How vendor visibility gaps are escalating supply chain security and compliance risks

 

As supply chains grow increasingly complex, organisations face mounting risks from unseen vendor access and unmanaged third-party relationships. New research highlights the urgent need for automated visibility to prevent costly breaches and compliance failures.

 

Flying Blind in Your Supply Chain: How Vendor Visibility Gaps Are Driving Security and Compliance Risks

By Frank Balonis, CISO, Kiteworks

In modern ente...

rprise operations, supply chains are more complex than ever. Vendors, subcontractors, cloud providers, and SaaS tools all touch sensitive company data in ways that are often invisible to the teams charged with managing them. While procurement and supply chain leaders excel at negotiating contracts and optimizing costs, one critical risk often goes untracked: who actually has access to your organization’s data, and what happens when that access is unmanaged?

Kiteworks’ 2025 Data Security and Compliance Risk: Annual Survey Report highlights a stark reality: nearly half of organizations operate without basic visibility into their security posture. While IT and security teams invest heavily in defenses, these investments often protect against threats that leadership doesn’t even know exist. The consequences? Breaches, compliance failures, operational disruption, and multimillion-dollar losses.
For supply chain and procurement leaders, the report reveals an urgent call to action: visibility into third-party relationships, specifically those exchanging private data, is no longer optional. It’s a business-critical requirement.

Danger Zone: When Third-Party Complexity Outpaces Oversight
One of the report’s most striking findings centers on the number of third parties an organization manages. Companies that maintain 1,001–5,000 third-party relationships face the worst outcomes. At this scale, organizations have outgrown manual tracking methods such as spreadsheets but often haven’t yet invested in enterprise-grade automation. This creates a “danger zone” where complexity exceeds human capability, and breaches become far more likely.
The numbers paint a sobering picture: organizations in this danger zone report a 46% increase in supply chain risks, the highest of any segment. Their risk score averages 5.19, compared to just 3.72 for organizations with fewer than 500 partners. Even more concerning, 24% of danger zone organizations experience seven or more breaches annually, with 26% facing potential litigation costs of $3–5 million per incident, not including lost revenue, fines, or reputational damage.
Procurement teams are directly implicated here. Each third party added to a supply chain brings not only commercial and operational responsibilities but also access to sensitive systems, data, and intellectual property. Without a single source of truth for tracking these relationships, organizations expose themselves to cascading risks: unknown partners can introduce vulnerabilities, and when breaches occur, detection is delayed because nobody had visibility in the first place.

Cascade Effect: Unknown Vendors Multiply Enterprise Risk
Kiteworks’ research identifies a powerful “cascade effect” in which one visibility gap predicts others with remarkable accuracy. The correlations are striking:

• 46% of organizations don’t know their actual breach frequency
• 42% are uncertain about their detection times
• 32% don’t conduct regular security audits
• 48% who don’t know breach frequency also can’t quantify litigation costs

For supply chain professionals, this underscores the interconnected nature of operational risk. A third party that is improperly managed is not just a contractual or logistical problem, it’s a potential conduit for cybersecurity threats that ripple across the enterprise. Detection times tell the story: 44% of organizations with 1,001–5,000 third parties take 31–90 days to detect breaches, while 31% of those with over 5,000 partners require more than 90 days. By the time breaches are detected, the damage is already done.

The Hidden Cost Multiplier
Beyond the obvious security implications, poor visibility creates a staggering financial burden that most organizations never fully quantify. The report reveals that for every $1.00 spent on visible compliance activities, organizations incur $2.33 in hidden costs, including opportunity costs, audit fatigue, and inefficient resource allocation.
This hidden cost multiplier explains why teams spend 1,000–1,500 hours annually on compliance reporting without knowing whether these efforts are effective. It’s not just wasted time; it’s strategic opportunity lost. Organizations with comprehensive governance achieve a 3.5x cost visibility advantage, tracking 75% of their security costs compared to just 35% for those without proper oversight.
The financial implications extend further:

• Breach Frequency Escalation: Zero breaches for 34% of organizations with fewer than 500 partners versus 24% experiencing 10+ breaches for those with over 5,000 partners
• Universal Risk Increases: Even organizations with fewer than 500 partners show 30% supply chain risk increases
• Contractual Limitations: 25% rely solely on legal agreements that may not withstand regulatory scrutiny
• Proactive Savings: Organizations prepared for compliance changes save 60% on implementation costs

Why Traditional Vendor Oversight Fails
Many organizations rely on spreadsheets or siloed databases to track vendor relationships. While this may work for those exchanging private data with a handful of third parties, it collapses under the weight of modern supply chains that can include thousands of partners, subcontractors, and cloud-based providers. The report found that security teams often discover breaches not through monitoring systems but through customer complaints or regulatory alerts, highlighting the inefficiency and danger of relying on manual methods.
The industry median risk score of 4.84 sits dangerously close to High Risk territory, with 15% of organizations operating at Critical risk levels (7.0–10.0) requiring immediate intervention. These aren’t abstract numbers, they represent real vulnerabilities that procurement teams must address.
Procurement teams need to ask tough questions:

• How many third parties currently have access to our critical data systems?
• Which subcontractors do they work with, and are those relationships monitored?
• How quickly can we detect unauthorized access across this ecosystem?
• What’s our actual risk score, and how does it compare to industry benchmarks?

