Supplier risk management solutions: What to look for

Suppliers are integral to business success, but they also pose potential risk.

For example, if a materials supplier suffers a data breach, attackers may be able to move laterally into your network and access protected data. In the case of a financial transaction provider, data collected by your company — and that you’re responsible for protecting — may be stolen or destroyed. In both cases, the results range from regulatory fines to compliance audits or even legal action.

Supplier risk management (SRM) solutions offer a way to minimize risk while maximizing the benefit of third-party partnerships. As the SRM market evolves, however, it can be challenging to find options that protect your interests without breaking your budget.

In our guide to SRM solutions, we’ll explore the operational basics and key capabilities of risk management tools, examine why these tools are gaining traction, and offer some key questions to help your team evaluate possible solutions.

What is supplier risk management?

Research firm Gartner defines supplier risk management as “the ability to assess and monitor supplier risk by tracking supplier financial performance, geopolitical risks, news sentiments, judicial filings, and regulatory compliance.”

In other words, anything that might create risk for first-party companies — from supplier data handling to public sentiment to procurement processes — is covered under SRM.

The scope and scale of SRM

Supplier risk management is a foundational element of third-party risk management. This is because all third parties fulfill some type of supply function. Material providers supply physical products or components. Logistics providers supply transportation, transaction service providers supply networks. IT providers supply resources or hardware.

This creates a continually evolving risk environment. As your company connects with new third parties or terminates agreements with current providers, your risk landscape shifts. Some risks will be reduced or eliminated, even as new issues arise.

The result? Third-party risk management is a key component of overall enterprise risk management and security due diligence. Consider an organization with robust internal IT security. Wireless networks are well protected, all employees must use multi-factor authentication (MFA), and access permissions are regularly reviewed.

This effort is wasted, however, without a robust SRM program. If these same processes and policies don’t extend to suppliers — or if teams don’t have visibility into supplier security operations — it becomes impossible to control risk.

Common risk types

Supplier risks are often one of several common types, including:

Financial

Financial risks include both the direct loss of money and the loss of revenue due to customer churn. For example, if a malicious actor breaches your third-party payment provider, they may be able to redirect funds. If customer credit card data is stolen, buyers may take their business elsewhere.

Reputational

Reputational risks are tied to public perception. If you fail to properly vet or verify vendors and these vendors are breached, your reputation suffers. Rebuilding it requires time, effort, and money.

Compliance

Third-party data breaches may also lead to compliance risks. Consider HIPAA. The Office for Civil Rights (OCR) can levy fines under HIPAA to organizations who fail to protect patient data. For example, if a health insurance provider works with a third-party data storage company that suffers a breach, both the third party and the insurance company may be fined under HIPAA.

Cybersecurity

Suppliers that have access to critical systems or resources pose a cybersecurity risk. This cyber risk is especially problematic if suppliers don’t immediately detect this breach; attackers could carry out reconnaissance from inside your network for weeks or months before raising red flags.

Operational

Finally, supplier breaches can lead to operational risks. For example, a manufacturing firm that allows some of its vetted suppliers access to production line data could find these same production lines taken offline if third-party vendors are breached. The impact of this issue can be mitigated if the company has robust business continuity and disaster recovery solutions in place. If not, breaches could lead to days or weeks without data access.

Why supplier risk is gaining attention

Increased regulatory scrutiny and the impacts of recent disruptions have put supplier risk into the spotlight this year.

Regulatory scrutiny and ESG pressure

Many companies now leverage redundant supply chain networks to minimize the risk of business disruption. More suppliers in more locations, however, casts a wider net for risk exposure. This has led to increased regulatory scrutiny that aims to limit the possibility of both national and international breaches.

For example, the Promoting Resilient Supply Chains Act of 2025 has now passed the House of Congress and is on track for Senate evaluation. This act would require the Industry and Analysis office of the International Trade Administration to “monitor and respond to disruptions in critical industries and supply chains.”

Environmental, social, and governance (ESG) pressures also play a role in the prioritization of supply chain risks:

• Environmental: To combat evolving consumer expectations, companies prioritize suppliers that can meet specific emissions targets and offer guarantees about sustainability. If suppliers can’t (or won’t) meet these goals, consumers may take their business elsewhere.
• Social: Consider recent consumer shifts in Canada. As noted by KPMG, 9 in 10 consumers want stores to promote Canadian-made products. If suppliers promise Canadian goods but can’t deliver, companies could suffer revenue loss.
• Governance: Governance refers to the protection of consumer and financial data. If supplier networks are at risk, this could lead to accidental or malicious data breaches, both of which undermine consumer confidence and lay the groundwork for non-compliance.

