[Blog](/blog) Show links Resources [Blog](/blog) [Breaches](/breaches) [eBooks, reports, & more](/resources) [Events](/events) [News](/news) [Cybersecurity](/category/cybersecurity) Show links Categories [Attack Surface Management](/category/attack-surface-management) [Company News](/category/company-news) [Compliance and Regulations](/category/compliance-and-regulations) [Cybersecurity](/category/cybersecurity) [Data Breaches](/category/data-breaches) [DevOps](/category/devops) [Human Cyber Risk](/category/human-cyber-risk) [Risks and Vulnerabilities](/category/risks-and-vulnerabilities) [Third-Party Risk Management](/category/third-party-risk-management) [Vendor Risk Management](/category/vendor-risk-management) [What is Third-Party Risk?](/blog/what-is-third-party-risk) Publish date September 20, 2026 {x} minute read # What is Third-Party Risk? [Get a demo](/contact-sales) [Free trial](/demo) [Download the PDF guide](/resources/complete-guide-to-third-party-risk-management) [Free trial](/demo) Written by [Catherine Chipeta](/team/catherine-chipeta) Cybersecurity Writer Catherine's work has influenced leaders in technology, SaaS, government, and financial services. Reviewed by [Axel Sukianto](/team/axel-sukianto) Marketing Director Table of contents eBook A Complete Guide to Third-Party Risk Management Free resource ### A Complete Guide to Third-Party Risk Management Learn how to protect your business with an effective cybersecurity program. [Download now](/resources/complete-guide-to-third-party-risk-management) Third-party risk is any risk brought on to an organization by external parties in its ecosystem or [supply chain](https://www.upguard.com/blog/what-is-the-digital-supply-chain). Such parties may include vendors, suppliers, partners, contractors, or service providers, who have access to internal company or customer data, systems, processes, or other privileged information. Managing that exposure is a [TPRM program](/tprm) job — discovery through offboarding, not a one-time vendor review. While an organization may have strong cybersecurity measures in place and a solid remediation plan, outside parties, such as [third-party vendors](https://www.upguard.com/blog/third-party-vendor), may not uphold the same standards. These third-party relationships can increase [vulnerabilities](https://www.upguard.com/blog/vulnerability) by providing an easier way for potential [threats](https://www.upguard.com/blog/cyber-threat) to attack even the most sophisticated of security systems.\ \ Discover UpGuard's [Third-Party Risk Management software](https://www.upguard.com/product/vendor-risk/third-party-risk-assessments) governs and automates your Vendor Risk. When that program needs a platform, start with a comparison of [third-party risk management software](/blog/best-third-party-risk-management-software-solutions) rather than picking the first vendor that shows up in a demo. ## Why Should I Care About Third-Party Risk? With most organizations relying on outsourcing to handle at least some aspects of their day-to-day operations, [third-party security](https://www.upguard.com/blog/third-party-security) should be front of mind. This is especially true given the rising number of [security breaches](https://www.upguard.com/breaches) that are arising from third-party relationships. A [recent study](https://www.techrepublic.com/article/study-finds-31-of-third-party-vendors-could-cause-significant-damage-to-organizations-if-breached/) shows that almost a third of third-party vendors would be considered a material risk if a breach occurred. Furthermore, [another study](https://techbeacon.com/security/35-stats-matter-your-security-operations-team) revealed that 80% of surveyed organizations experienced a data breach originating from a third party in 2020. Ultimately, your organization's board of directors and senior management are responsible for managing third-party relationships. [The identification and control of associated risks](https://www.upguard.com/blog/what-is-vendor-tiering) should be held to the same standard as activities that were handled from within the organization. Despite the numerous risks that arise from third-party relationships over the vendor life cycle, many organizations still do not manage third-party risks as diligently as internal ones.   