Navigating Regulatory Changes in Vendor Risk Management

Introduction

The regulatory landscape for vendor risk management is undergoing a seismic shift. With supply chain cyberattacks on the rise and high-profile breaches triggering public outcry, regulators across the globe are tightening compliance expectations around third-party oversight. Businesses can no longer treat vendor risk as a one-off procurement checkbox. Instead, they must view it as a living, breathing element of enterprise risk management—now shaped directly by evolving regulatory requirements.

The Shifting Regulatory Landscape

In 2025, vendor risk management isn’t just a best practice—it’s increasingly a legal mandate. Across multiple jurisdictions, regulatory frameworks are converging on a common theme: organizations are responsible not only for their own security posture, but for the risks posed by vendors, subcontractors, and even fourth parties. Let’s break down the key regulations driving this change.

• DORA (EU Digital Operational Resilience Act): Effective from January 2025, DORA imposes mandatory ICT risk management across financial entities, with explicit requirements for third-party oversight. It includes contractual clauses, resilience testing, and systemic risk mitigation for critical third parties.
• NY DFS 500 (USA): The New York Department of Financial Services (NY DFS) updated its cybersecurity regulations to require covered entities to implement detailed third-party risk policies, including annual assessments and monitoring of service providers’ cybersecurity practices.
• APRA CPS 230 (Australia): Slated to go live in 2025, CPS 230 introduces new operational risk and third-party management expectations for banks and insurers, requiring board-level oversight and formal risk assessments for material outsourcing arrangements.

These regulatory initiatives may differ in structure, but the core message is universal: organizations must actively manage and mitigate third-party risk or face consequences—from fines to reputational damage.

Top Compliance Challenges for Risk Teams

As vendor risk regulations proliferate, many risk and compliance teams find themselves stretched thin. Navigating a maze of overlapping, sometimes conflicting, rules across geographies is daunting. Some of the most pressing challenges include:

• Vague Definitions: Many frameworks refer to “critical” or “material” vendors without offering clear thresholds. This leaves companies to define their own criteria—which can backfire under audit.
• Fragmented Governance: Vendor risk may sit with procurement, security, legal, or compliance—leading to inconsistent assessments, siloed tools, and unclear ownership of regulatory obligations.
• Manual Processes: Many organizations still rely on spreadsheets and email for third-party assessments, making it nearly impossible to track compliance at scale or demonstrate oversight to regulators.
• Vendor Resistance: Even when companies implement robust vendor due diligence processes, some vendors push back on providing detailed data, citing confidentiality concerns or workload limitations.

To meet compliance demands, organizations must clarify roles, automate processes, and enforce vendor cooperation as a condition of doing business.

Case Studies: Breaches That Reshaped Policy

Several high-profile breaches over the past five years have become case studies in regulatory reaction. These incidents not only exposed the fragility of third-party ecosystems but also prompted governments and regulators to update their guidance or mandates.

• SolarWinds (2020): A nation-state attack inserted malicious code into SolarWinds' Orion software, which was then distributed to over 18,000 customers, including U.S. federal agencies. The fallout led to executive orders in the U.S. focused on software supply chain integrity and third-party risk transparency.
• MOVEit (2023): The file transfer software used by hundreds of government agencies and financial institutions was exploited by the Clop ransomware gang. Many affected organizations had no direct contract with the software vendor, highlighting the risk of indirect dependencies. This breach influenced DORA’s third-party concentration risk clause.
• Okta Vendor Breach (2022): Attackers gained access to Okta’s systems via a third-party customer support provider, causing ripple effects across major enterprises. The incident reinforced expectations for sub-contractor risk evaluation.

These events changed how regulators view shared responsibility. Breach accountability now extends well beyond an organization’s internal perimeter.

