Strengthening Your Defenses: Managing Third-Party Risks in 2025

Greg Fulk
10/28/2025

The 2025 FINRA Annual Regulatory Oversight Report underscores the rising risks of third-party vendors in cybersecurity and compliance. As organizations rely more on outside providers, data breaches, weak security controls, and compliance gaps are becoming more common. 

This article explains how to audit, monitor, and reduce third-party risks to keep your business secure and resilient.

The Rising Stakes of Third-Party Risk

Third-party vendors have become critical partners in everything from IT infrastructure to HR software. But they’re also one of the fastest-growing sources of third-party cybersecurity risks and compliance failures. 

In its 2025 report, FINRA highlights the need for third-party risk due diligence, warning that firms cannot outsource regulatory obligations; any vendor weakness can quickly become their liability.

The report highlights common gaps such as incomplete vendor inventories, poor contract protections, lack of involvement in incident response, and failure to account for “fourth-party” dependencies (your vendors’ vendors).

These warnings aren’t theoretical. In finance alone, regulators have already imposed over $600 million in penalties in 2024 for recordkeeping and supervision failures, many of them linked to weak oversight of electronic communications. Beyond finance, global regulators like the Basel Committee are tightening rules around outsourcing and vendor risk.

For businesses and managed IT providers, the message is clear: third-party risk management is no longer just procurement hygiene. It’s a core part of your security and compliance posture.

What’s Different in 2025?

For much of their history, many firms relied on periodic reviews and boilerplate contracts. But vendor risk management in 2025 requires far more rigor and visibility, as spikes in vendor breaches and AI risks have changed the rules of the game.

• Cyberattacks through vendors are increasing. Supply chain attacks surged globally in 2024, and regulators now expect firms to prove resilience not only at the perimeter but inside their vendor ecosystem.
• Regulators are watching AI. FINRA explicitly asks firms to identify whether vendors use generative AI, and to update contracts to prevent sensitive firm or customer data from being ingested or exposed.
• Fourth-party risk is on the radar. Vendors of vendors can create hidden exposure. Failing to monitor these relationships can break your continuity plans.

Recognizing these changes early gives leaders the chance to strengthen defenses before regulators (or attackers) expose the gaps.

A Practical Framework for Managing Vendor Risk

1. Build a Comprehensive Vendor Inventory

Start by mapping every vendor relationship across IT, HR, legal, finance, and operations. Don’t forget to track shadow IT and fourth-party vendor risk, since your providers’ subcontractors can expose you, too. A centralized registry creates the foundation for consistent, foolproof oversight.

2. Assess and Prioritize by Risk

Not all vendors are equal. Classify them by:

• Data sensitivity → Do they handle PII, health, or financial records?
• Geopolitical factors → Where are their servers or subcontractors located?
• Operational criticality → Would an outage stop revenue-critical workflows?
• Regulatory exposure → Are they subject to FINRA, HIPAA, or GDPR requirements?

This prioritization lets you allocate monitoring resources to the partners that matter most.

3. Strengthen Vendor Contract Data Protection

Contracts should clearly specify:

• Incident response obligations (notification timelines, participation in drills)
• Data handling requirements (return or certified deletion at termination)
• Security standards (encryption, access management, logging)
• Compliance assurances tied to relevant regulations

This is also where you address vendor use of AI or subcontractors, both hot buttons for regulators in 2025. Vendor contract data protection must cover how information is stored, transferred, and destroyed, including requirements for return or certified deletion at termination

4. Move from Checklists to Continuous Monitoring

Annual questionnaires and static checklists are no longer enough; firms need continuous vendor monitoring to stay ahead of fast-moving risks. 

Leading teams are adopting automated tools to monitor vendor posture in real time, scanning for vulnerabilities, configuration drift, leaked credentials, or compliance red flags. AI-driven platforms can even flag emerging risks such as potential bribery or corruption indicators.

5. Strengthen Governance and Collaboration

Whether your organization centralizes third-party risk management (TPRM) or distributes it across departments, governance must be clear. Involve IT, compliance, procurement, legal, and operations in a common process. This prevents gaps and creates a single source of truth for executives.

6. Include Vendors in Incident Response

Run tabletop exercises as part of your third-party incident response planning, simulating cyberattacks or outages with your key vendors. Define clear communication channels, escalation paths, and responsibilities. Regulators increasingly expect to see proof of these joint preparedness efforts.

7. Offboard Vendors Securely

When ending a vendor relationship, enforce secure data destruction or verified return of assets. Update access controls, terminate credentials, and review lessons learned. Poor offboarding is one of the most overlooked, and riskiest, gaps.

What Security-Focused Businesses Are Asking About Vendor Risk Management

Q: What’s the biggest new third-party risk trend in 2025?

A: Regulators are spotlighting vendor cyberattacks, AI use, and fourth-party dependencies as leading risks. Firms are expected to actively monitor these areas, not just sign contracts and hope for the best.

Q: How do you continuously monitor vendors?

A: Automated tools track vulnerabilities, leaked data, misconfigurations, and dark-web chatter in real time. This replaces outdated annual reviews and surfaces issues before they escalate.

Q: What is fourth-party risk?

A: It’s the exposure created when your vendors rely on subcontractors. A cloud service provider may outsource part of its operations, creating hidden dependencies that still impact you.

Q: Why does generative AI matter here?

A: If a vendor uses GenAI tools, your firm’s sensitive data could be ingested into large language models. FINRA now expects firms to address this risk contractually.

Org IQ’s Perspective: From Archiving to Analytics

Legacy email management tools focus on whether emails and records exist. Org IQ takes a different approach: surfacing patterns, anomalies, and signals that point to potential risk, whether inside your organization or across your vendor ecosystem.

For example:

1. Vendor communication gaps can show up in latency or tone shifts in email.
2. Regulatory blind spots become visible through missing metadata or incomplete retention.
3. Spot when your business depends on a single vendor contact or team, and flag coverage gaps before they disrupt service.

Instead of reacting to compliance failures, analytics-forward platforms like Org IQ help you see risks forming early and act before they escalate.

Final Takeaways

TPRM best practices have shifted from a peripheral concern to a core business requirement. Regulators now expect firms to manage vendor oversight proactively, not reactively. 

Static reviews and annual questionnaires aren’t enough when cyberattacks and compliance breaches increasingly originate from vendor relationships. Continuous monitoring, incident planning, and firm contractual protections have become the baseline for resilience.

At the same time, the most forward-looking organizations are using analytics to transform vendor oversight from a compliance burden into a source of strategic strength. By layering intelligence over contracts and governance, leaders can anticipate threats, close gaps before they escalate, and build a culture of resilience. 

In 2025, managing third-party risk isn’t just about staying out of trouble. It’s about strengthening your defenses and gaining a competitive edge.

→ See how Org IQ helps you monitor third-party risks in real time — with vendor insights, audit-ready records, and proactive alerts built in. Try it free for 30 days.

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