Failure to manage these risks can leave organizations exposed to regulatory action, financial action, litigation, reputational damage, and can impair the organization's ability to gain new or service existing customers. [Learn how to manage service provider risks >](https://www.upguard.com/blog/evaluating-managing-service-provider-security-risks) ## Types of Third-Party Risks There are many potential risks that third parties can bring to an organization, spanning six key areas: * [**Cybersecurity risk**](https://www.upguard.com/blog/cybersecurity-risk)**:** The risk of exposure or loss resulting from a [cyber attack](https://www.upguard.com/blog/cyber-attack), [data breach](https://www.upguard.com/blog/data-breach), or other security incidents. This risk is often mitigated by [performing due diligence](https://www.upguard.com/blog/vendor-due-diligence) before onboarding new vendors and ongoing monitoring over the vendor lifecycle. * **Operational risk:** The risk that a third party will cause disruption to the business operations. This is generally managed through contractually bound service level agreements (SLAs). Depending on the criticality of the vendor, you may opt to have a backup vendor in place to ensure business continuity. This is common practice for financial institutions. * **Legal, **[**regulatory**](https://www.upguard.com/blog/how-to-manage-regulatory-risk-in-cybersecurity)**, and compliance risk:** The risk that a third party will impact your organization's compliance with local legislation, regulation, or agreements, e.g. the EU's [General Data Protection Regulation (GDPR)](https://www.upguard.com/blog/how-to-be-gdpr-compliant). This is particularly important for [financial services](https://www.upguard.com/industries/financial-services), [healthcare](https://www.upguard.com/industries/healthcare), and government organizations as well as their business partners.   * **Reputational risk: **The risk arising from [negative public opinion](https://www.upguard.com/blog/what-is-doxing) caused by a third party. Dissatisfied customers, inappropriate interactions, and poor recommendations are only the tip of the iceberg. The most damaging events are [third-party data breaches](https://www.upguard.com/blog/prevent-third-party-data-breaches) resulting from poor security controls, like the high-profile [Target data breach in 2013](https://www.usatoday.com/story/money/2017/05/23/target-pay-185m-2013-data-breach-affected-consumers/102063932/). * **Financial risk:** The risk that a third party will have a detrimental impact on the financial success of your organization. For example, your organization may not be able to sell a new product due to poor supply chain management. * **Strategic risk:** The risk that your organization will fail to meet its business objectives because of a third-party vendor. It’s worth noting that these areas often overlap, for example, if a business experiences a cybersecurity breach and customer data is compromised, this would also pose operational, compliance, reputational, and financial risks. [Learn how to communicate Third-Party Risk to the Board >](https://www.upguard.com/blog/how-to-communicate-third-party-risk-to-the-board) ## How Can I Minimize Third-Party Risks? The immediate action you will need to take to mitigate third-party risks depends on the status of your organization’s [third-party risk management (TPRM)](https://www.upguard.com/blog/third-party-risk-management) program. Firstly, you should assess your current TPRM program to identify which security measures, if any, you currently have in place. Put simply, the initial stages of the [vendor risk management ](https://www.upguard.com/blog/vendor-risk-management)process should cover: ## 1. Keep an Up-to-Date Vendor inventory Who are your vendors? You first need to accurately identify who your vendors are. A third-party vendor is any person or organization who provides a product or service to your organization, who does not work at your organization, e.g. manufacturers and suppliers, service providers, short and long-term contractors, and external staff. The inventory should be kept up-to-date, track onboarding and offboarding workflows, and extend to [fourth parties](https://www.upguard.com/blog/what-is-fourth-party-risk) (your third-party vendor’s vendors). To automate the process of discovering new vendors and third-party assets, risk management teams should use an Attack Surface Management solution.tracking emerging IP addresses in your attack surface in real-time. For an overview of how to keep an up-to-date inventory of your digital assets with attack surface management techniques, watch this video. [Learn about the top Attack Surface Management solutions >](https://www.upguard.com/blog/best-attack-surface-management-software-solutions) ## 2. Establish a Vendor Assessment Process After creating a comprehensive inventory of vendors, you need to develop a [third-party risk assessment](https://www.upguard.com/blog/what-is-a-third-party-risk-assessment) workflow. Organizations use this process to assess and approve potential third-party vendors and suppliers to ensure they can meet all contracted stipulations and agreements. At this stage, you should include a [vendor questionnaire template](https://www.upguard.com/blog/vendor-risk-assessment-questionnaire-template) to streamline the onboarding of new vendors and the assessment of current vendors. Vendor risk assessment could reveal the following valuable risk mitigation insights: * **Risk and Compliance Information** - Risk assessment data will indicate regulatory compliance gaps. * **Vendor Management Efficacy** - The efficacy of a vendor’s VRM program will indicate your likelihood of being impacted by [fourth-party risks](https://www.upguard.com/blog/what-is-fprm). * **Security Posture