Failing to manage third-party cybersecurity risks can lead to significant consequences, including data breaches that compromise customer information. In fact, 44% of organizations reported a data breach last year, with 75% of those breaches stemming from third-party vendors having excessive privileged access. The reputational damage and financial costs associated with these breaches can be substantial, impacting customer trust and future business opportunities.

Organizations can improve their third-party risk management by adopting a holistic Governance, Risk, and Compliance (GRC) software solution. This approach centralizes critical vendor information, enabling teams to manage costs, performance, and exposure more effectively. Additionally, establishing consistent vendor review processes and prioritizing vendors based on their access to sensitive data can help organizations stay proactive in identifying and mitigating risks.

Strong cybersecurity practices are increasingly important for organizations seeking cyber insurance. Insurers prefer to work with companies that demonstrate high security standards, as this can lead to better policy rates. As more contracts include cyber insurance clauses, effective third-party risk management becomes essential not only for compliance but also for securing favorable insurance terms, especially as premiums continue to rise.