In our annual survey of risk leaders in more than 500 organizations, we found that 77% of cybersecurity breaches in the last three years originated with a third party. For financial services companies, that statistic isn't just alarming—it's a wake-up call about the impact of third-party risk management (TPRM) on business outcomes.

Like most industries, Financial Services has seen third-party ecosystems explode: the average company now works with 286 vendors, up from 237 just last year. But unlike most other industries, you face intensifying regulatory scrutiny, and your services play an essential role for other companies. Failure to comply with requirements can lead to fines…and it can also destabilize entire market segments.

But despite the complexity of the regulatory landscape, most core third-party risk management requirements are relatively consistent across different compliance frameworks. That means you can build a foundation that satisfies multiple regulatory obligations at once, rather than spinning your wheels on separate compliance programs for each agency.

In this article, we’ll look at the ways Financial Institutions (FIs) can create more effective, efficient TPRM through the lens of compliance. We’ll look at the unique challenges the industry faces, why compliance makes sense as a starting point, and look at core requirements your firm can master to streamline the regulatory burden.

Why Financial Services Faces Unique TPRM Challenges

For many industries, TPRM is driven solely by the risk appetite (and risk tolerance) of the individual organization. But FIs have a host of other specific concerns that impact their approach to third-party risk, including:

Overlapping regulatory requirements. FIs must navigate a matrix of requirements from banking regulators, securities commissions, privacy authorities, and emerging frameworks like DORA in the EU. A single vendor relationship might need to satisfy requirements from half a dozen different regulatory bodies, each with their own timelines and interpretation of acceptable risk management.
Systemic risk is amplified. When your vendor has a problem, it doesn't just affect your institution. The essential nature of FIs means that vendor failures have consequences that extend far beyond individual companies.
Data sensitivity and volume. You're handling millions of transactions daily, processing vast amounts of highly sensitive personal and financial data. Any third-party access to this data creates potential exposure points that must be carefully managed and monitored—and the regulatory consequences of getting it wrong are severe.
Pace of digital transformation. Technology is a competitive necessity for FIs, and the rapid adoption of new innovations has far outpaced the capacity of traditional TPRM teams to thoroughly assess, understand, and mitigate risk.

Compliance as a Strategic Starting Point for TPRM

The challenges we just discussed are actually a good reason for regulatory oversight: regulation sets clear, consistent standards that apply equally and can improve risk outcomes. The problem (besides the overlapping/conflicting quality of regulations that we touched on) is that many organizations view compliance only as a “necessary evil” rather than an opportunity to build a stronger, more agile TPRM process.

Most security and risk executives expect their TPRM team to deliver value. By overlooking compliance as table stakes, companies miss an opportunity to build a better engine for risk-based ROI.

Here's why starting with compliance requirements makes strategic sense:

Avoid consequences for non-compliance. Okay, this IS table stakes, but FIs face some of the most aggressive enforcement across industries. Penalties and operational restrictions affect the bottom line, so the obvious had to be stated in an article like this.
Create TPRM discipline and structure the right way. Compliance requires structure and alignment, and in the long run, those lead to efficiency and value creation. Many TPRM teams in unregulated industries still take a highly manual, ad hoc approach to vendor risk, leaving them without repeatable, scalable processes and exposing them to unnecessary risk.
Build stakeholder confidence and consumer trust. Your customers, investors, and business partners expect you to maintain rigorous third-party controls. Demonstrating compliance with established regulatory standards provides external validation of your risk management capabilities—and that translates to real business value.

Convergent Compliance: An Opportunity for Better TPRM

The good news is that the fundamental principles of effective vendor risk management are remarkably consistent across different frameworks. Whether you're dealing with DORA in Europe, GDPR privacy requirements, CCPA in California, or NIS2 cybersecurity standards, the core requirements keep showing up again and again.

This “convergence” of shared requirements creates a significant opportunity for financial services firms. Instead of building separate compliance programs for each regulatory framework (which is expensive and inefficient), you can develop integrated capabilities that satisfy multiple requirements simultaneously.

By focusing on ten core third-party risk management areas that appear consistently across regulatory frameworks, you can achieve broad regulatory coverage while building more effective risk management outcomes. It's not just about reducing compliance costs—though that's certainly a benefit. It's about creating a more robust, mature, and scalable approach to vendor risk management.

The Ten Core Requirements Every Financial Services Firm Should Master

Let's dig into the specific requirements that show up consistently across regulatory frameworks. These aren't just compliance checkboxes—they're the building blocks of effective third-party risk management. Building and documenting these steps is essential for both demonstrating compliance across a range of frameworks and maturing the quality of your TPRM program.

