Vendor and supplier relationships are the new “extended enterprise” – especially in highly regulated sectors like finance, healthcare, and critical infrastructure. A staggering 98% of organizations report that at least one of their third-party partners suffered a breach in the past two years [processunity.com]. Yet many companies still treat third-party risk management (TPRM) as a check-the-box exercise, using spreadsheets or ad-hoc processes to get by [prevalent.net]. This disconnect between the growing threat landscape and inadequate vendor risk practices has created a single most pressing and unsolved problem for regulated companies: the inability to effectively assess, monitor, and mitigate third-party risks across their vendor ecosystem in a timely, efficient way. In other words, organizations struggle to gain real visibility and assurance of vendor risk, leaving gaping blind spots in security, compliance, and operational resilience [csoonline.comprevalent.net]. In the sections below, we delve into why this problem persists, why it’s so critical in regulated industries, and how a new approach and mindset – attuned to buyer realities – could finally solve it.
The Unsolved Problem: Incomplete and Inefficient Vendor Risk Oversight
Too many vendors, not enough insight. Modern enterprises depend on thousands of third parties, but resource-strapped risk teams can only properly manage a fraction of them. A recent industry study found that due to lack of staff and coordination, companies are actively managing only about one-third of their vendors – leaving two-thirds of vendors insufficiently assessed or monitored [prevalent.net]. This long-tail of “unseen” vendor risk is a ticking time bomb in regulated sectors, where even a minor supplier’s failure can trigger security breaches, compliance violations, or operational outages.
Traditional TPRM tools fall short. Why is this problem still unsolved despite a proliferation of TPRM platforms? Current solutions largely rely on two flawed approaches: external security ratings and exhaustive questionnaires. Unfortunately, neither yields the reliable, actionable risk insight companies need. External cyber scorecards (from providers like SecurityScorecard or BitSight) only perform “drive-by” assessments of a vendor’s internet-facing footprint, often generating misleading scores (high false positives ~90% [visotrust.com]) that don’t reflect the vendor’s true security posture or the context of how you use their services [csoonline.comcsoonline.com]. On the other hand, the classic questionnaire-based assessments are slow and onerous – massive spreadsheets or portals of yes/no questions that vendors begrudgingly fill out. Not only do these consume months of chase cycles, but savvy vendors have learned to game them (“mature vendors have by now figured out to never say ‘no’ to any questions” [csoonline.com]). The result is often superficial compliance theater: piles of generic responses and attached policies that give a false sense of security rather than genuine risk clarity [csoonline.com]. In fact, about 75% of vendors simply ignore or significantly delay responding to risk questionnaires at all [visotrust.com] – reflecting fatigue and lack of incentive – leaving the company flying blind for extended periods. Clearly, today’s predominant methods are “marginally unhelpful” [csoonline.com] and fail to truly solve the core TPRM problem: understanding the actual risk your vendors posecsoonline.com.
Lack of continuous, contextual oversight. Even when initial due diligence is completed, maintaining ongoing oversight of vendors is largely unresolved. Point-in-time assessments (e.g. annual reviews) cannot capture the dynamic nature of vendor risk – new vulnerabilities, compliance lapses, financial instability, or fourth-party issues can emerge at any time. Yet continuous monitoring tools, where adopted, often overwhelm teams with raw alerts and technical findings without context or prioritization [processunity.com]. Companies struggle to connect these feeds to business impact – which vendor issues truly threaten our operations or regulatory compliance? – leading to alert fatigue and important warnings being missed. Moreover, few programs effectively cover fourth-party risk (risks from subcontractors of your vendors), which is acute in regulated sectors with complex supply chains. Traditional oversight methods cannot easily map these dependencies [processunity.com], leaving critical vulnerabilities in areas like cloud service dependencies or outsourced sub-processors. In summary, organizations are flying with incomplete radar: they may catch the high-profile vendors or obvious cyber issues, but lack a comprehensive, efficient way to see and manage risk across all third (and fourth) parties throughout the relationship lifecycle.
One high-priority issue encapsulates this unsolved challenge: the lack of timely, trustworthy vendor risk intelligence and remediation across the entire supply chain. Companies are painfully aware that “it only takes one missed gap to compromise your entire security chain” [processunity.com] – yet current tools and processes leave many gaps. This unmet need is especially pronounced in regulated industries, where the stakes for closing those gaps are highest.
