6 Key Challenges Affecting Third-Party Risk Management Systems

Third-Party Risk Management Industry Trends

Third-party involvement in data breaches doubled from 15% to 30% of all incidents in a single year, according to the IBM Cost of a Data Breach Report 2025. Supply chain attack now account for 15% of total breaches, at an average cost of $4.91 million and an average detection time of 267 days.

Concurrently, regulators have codified TPRM expectations. In June 2023, the Federal Reserve, the FDIC, and the OCC jointly issued Interagency Guidance on Third-Party Relationships, establishing a consistent federal framework requiring financial institutions to oversee third parties across the full lifecycle of the relationship.

AI adoption has added a new dimension. The IBM report found that 30% of AI security incidents occur via third-party integrations, and 44% of zero-day attacks now target the managed file transfer systems that organizations use for AI data exchange. The intersection of AI risk and vendor risk has become a priority management concern.

2026 TPRM Challenge Summary

The following table summarizes all six key challenges, their current context, and assessed risk levels for financial institutions in 2026.

6 Key Challenges of Third-Party Risk Management Systems

1. Data Security and Privacy Concerns

The challenge of safeguarding data across a network of external M Cost of a Data Breach Report 2025, third-party involvement in data breaches doubled from 15% to 30% of incidents in a single year. Supply chain attacks average $4.91 million per incident and take 267 days on average to detect and contain, because they exploit established trust relationships rather than attacking systems directly.

Financial institutions must ensure third parties adhere to current data security standards, including requirements under U.S. state privacy laws, and implement:

• Robust encryption
• Access controls
• https://www.360factors.com/risk-control-self-assessments-datasheet/

2. Inadequate Visibility and Control

Lack of visibility into third-party operations leaves organizations vulnerable to unforeseen risks. This encompasses ongoing monitoring of vendor operational risk, financial stability, and geopolitical factors that could affect supply chains.

To maintain visibility across all third-party relationships and their associated risks, comprehensive TPRM system should offer:

• Real-time monitoring
• Detailed analytics
• Reporting tools

The 2023 Interagency Guidance explicitly requires ongoing monitoring rather than point-in-time assessments.

3. Compliance and Regulatory Challenges

The June 2023 Interagency Guidance on Third-Party Relationships, issued jointly by the https://www.360factors.com/blog/occ-heightened-standardsOCC, Federal Reserve, and FDIC, established lifecycle-based oversight requirements that apply across all vendor relationships, with heightened expectations for critical third parties.

In 2026, organizations operating internationally also contend with the EU AI Act, which phased in obligations beginning February 2025 and extends its broadest requirements to August 2026.

Institutions using AI tools sourced from third-party vendors must assess whether those tools meet transparency, fairness, and auditability requirements. The OCC issued updated model risk management guidance in 2026, specifically addressing AI and generative AI models.

4. Managing Complex Supply Chains

Modern supply chains often span multiple countries and involving numerous subcontractors and technology intermediaries. This layered structure creates risks that extend beyond direct vendors to secondary and tertiary suppliers.

Effective TPRM requires assessing not only primary vendor risk but evaluating the entire supply chain. This demands a system capable of deep supply chain analysis, automated vendor tiering, and consistent risk assessment at every tier.

5. Reliance on Manual Processes

The persistence of manual processes in risk management remains a significant operational barrier. Spreadsheet-based workflows are time-consuming, prone to human error, and structurally unable to support real-time risk assessments or the continuous monitoring now required by the 2023 Interagency Guidance.

Automating TPRM processes through a purpose-built platform streamlines risk assessments, improves accuracy, enables quicker response to emerging threats, and creates auditable records that support regulatory examination.

6. AI and Emerging Technology Risk

AI adoption has created a materially new category of third-party risk that did not exist at scale in prior TPRM frameworks. According to the IBM Cost of a Data Breach Report 2025, 30% of AI security incidents occur via third-party integrations, and SaaS-delivered AI represents the highest-risk source category, accounting for 29% of AI security incidents.

Financial institutions procuring AI tools from third-party vendors face compounding risks:

• The AI tool itself may introduce model bias, opacity, or security vulnerabilities
• The vendor delivering the tool may lack adequate security controls
• The data flows created by AI-driven workflows can expose sensitive customer and organizational data to new attack surfaces.

The OCC and federal banking agencies have signaled that AI-specific third-party risk will be an active examination focus, and institutions are expected to assess AI vendors against both standard TPRM criteria and AI-specific risk dimensions.

Confidently Manage Your Organization’s TPRM Risk

Addressing the challenges associated with third-party risk requires a comprehensive, technology-driven solution that can identify and assess risks, provide actionable insights, support regulatory compliance, and adapt to emerging risk categories including AI. Predict360’s TPRM solution integrates these capabilities into a structured risk management lifecycle.

The platform supports TPRM programs across the following phases:

Financial institutions face an intricate and evolving landscape of third-party risks. Implementing a structured TPRM platform provides the tools and oversight framework needed to navigate these challenges with confidence.