What is Fourth-Party Risk, Why It’s Important, and How to Manage It


Monitoring and managing third-party risk has become a top priority for organizations. But cyber risk also lurks in your fourth-party and extended ecosystem.

While you may have cybersecurity practices and controls in place, your vendors’ vendors, their vendors, and so on, may not. For this reason, it’s important to understand and monitor risk across this potential attack surface.

Let’s look at what fourth-party risk is, why it matters, and steps you can take to manage it.

What is fourth-party risk?

You probably maintain an inventory of all your third parties and have a third-party risk management (TPRM) program in place to vet and monitor their security practices. But your vendors also rely on an interconnected ecosystem of suppliers and subcontractors which expands the risk surface in ways that are impossible to fathom.

Without a clear understanding of the business relationships and security posture of these fourth and nth parties, your organization could be at risk.

For example, if a fourth-party experiences a cyber incident and is forced to shut down operations, it could impact your business. If that cyber incident involves a data breach and that fourth-party vendor has access to your organization’s sensitive data, then you risk being compromised. You might also, inadvertently, be violating data protection regulations such as GDPR. HIPAA, and PCI security standards.

Additionally, you could be held liable for data loss and face reputational and financial risk. Indeed, the SSAE-18 audit standard includes language requiring that organizations appropriately manage both third- and fourth-party risk.  

Why is fourth-party risk management increasingly important to business leaders?

Due to the increased frequency and sophistication of cyber-attacks, especially highly prevalent supply chain attacks, vendor risk management has emerged as an urgent priority for the C-suite and board.

Indeed, Gartner research shows that 88% of boards now regard cybersecurity as a business risk rather than solely a technical IT problem. And, by 2026, at least 50% of C-level executives' employment contracts will include cyber risk performance requirements.

Consequently, security and risk management leaders are being asked to report to the board and C-suite on their security and risk programs. 

But fourth-party risk is a significant blind spot. The solutions offered by security and risk management firms simply don’t provide visibility into the security posture of your vendors’ subcontractors. In fact, fourth-party risk management often begins and ends with a vendor providing you with an inventory of their fourth-party suppliers.

Without the ability to report on fourth-party risk in a measurable and meaningful way, it becomes much harder to fight for the appropriate budget and resources. This will create gaps in your risk management program.

How to manage fourth-party risk

According to KPMG, 79% of senior TPRM professionals say that they urgently need to improve how they identify and assess fourth parties in their supply chain.

But identifying the vendors your vendors work with and the risks they pose to your network is a near impossible task. Every day, your organization's digital footprint expands exponentially, as does your fourth-party ecosystem, making it increasingly difficult to measure and manage risk.

As a security or risk management leader, you may find yourself asking the following questions:

  • How can we gain visibility into fourth-party relationships (especially vendors that our vendors most depend on)?
  • How can we assess concentrated risk (critical areas of risk in the supply chain that could impact our business in the event of a breach or other cyber-attack)?
  • What’s the best way to communicate program performance and assure stakeholders that fourth-party risk is under control?

How Bitsight can help with fourth-party risk

If you’re struggling with fourth-party risk management, Bitsight can help.

Instead of relying on your vendors to provide information on their suppliers or trust that they are monitoring their security performance, you can use Bitsight for Fourth-Party Risk Management to monitor and manage the risk surface of your vendor supply chain.

Using Bitsight you can:

  • Quickly identify and visualize fourth-party relationships with dashboard views into potentially risky fourth parties based on their security ratings.
  • Identify connections and interdependencies between third-, fourth-, and nth parties.
  • Understand the downstream impacts of a cyber incident.
  • Continuously monitor for emerging fourth-party risks, including incidents that could affect your business and new relationships that pose risk. Receive alerts the moment an incident that may affect you occurs.
  • Generate dynamic, on-demand, easy-to-understand reports on fourth-party risk. Provide stakeholders with credible evidence that your fourth parties’ security controls are being managed effectively. 

And, because Bitsight automates fourth-party risk management, you can achieve all this using the resources you have today.

Learn more about how Bitsight can help strengthen your fourth-party risk management program.

Digital Supply Chain Third Party Risk eBook