Why It’s Critical: High Stakes in Regulated Sectors
In finance, healthcare, and critical infrastructure, third-party failures can be catastrophic – not only a cybersecurity issue, but a compliance and operational resilience crisis. Regulatory bodies have ramped up expectations for vendor risk management because they’ve seen the fallout when it’s lacking. For example, Europe’s new Digital Operational Resilience Act (DORA) explicitly requires banks to ensure ICT service providers (vendors) are resilient and to continuously monitor third-party risks; similar guidance from US banking regulators in 2024 emphasizes robust third-party oversight as a safety-and-soundness issue [prevalent.net]. When companies fail to manage vendor risks, they expose themselves to:
-
Costly Data Breaches and Financial Loss: A single breach via a third party can cascade into millions in damage. The global average cost of a data breach hit $4.88M in 2024 [processunity.com], and regulators often levy hefty fines if the breach stemmed from inadequate vendor due diligence or oversight. In healthcare, a vendor’s mishandling of patient data could trigger HIPAA violations with fines up to $1.5M per incident – not to mention erode patient trust. Financial institutions face similar penalties under privacy laws and can suffer market losses if a critical supplier outage disrupts customer services (imagine a payment processor outage at a bank). It’s no wonder that 61% of companies reported experiencing a third-party caused security incident just in the last year [prevalent.net]. This is not a hypothetical risk – it’s happening constantly, and each incident carries regulatory and financial repercussions.
-
Compliance and Regulatory Risk: Regulated firms must demonstrate control over their vendor ecosystem. Failure to do so can result in enforcement actions, loss of licenses, or forced operational changes. For instance, bank regulators have penalized banks for not vetting fintech partners properly in “banking-as-a-service” arrangements, seeing it as unsafe practice. In highly regulated environments, a vendor’s non-compliance (e.g. a cloud provider failing a SOC 2, or a supplier violating labor laws) becomes the company’s non-compliance in the eyes of the law. This extends to newer domains like ESG and data residency: if your supplier violates sanctions or privacy regulations, regulators will hold your organization accountable for oversight lapses. Thus, the unsolved vendor risk problem exposes companies to compliance violations and legal liability, despite all the rules telling them to fix it. Every audit or exam becomes a fire drill to scramble together vendor documentation – or worse, an incident reveals that the oversight was only on paper.
-
Operational and Safety Risk: In critical infrastructure (energy grids, transportation, hospitals), a vendor failure can literally shut down operations or endanger lives. Think of a hospital whose cloud EHR provider goes down, crippling patient care, or a power utility whose equipment supplier delivers a faulty component causing an outage. Regulators in these sectors (e.g. FERC/NERC for utilities, FDA for medical devices) are intensely focused on supply chain risk and operational resilience. If a company lacks visibility into vendor stability and preparedness, they might miss early warning signs – like a key supplier experiencing financial distress or a subcontractor with poor safety practices – until a disaster occurs. The business/operational resilience aspect of vendor risk is one of the least tracked areas today [prevalent.net], yet in regulated industries it’s as critical as cyber risk. Failing to solve this means not only cyber breaches, but also downtime, lost revenue, and potentially harm to customers or the public.
In short, the unsolved vendor risk problem is critical because it directly undermines the core mandates of regulated industries: protect customer data (security/privacy), maintain compliance, and ensure uninterrupted, safe operations. Companies that don’t address this effectively are playing roulette with both their stakeholders’ trust and the regulators’ patience.
Why Companies Delay or Avoid Existing TPRM Solutions
Given the high stakes, one might expect organizations to rush to adopt third-party risk platforms. Paradoxically, many drag their feet or resist investing in TPRM technology. Understanding this buyer behavior is key to crafting a solution that actually gets used. Several factors explain the hesitation:
-
Heavy Lifting and Long Onboarding: Ironically, the very platforms meant to ease the burden of vendor risk can feel like a burden to launch. Traditional GRC/TPRM systems often demand lengthy implementations – mapping processes, uploading vendor lists, customizing questionnaires – taking months before delivering value. Overstretched teams simply don’t have the bandwidth for a drawn-out rollout that increases short-term workload. In regulated firms, risk and compliance teams are already drowning in daily firefighting and audits; a project that “stretches across months, often creating business delays” (as with typical vendor onboarding processes [processunity.com]) is viewed as a luxury they can’t afford right now. This leads to a “we’ll deal with it next quarter/year” procrastination, despite the underlying risk.