What Regulators Expect from Vendor Risk Programs

A common question from compliance teams is, “What do regulators really want us to do?” While the answer varies by region and sector, some expectations are nearly universal in 2025:

• Risk-Based Tiering: Not all vendors are equal. Regulators expect organizations to classify vendors by criticality and apply differentiated due diligence accordingly.
• Initial and Ongoing Assessments: Due diligence isn’t a one-time task. Risk profiles can evolve, so continuous or at least annual reassessments are essential—especially for high-risk vendors. See continuous monitoring strategies.
• Incident SLAs and Escalation Protocols: Contracts must include breach notification windows (often 72 hours or less) and obligations to participate in investigations. Failure to disclose within this period can be a regulatory violation.
• Board-Level Reporting: Risk committees or boards must be regularly briefed on critical vendor risks and regulatory gaps. Passive awareness is no longer sufficient.

By aligning with these expectations, organizations not only achieve compliance—they reduce business disruption from unforeseen third-party failures.

Bridging the Gap: Aligning with Governance & Audit

One of the most overlooked areas in vendor risk programs is their alignment with internal governance and audit. Risk and compliance teams often work in isolation from those performing assurance or board oversight. This siloed approach creates duplication, inefficiency, and worse—gaps regulators can easily identify.

Internal audit should be reviewing the effectiveness of third-party due diligence processes, not just checking for their existence. Governance teams should ensure vendor risk metrics and trends are part of the organization’s enterprise risk management framework, as outlined in strategic IT risk integration.

Bridging this gap is critical. Not only does it reduce friction across teams, but it also creates a unified narrative for regulatory reporting and board presentations.

Leveraging Technology for Compliance Efficiency

Regulatory mandates can feel overwhelming—but the right technology stack can help streamline compliance and reduce human error. Organizations are increasingly turning to automation and integrated platforms to manage vendor risk at scale.

• GRC Platforms: Tools like ServiceNow, Archer, and OneTrust provide vendor risk modules that support tiering, assessments, and policy enforcement, all while generating audit-ready reports.
• Third-Party Risk Exchanges: Pre-assessed vendor libraries (e.g., CyberGRX) can accelerate onboarding by using standardized assessment templates accepted across industries.
• AI for Document Analysis: Some organizations are deploying natural language processing tools to scan vendor contracts for missing clauses or risk terms that don’t align with regulation.

While tech isn’t a silver bullet, it plays a critical role in making compliance scalable—especially when dealing with hundreds or thousands of vendor relationships.

Practical Strategies for Multi-Jurisdiction Compliance

For multinational organizations, the challenge isn’t just meeting one standard—it’s managing compliance across continents. Here are practical strategies:

• Create a Unified Risk Framework: Instead of tailoring processes to each regulation, develop a global baseline framework that meets the strictest controls. Use a “comply-once, report-many” approach.
• Map Controls to Requirements: Use control mapping tools or spreadsheets to align your internal controls with DORA, NY DFS, CPS 230, and others. This makes audits and certifications far easier to handle.
• Designate Regulatory Champions: Assign a regional lead for each major regulatory area. These champions stay current on updates, interpret requirements, and act as liaisons during assessments.
• Conduct Annual Regulatory Readiness Reviews: Just like a financial audit, conduct a vendor risk regulation gap analysis annually to ensure no drift has occurred in process or evidence.

Compliance across borders is complex, but a harmonized approach built on flexibility and documentation will help you pass scrutiny with confidence.

Conclusion: Building Resilience Through Compliance

The future of vendor risk management is no longer defined by spreadsheets or annual questionnaires—it is shaped by regulators, real-world threats, and the need for cross-functional collaboration. Navigating regulatory change is not just about avoiding penalties. It’s about building resilient, secure, and transparent vendor ecosystems that can stand up to scrutiny in boardrooms, newsrooms, and courtrooms.

Organizations that elevate their vendor risk programs to meet new mandates are not only future-proofing against fines—they're building operational resilience and trust. And in today’s volatile environment, that may be the most strategic advantage of all.