It’s also worth noting that supplier risks are now extending past third parties to include fourth parties, which are the suppliers of your suppliers. According to Help Net Security, 4.5% of all breaches now extend to fourth parties. This is especially concerning because companies working with third parties may not know how many — or what type — of fourth parties their suppliers or vendors are working with. If these fourth parties have substandard data collection and protection policies, companies could face unexpected reputational risks.

Lessons from recent disruptions

Recent disruptions highlight the impact of supplier risk.

Consider Marriott International, which saw one of its suppliers breach, resulting in the exposure of guests’ Social Security numbers. Not only does this damage Marriott’s reputation, but it could lead to legal challenges if customer data is used for subsequent financial fraud.

Whole Foods offers a warning about operational risk mitigation. In June 2025, a cyberattack on the company’s primary supplier caused weeks-long delays in food deliveries, forcing Whole Foods to find workarounds. This negatively impacts customer perception and costs the company time and money as they look to minimize the damage.

In the case of Ocala, Florida, meanwhile, fraudsters masquerading as a legitimate supplier managed to steal $742,000 from the city. Here, a lack of supplier security processes made this kind of breach possible.

Key capabilities of supplier risk management tools

Supplier risk management tools should include key capabilities such as risk scoring and monitoring, along with framework and compliance mapping.

Risk scoring and monitoring

Risk scoring helps companies rank suppliers across multiple vectors to understand total risk. These vectors may include cybersecurity practices, operational resiliency and continuity policies, and partnerships with other vendors. Risk scoring should be carried out regularly to account for any changes in supplier conditions.

Risk monitoring is a more active process of risk management. Instead of scoring suppliers, monitoring tools respond in real time. For example, tools identify a possible breach, and they automatically notify your staff to take immediate action.

In combination, risk scoring and monitoring help companies create a risk profile that tracks supplier relationships and supplier performance to help optimize vendor management.

Framework and compliance mapping

Mapping also plays a key role in risk management, and tools should be capable of doing so across both standards frameworks and compliance requirements.

Common frameworks include guidelines from NIST and the ISO, such as ISO 27001. Compliance requirements include SOC 2, PCI DSS, HIPAA, and GDPR, to name a few.

Mapping itself is the process of connecting the dots, ensuring all parts of supplier processes are aligned with preferred standards and meet compliance expectations. While compliance is not the end-all-be-all of data security, it helps companies align with widely accepted best practices and creates a solid foundation for building a secure and resilient supply chain.

Questions to ask when evaluating solutions

Not all SRM solutions are created equal. To ensure solutions align with your needs, ask questions that cover key operational categories.

Integration and customization

Third-party risk management software should be simple to integrate and easy to customize. To check that tools offer these benefits, ask:

• How well do software solutions integrate with existing systems? SRM tools don’t exist in isolation. Ask prospective vendors how well their tools integrate with existing GRC, TPRM, ERP and ITSM platforms to centralize third-party data, track evidence, and automate control testing.
• What functions and features can be customized? Every business is different. What e-commerce companies need from suppliers is different from that of manufacturers, and different again from financial firms. Ask SRM providers how tools can be customized to meet your needs.

Real-time alerting and dashboards

• What triggers real-time alerts? Real-time alerts and notifications let your company take action to reduce the impact of supplier breaches. Ask what triggers these alerts and how they can be automated.
• What type of data can be displayed on dashboards? Dashboards provide a single pane of glass to help teams quickly see what’s going on and what action they need to take. Always ask about dashboard customization and ease of collaboration across teams.

How AuditBoard supports supplier risk management

AuditBoard infosec solutions offer a comprehensive approach to supplier risk management that supports operational goals and meets regulatory expectations. Features that set AuditBoard apart from other enterprise risk management vendors include:

Centralized risk register

AuditBoard’s centralized risk register tracks supplier onboarding, risk tiering, control effectiveness, and remediation activities, with audit trail visibility to support testing and executive reporting.

Scalable workflows and collaboration

AuditBoard is inherently scalable. Our solutions scale with your business, meaning you’re always covered no matter how many new suppliers you bring on board or new processes you introduce.

Comprehensive collaboration, meanwhile, ensures your teams are always ready to assess, remediate, and report on third-party risk.

Explore our continuous monitoring guide to help your teams build an end-to-end risk management environment.

See more of your supply chain with SRM

The more you see of your supply chain, the lower your risk.

Increasing supply chain complexity, paired with growing data volumes, however, can leave companies in the dark about what’s happening along the chain. With a single broken link potentially leading to financial, operational, or regulatory impacts, businesses need a better way to see exactly what’s happening, why it’s happening, and what they can do about it.

The solution? Robust and reliable SRM. Equipped with solutions capable of centralizing risk, scaling workflows, and empowering collaboration, businesses are better prepared to meet the expectations of supplier risk management.

Streamline supplier risk with a connected platform built for infosec, audit, and compliance. Start your AuditBoard demo today.