-
Unclear ROI and Intangible Benefits: Third-party risk management’s value is largely in preventing something (breaches, fines, outages) – which can be hard to quantify until disaster strikes. Busy executives ask: what do we tangibly gain by investing in this tool? If the answer is “a centralized dashboard and some risk scores,” that may not sway budget decisions compared to revenue-generating projects. Companies that have avoided major incidents so far might develop a false sense of security, believing their current ad-hoc process is “good enough” since nothing bad has happened (yet). This complacency is reinforced by checkbox compliance: if they passed last year’s audit with their spreadsheet-based program, why spend hundreds of thousands on a new platform? The ROI calculus is murky without a clear, imminent pain point. Many buyers therefore delay, reasoning that the status quo – however imperfect – hasn’t visibly hurt them and keeps costs down.
-
User Resistance and Tool Fatigue: Front-line staff tasked with vendor risk often view new platforms with skepticism. They’ve perhaps seen past tools become shelfware due to complexity, or fear that automation will flood them with more data to interpret. Limited executive support is another barrier – if leadership isn’t championing the cause, a risk manager pushing for a new system faces an uphill battle. There’s also an element of psychology and pride: teams may insist their homegrown process works fine, or worry that adopting an “out-of-the-box” solution could expose gaps in their current program. Furthermore, truly effective TPRM requires cross-functional participation (IT, legal, procurement, business units). In organizations with siloed culture, getting everyone to embrace a single platform is daunting – it’s easier to keep using email and Excel, even if inefficient, because it avoids change management fights. In summary, overwhelmed and under-resourced teams often perceive adopting a TPRM platform as more hassle than relief in the short term. Without a clear, immediate win and minimal disruption, they default to delaying action.
-
False Sense of Control: Some firms harbor a belief that contracts and insurance transfer the risk – e.g. “We have strong vendor contracts with security requirements, and our vendors carry liability insurance, so we’ll be covered even if something happens.” This mindset can breed complacency, causing companies to underinvest in actively managing the risk. It’s only after a scare or near-miss (a vendor suffers an incident or a regulator questions their program) that urgency kicks in. Unfortunately, by then implementing a solution is reactive and rushed.
Bottom line: existing third-party risk solutions have not broken through the inertia at many organizations because they demand too much upfront effort for uncertain payoff. To overcome this, the problem must be addressed in a way that immediately makes the buyer’s life easier, not harder. The next section discusses how a reimagined platform could do just that.
Solving the Issue: A Low-Lift, High-Impact Approach
To solve this unsolved vendor risk problem and spur rapid adoption, a new TPRM platform must flip the script: deliver instant clarity and value with minimal work from the customer’s team. Here’s what such a solution could look like and how it targets the pain points:
-
📊 “Instant Risk Radar” via Pre-Populated Data: The platform should come out-of-the-box with rich intelligence on common vendors and suppliers in regulated industries – think of it as a third-party risk exchange network where much information is already gathered. Instead of making the buyer build every vendor record from scratch, the system could leverage databases of security ratings, compliance certifications, financial health indicators, and even past assessment results for tens of thousands of vendors. (In fact, some modern exchanges allow reuse of previously completed assessmentsprocessunity.com.) This means the moment a company onboards the tool and uploads their vendor list, they get an immediate risk snapshot: which vendors have known breaches, which have up-to-date SOC 2 or ISO27001 certificates, which might be using outdated software, etc. By reducing the need to chase every vendor for information, the platform dramatically lowers the activation energy for the buyer. They start with a foundation of insight that would have taken them months to collect manually. Fast time-to-value is key – for example, AI-based approaches have shown they can cut risk evaluation timelines from 60–90 days down to just 5–8 days, and achieve near-100% vendor coverage through automation. That kind of speed and coverage is game-changing for a lean risk team.