1. Comprehensive Risk-Based Vendor Assessments

Thorough, regular due diligence of vendors is a core requirement across regulatory frameworks. This comprehensive evaluation of your third parties includes a business model assessment, compliance posture, financial review, geographic considerations, and alignment with your risk posture.

How to meet requirements: Develop standardized assessment questionnaires tailored to different vendor types and risk levels. Include financial stability reviews, compliance certifications, security assessments, and operational capability evaluations. Create clear criteria for vendor approval and establish regular reassessment cycles based on risk levels. The key is making this process repeatable and scalable across your entire vendor ecosystem.

Required by: Interagency guidance (i.e. recommendation of two or more agencies), DORA, GDPR, CCPA, NIS2

2. Ongoing Monitoring of Third-Party Performance and Security

Ongoing monitoring requires continuous oversight mechanisms that evaluate vendor performance, contract compliance, and evolving risk exposures. These mechanisms include reviewing SOC reports, audit findings, control testing results, security posture monitoring, and SLA adherence tracking.

How to meet requirements: Establish automated monitoring systems for key performance indicators and security metrics. Schedule regular vendor reviews based on risk tiers—your critical vendors might need quarterly reviews, while lower-risk vendors might be assessed annually. Create escalation procedures for performance issues and maintain vendor scorecards that track compliance and performance trends over time.

Required by: Interagency guidance, DORA, GDPR, NIS2

3. Incident Response Planning and Reporting

Ensure that both you and your vendors have formal incident detection, escalation, and response capabilities. This includes requiring timely notification of security, privacy, or operational incidents affecting your data or services, with incident management procedures that align with your organization's broader incident response framework.

How to meet requirements: Develop incident response playbooks that define roles, responsibilities, and communication procedures for various types of vendor-related incidents. Establish incident notification requirements in vendor contracts, including specific timelines and escalation procedures. Test incident response procedures regularly through tabletop exercises with key vendors.

Required by: Interagency guidance, DORA, GDPR, CCPA, NIS2

4. Clear Contractual Agreements on Responsibilities and Rights

Contracts must explicitly define the scope of services, performance expectations, security and compliance obligations, audit rights, data ownership and processing terms, breach notification timelines, and termination clauses that pertain to your relationship with vendors.

How to meet requirements: Develop standardized contract templates that include comprehensive risk management clauses. Ensure contracts specify regulatory compliance requirements, security standards, audit rights, and performance metrics. Include clear remediation procedures and termination rights for non-compliance.

Required by: Interagency guidance, DORA, GDPR, CCPA, NIS2

5. Governance and Accountability for Third-Party Risk

Designate and document assigned roles and accountability for TPRM at both the executive and operational level. These include board oversight, periodic risk posture reviews, integration with enterprise risk management, and regular leadership reporting.

How to meet requirements: Establish a formal TPRM governance structure with clear roles and responsibilities. Create board-level oversight with regular reporting on third-party risk posture. Integrate TPRM into enterprise risk management frameworks and ensure adequate resource allocation for program execution.

Required by: Interagency guidance, DORA, NIS2

6. Data Protection and Privacy Controls

These are explicit requirements for third parties to implement privacy controls and data protection practices that meet or exceed legal and regulatory standards, including GDPR, CCPA compliance, proper PII handling, data minimization, and breach notification procedures.

How to meet requirements: Develop comprehensive data protection language for vendor contracts. Conduct privacy impact assessments for vendors handling personal data. Implement data classification systems and ensure vendors apply appropriate protection levels. Establish clear data breach notification and response procedures.

Required by: Interagency guidance, DORA, GDPR, CCPA, NIS2

7. Termination and Exit Strategy Planning

Formal offboarding and exit strategies for third-party relationships (particularly critical vendors), addressing data retrieval, transition to alternate providers, continuity of operations, and secure data destruction are necessary to ensure business continuity after your vendor relationships end.

How to meet requirements: Develop detailed exit planning procedures for different vendor types. Include data retrieval and destruction requirements in vendor contracts. Maintain updated inventories of vendor-held data and systems. Create transition plans for critical vendors and test these plans regularly.

Required by: Interagency guidance, DORA, NIS2

8. Inventory and Classification of Third-Party Relationships

You can’t manage what you don’t know. Create a centralized, accurate, and up-to-date inventory of all third-party relationships, including subcontractors, with each vendor classified by service type, risk level, regulatory impact, and operational criticality.

How to meet requirements: Implement a centralized vendor management system that captures all vendor relationships. Develop classification criteria based on risk levels and regulatory requirements. Establish processes for maintaining inventory accuracy and completeness. Include subcontractor visibility in vendor reporting requirements.

