In the fast-evolving landscape of third-party risk management (TPRM), organizations are ramping up their efforts to address the growing risks associated with vendors and partners. As we look ahead to 2025, it is clear that the need to manage these risks has become more urgent than ever before, driven by a myriad of factors including new regulations, geopolitical tensions, and vulnerabilities within the supply chain.
One of the key predictions for the future of TPRM is the increasing role of Artificial Intelligence (AI) in driving predictive insights and streamlining processes. AI is set to revolutionize the way organizations automate risk assessments, identify patterns in large datasets, and detect potential issues at a faster pace. By leveraging Large Language Models (LLMs), companies can pinpoint inconsistencies in documentation and responses, enhancing the overall risk management process. While only a small percentage of organizations were actively using AI for TPRM in 2024, this number is expected to rise significantly as businesses bridge governance gaps and embrace automation.
Moreover, as regulations continue to tighten globally, there will be a push for elevated due diligence in TPRM. Governments and regulatory bodies are placing increased emphasis on areas such as data privacy, ESG compliance, and operational resilience. Companies will need to conduct more rigorous assessments of their third-party suppliers and partners to ensure compliance with evolving regulations. For instance, initiatives like the EU Digital Operational Resilience Act (DORA) are setting new standards for operational resilience within the financial sector, signaling a broader trend towards more stringent due diligence requirements. ESG mandates such as the EU’s CSRD and CSDDD will also necessitate businesses to evaluate supplier practices related to areas like carbon emissions, labor conditions, and ethical sourcing.
Furthermore, the geopolitical landscape is becoming increasingly unstable, prompting organizations to closely monitor their extended ecosystems. With ongoing crises in regions like Ukraine and the Red Sea, companies will focus on analyzing ultimate business owners (UBOs) and regional concentration risks to anticipate disruptions and avoid potential sanctions. By expanding vendor firmographic data, organizations can mitigate downtime and ensure operational continuity in the face of geopolitical challenges.
In addition, TPRM is expected to be embedded into enterprise culture, becoming a shared responsibility across various departments within organizations. This shift towards a more collaborative approach will involve procurement teams, risk managers, and other stakeholders playing more significant roles in sourcing, due diligence, and vendor offboarding. By integrating TPRM into broader business processes, organizations can foster better coordination and mitigate risks more effectively.
Centralized risk reporting will also become essential as boards and senior leadership increasingly demand consolidated views of internal and external risks. By integrating TPRM into governance, risk management, and compliance (GRC) frameworks, organizations can provide unified key risk indicators that offer business-impact-focused insights accessible to both technical and non-technical stakeholders, enabling more informed decision-making.
Moreover, aggregated risk monitoring will be crucial in strengthening resilience as organizations face a rising number of third-party cybersecurity incidents. By continuously monitoring risks across various domains such as cyber, operational, reputational, ESG, and financial, companies can respond more effectively to emerging threats and enhance supply chain resilience.
Lastly, the prediction that third-party data breaches will reach a critical point in 2025 underscores the importance of proactive risk management. With cybercriminals targeting third parties supporting high-profile industries like healthcare, finance, and education, organizations will need to prioritize cybersecurity measures to mitigate these threats effectively.
In conclusion, the future of TPRM is marked by significant changes and challenges, from the adoption of AI to stricter regulations and a focus on resilience. By embracing innovation and prioritizing governance, organizations can navigate the evolving landscape of third-party risk management and turn challenges into opportunities for sustainable growth and success in 2025.