-
🤖 Automation of the Mundane: To ensure minimal buyer lift, the platform should automate the most labor-intensive tasks in TPRM. This includes auto-sending and tracking questionnaires or evidence requests, pulling in real-time security alerts about vendors, and even scanning documents. Modern AI can be employed to review vendor-provided artifacts (policies, attestations) and flag exceptions – tasks that would otherwise consume analyst hours. If a bank needs to verify that 50 vendors are compliant with a new regulation, the platform could automatically parse vendors’ compliance reports for the relevant sections, instead of the user reading each one. By using AI/ML to “do the heavy lifting”, the tool addresses the resource constraint directly: one analyst can manage many more vendors when rote tasks are offloaded to the system [processunity.com]. Crucially, this automation must be coupled with user-friendly workflow: e.g. a centralized vendor portal for document submissions and communications can streamline interactions and eliminate redundant back-and-forth [processunity.com]. The easier you make it for vendors to comply (single portal, standardized requests), the more likely those 75% who ignore assessments will engage. In short, the platform should act like an “extra team member” that handles drudge work, letting risk managers focus on critical thinking rather than email chasing.
-
🎯 Focused, Contextual Risk Insights: Solving the problem isn’t about dumping more data on the user – it’s about distilling the right data. A winning platform would prioritize clarity over quantity. This means building in risk scoring and analytics that account for both the vendor’s intrinsic risk and how the company uses that vendor (sometimes called “usage risk”[csoonline.com]). For example, a payroll software vendor and a data center provider might both have medium security scores, but the latter is far more critical to a bank’s operations. The tool should highlight that context: perhaps by automatically classifying vendors by criticality (tiering) and mapping their risk indicators to potential business impact [processunity.comprocessunity.com]. It should also triage continuous monitoring alerts into a dashboard of actionable priorities – flagging, say, that your high-criticality vendor just had a breach or a key certificate expired, whereas low-risk vendors’ minor issues are lower on the list. This addresses the “noise” problem: rather than inundating an overwhelmed team with raw alerts, the platform gives a clear to-do list ranked by risk. As one best practice suggests, implementing vendor risk scoring and clear escalation protocols is vital to avoid alert fatigue and “ensure rapid response to high-risk threats” [processunity.comprocessunity.com]. In essence, the solution should serve as an early-warning system with judgment – surfacing the most pressing vendor issues (security, compliance, financial) in plain language and in context of regulatory impact. That clarity not only helps prevent incidents but also makes it easier to demonstrate value to executives (“Here are the top 5 vendor risks we eliminated this month, and what that saved us”).
-
⚡ Rapid Remediation and Guidance: Identifying risk is half the battle; the platform should also facilitate fast mitigation. This could mean providing guided remediation workflows – for instance, if a vendor has a high-risk gap (no encryption, or no BAA in place), the system might suggest templated contract addenda or remediation plans and track the vendor’s progress on them. Many programs falter by stopping at risk identification without ensuring issues get fixed. By embedding remediation steps and even offering integration with ticketing systems (so issues flow to the responsible owner), the tool ensures risks are actually reduced, not just documented. For regulated industries, this is golden: it creates an audit trail that “we found X risk and here’s the proof we got it addressed,” closing the loop that many TPRM processes lack. Minimal effort is required from the user if the platform orchestrates much of this – sending reminders to vendors, verifying evidence, and updating status. An ideal solution might even provide benchmark data (e.g. “75% of vendors in our network addressed this same vulnerability within 2 weeks”) to pressure laggards and assure the buyer that the ask is reasonable. The end goal is a fast time-to-value not only in setup but in outcomes: within the first weeks, the buyer should see real risk reduction (e.g. a dangerous vendor gap closed, or a previously unknown high-risk vendor flagged for replacement).
In summary, a platform that solves the unsolved problem will act less like traditional software and more like a concierge risk partner: quickly illuminating where the biggest vendor risks are, taking on the grunt work to gather and analyze data, and handing the user clear, prioritized insights and actions. By aligning with how resource-strapped, compliance-weary teams operate, it minimizes friction and accelerates time-to-value. Next, we’ll explore how to win over those very teams by addressing their psychology and needs.
