenance tickets, which is a massive advancement we couldn’t have achieved without UpGuard. We previously wouldn’t have detected at least 10% of those tickets, so UpGuard has enabled us to work faster by detecting issues quickly and providing detailed information to remediate these issues.” - iDeals
• “One of the platform's best features is bringing all our vendors into one risk profile and managing it from there. We can also set reassessment dates, which means we don’t have to manage individual calendar reminders for each vendor.” - Wesley Queensland Mission
• “The questionnaire side is very powerful and crucial to our processes. It has saved me a lot of time. I can’t imagine manually sending out a spreadsheet questionnaire and then trying to put together a remediation plan.” - ALI Group