Levels** - Risk assessment provide deeper insights about a vendor’s security posture. When supported by security ratings, this process allows you to track each vendor’s cybersecurity levels against industry standards. ‍\ [Take a self-guided tour of UpGUard's Vendor Risk Management solution >](https://upguard.navattic.com/wf03gnb?ref=blog) ## 3. Implement A Third-Party Risk Management Program While these steps are important in establishing a strong foundation for TPRM, they are not enough on their own. An effective [Third-Party Risk Management program](https://www.upguard.com/blog/ciso-checklist-vendor-risk-management) should also consider the following: * Most large organizations manage hundreds or thousands of vendors, with each posing differing risk levels. Each risk tier has a unique [due diligence](https://www.upguard.com/blog/vendor-due-diligence) and risk assessment process and other tier-specific requirements, meaning your [information security](https://www.upguard.com/blog/information-security) team will need to individually categorize each vendor accordingly. They will also need to engage with vendors to prompt risk profile questionnaire completion and communicate the importance of TPRM within the organization. * Managing such a large number of vendors also requires prioritization of high-risk over lower-risk vendors. However, it is still essential to regularly assess all vendors against the same standardized checks to ensure nothing falls through the cracks. * Managing third-party risk is not a “set-and-forget” endeavor. Vendor questionnaires should not only be part of the onboarding process but also be completed on at least an annual basis. Vendors require [continuous monitoring](https://www.upguard.com/blog/continuous-security-monitoring), with regular assessments and checks to ensure their [security posture](https://www.upguard.com/blog/security-posture) is healthy. With these considerations in mind, it is clear that [effective TPRM](https://www.upguard.com/blog/effective-tprm-programs) requires significant time and resources. Information security teams must attend to all other facets of your organization’s security program and may not have the necessary capability to thoroughly manage third-party risk. The most cost-effective workaround to this problem is to leverage the services of a managed TPRM provider. For an overview of the processes involved in a Third-Party Risk Management service, watch this video: ‍ eBook A Complete Guide to Third-Party Risk Management Free resource ### A Complete Guide to Third-Party Risk Management Learn how to protect your business with an effective cybersecurity program. [Download now](/resources/complete-guide-to-third-party-risk-management) ## Related posts Learn more about the latest issues in cybersecurity. Third-Party Risk Management #### [The Evidence Is In: UpGuard Named a Leader in the IDC MarketScape for Worldwide Third-Party Risk Management](/blog/upguard-named-leader-in-idc-marketscape) UpGuard has been named a Leader in the IDC MarketScape: Worldwide Third-Party Risk Management Services 2026 Vendor Assessment. Find out why. [](/team/cassy-van-eeden) [Cassy van Eeden](#) October 18, 2026 Third-Party Risk Management #### [We Researched Four AI Evidence Analysis Tools for TPRM. Here’s What We Found.](/blog/ai-evidence-analysis-tools-for-tprm) We researched four AI evidence-parsing tools against four criteria that security teams often overlook. None nailed all four. [](/team/cassy-van-eeden) [Cassy van Eeden](#) September 29, 2026 Cybersecurity #### [12 Cybersecurity Horror Stories of 2026 (No Costume Required)](/blog/cybersecurity-horror-stories-2026) A warning ignored once becomes a headline. Read more about these 12 real 2026 cybersecurity incidents, and the sign each one gave before it made the news. [](/team/revashni-moodley) [Revashni Moodley](#) October 14, 2026 Cybersecurity #### [Left Unsupervised: 10 Times Access Outlived Its Authorization](/blog/10-times-access-outlived-authorization) Access granted once shouldn’t mean access forever. Read more on how unmonitored access caused 10 of these real-life breaches and what they taught us. [](/team/revashni-moodley) [Revashni Moodley](#) August 25, 2026 Third-Party Risk Management #### [The Vendor Assurance Confidence Gap: Why It’s Widest With Your Most Critical Vendors](/blog/vendor-assurance-confidence-gap) Vendor assurance efforts are rising while confidence in them is falling. This gap is widest with the vendors that matter most. Here’s why. [](/team/cassy-van-eeden) [Cassy van Eeden](#) August 25, 2026 Third-Party Risk Management #### [Higher Education TPRM in 2026: New Research Maps the Vendor Visibility Gap](/blog/higher-education-tprm-2026) Explore UpGuard’s latest research into higher education third-party risk, including supplier concentration and systemic vendor exposure. [](/team/cassy-van-eeden) [Cassy van Eeden](#) August 10, 2026 [All posts](/blog) Experience superior visibility and a simpler approach to cyber risk management [Get a demo](/contact-sales) [Free trial](/demo)