Without answers, organizations are effectively “flying blind,” and the cost of this ignorance can be measured in millions.

Role of AI and Automation in Modern Vendor Management
Another challenge is the ungoverned adoption of AI tools across departments. Only 17% of organizations have implemented AI governance frameworks, yet AI-generated content increasingly flows through vendor and partner networks. Untracked AI tools can introduce IP risks, privacy exposures, and compliance violations, creating another vector of supply chain vulnerability.
Procurement teams can help mitigate these risks by requiring centralized reporting on vendor tools and services, automated dashboards for continuous monitoring, and clear contractual obligations regarding AI usage. When combined with automated vendor tracking systems, these practices ensure that organizations know exactly who touches sensitive data and how it is being processed.

Building Real Visibility in the Supply Chain
Kiteworks’ report highlights that organizations achieving strong visibility share several characteristics:

• Continuous Measurement: Automated systems replace periodic manual reviews, giving procurement teams real-time insight into third-party access and activity
• Single Source of Truth: Data about vendors, subcontractors, AI usage, and breach history is consolidated, eliminating siloed blind spots
• Actionable Approximation: Even approximate counts are better than no data, organizations tracking “approximately 3,000 vendors” are far less vulnerable than those with no idea at all
• Foundation Before Sophistication: Basic vendor tracking, breach history, and compliance metrics must be established before layering on advanced analytics

For procurement leaders, these principles translate directly into better contract management, risk mitigation, and cost savings. Knowing your vendor count allows for more informed negotiations, targeted risk assessments, and streamlined compliance reporting.
Privacy Dividend: Unexpected Returns on Visibility Investment
Perhaps most compelling for supply chain leaders is the “privacy dividend” that mature organizations achieve. Companies with comprehensive privacy programs report:

• 27% reduced security losses
• 21% enhanced customer loyalty
• 21% improved operational efficiency

This isn’t just about avoiding losses, it’s about competitive advantage. Organizations with strong visibility detect breaches 67% faster and achieve 81% cost reduction through privacy-enhancing technologies. These aren’t marginal improvements; they’re transformative business outcomes.
Business Case Supply Chain Leaders Can Act On
The report offers a compelling ROI for investing in vendor visibility that goes beyond traditional security metrics. Supply chains that prioritize visibility operate more efficiently, innovate faster, and avoid preventable losses. The financial case is clear:

• 3.5x better cost tracking for organizations with comprehensive governance
• 60% savings on compliance implementation for prepared organizations
• $2.33 in hidden costs eliminated for every visible dollar spent
• 46% lower supply chain risk for organizations outside the danger zone

In other words, strong vendor oversight isn’t just a security imperative, it’s a competitive advantage with measurable financial returns.

The Bottom Line: Visibility Pays Dividends
The message is clear: blindness in your supply chain is costly and preventable. The Kiteworks 2025 Data Security and Compliance Risk: Annual Survey Report shows that unknown third parties, ungoverned AI, and delayed breach detection multiply enterprise risk in ways that procurement teams can no longer ignore.
For procurement and supply chain leaders, the mandate is straightforward: track third-party relationships rigorously, implement automated monitoring, consolidate visibility across the enterprise, and integrate security metrics into procurement strategy. The cost of ignoring these risks extends far beyond the obvious, from the $2.33 hidden cost multiplier to the 46% increase in supply chain risks for danger zone organizations.
The benefit of achieving visibility is equally substantial: reduced risk, improved efficiency, and a supply chain that is not just secure, but resilient and agile. With organizations achieving 3.5x better cost visibility and 27% security loss reduction through mature programs, the business case writes itself.
Visibility isn’t optional in today’s interconnected supply chain. Organizations that see clearly thrive; those that fly blind pay the price.

Frank Balonis is chief information security officer and senior VP of operations and support at Kiteworks, with more than 20 years of experience in IT support and services. Since joining Kiteworks in 2003, Balonis has overseen technical support, customer success, corporate IT, security and compliance, collaborating with product and engineering teams. He holds a Certified Information Systems Security Professional (CISSP) certification and served in the U.S. Navy.