Required by: Interagency guidance, DORA, NIS2

9. Third-Party Access Management

In order to prevent unnecessary vendor risk, document robust access control policies for third parties, including least privilege access, multifactor authentication, monitoring of privileged accounts, and periodic access reviews, ensuring vendors cannot access sensitive systems or data beyond what's necessary.

How to meet requirements: Develop comprehensive access management policies specifically for third parties. Implement identity and access management systems that support vendor access controls. Establish regular access reviews and certification processes. Monitor vendor access activities and implement automated controls where possible.

Required by: Interagency guidance, DORA, GDPR, CCPA, NIS2

10. Business Continuity and Resilience Planning

These are documented commitments from vendors to demonstrate their ability to maintain operations through business disruptions, including cyberattacks, natural disasters, or supply chain failures, with tested business continuity and disaster recovery plans.

How to meet requirements: Ensure vendors provide detailed business continuity and disaster recovery plans. Conduct regular testing of vendor continuity capabilities. Develop alternate sourcing strategies for critical services. Include continuity requirements in vendor contracts and monitor vendor resilience capabilities over time.

Required by: Interagency guidance, DORA, NIS2

How Whistic Supports the Strategic Approach to Compliance

Building and maintaining these ten core capabilities manually is resource-intensive and often impractical at scale. That's where modern, AI-powered TPRM platforms like Whistic come into play.

Based on our survey data, 59% of companies say that AI will have the largest influence on the future of vendor risk management—and that number is growing. But here's the thing: AI isn't just changing how we do TPRM, it's making it possible to actually achieve the comprehensive approach we've outlined without breaking the bank on resources. In fact, modern, AI-powered TPRM makes it possible to reduce time and costs of risk assessments, so you can assess more vendors in greater detail with fewer resources.

Here's how Whistic specifically addresses these ten core requirements:

Whistic’s AI suite of capabilities, Assessment Copilot, utilizes three key features to expedite and enrich the vendor assessment process:

Vendor Summary—This is essentially an automated assessment, allowing you to run security information against the control framework of your choice (even a customized one). Vendor Summary automatically produces context-rich responses that include full citations to the source material.
SOC 2 Summary—Just as you might guess, this feature allows you to parse a lengthy, technical SOC 2 audit report for information relevant to your specific controls, rather than poring through the document manually. The resulting summary is 5-6…perfect for demonstrating compliance AND reporting to senior stakeholders.
Vendor Insights—This capability allows you to query your entire vendor inventory at once, rather than vendor by vendor. This is useful if there is a known vulnerability that may impact your vendors, or if your risk profile changes for any reason.

Copilot integrates AI with your existing TPRM workflows, which is great for two reasons. First, you don’t have to change the way you work to gain speed and insight. Second, it maximizes mature programs that have built the kind of compliance discipline we’ve discussed. Here’s how it helps you to both meet these requirements and augment their impact:

Assessment automation tackles requirements 1, 2, and 8 by using AI to extract intelligence from multiple data sources—including documents you already have, public trust centers, and previously completed assessments. Instead of waiting days or weeks for a vendor to complete a questionnaire, you can get a good head start on a comprehensive risk assessment in minutes using existing documentation.
Transparency and auditability support requirements 3, 4, and 5 by providing full citations, confidence scores, and audit trails for every AI-generated response. You're not dealing with a "black box" AI system—you can see exactly how conclusions were reached and verify the source material.
Comprehensive data integration addresses requirements 6, 7, and 9 by centralizing all vendor documentation and risk data in a single platform. This makes it possible to track data handling practices, monitor access controls, and maintain detailed records for exit planning.
Continuous monitoring capabilities support requirement 10 by automatically triggering reassessments based on changes in vendor risk profiles or your own requirements. Instead of manual, periodic reviews, you get ongoing visibility into vendor resilience and performance.

Building Your Foundation for Success

These ten requirements represent the essential building blocks of effective third-party risk management in financial services. By implementing comprehensive capabilities in each area, organizations can create a robust TPRM foundation that satisfies multiple regulatory frameworks while effectively managing vendor-related risks.

The key to success lies in treating these requirements as interconnected components of a comprehensive risk management system rather than isolated compliance checkboxes. When properly implemented, this approach not only satisfies regulatory requirements but also creates genuine business value through improved vendor relationships, reduced operational risk, and enhanced organizational resilience.

Whistic’s AI-first TPRM can also help to amplify the impact of your mature program by delivering automation (speed), resource control (reduced costs), and thorough, consistent assessments (reduced risks). If you’re an FI looking to hit the mark on compliance and create ROI through TPRM, schedule some time with our team and we’ll show you how we can help.