More than half (54%) of organizations expect moderate to significant logistics disruptions in their supply chain in the next 12 months, driven by policy uncertainty and geopolitical tensions, according to Sedgwick’s 2026 forecasting report.

Tariffs and trade policy shifts, geopolitical instability, regulatory upheaval, cyber threats, and aging or legacy systems are converging to make supply chain risk management one of the most complex—and most urgent—priorities for 2026.

For many organizations in regulated industries and government supply chains in particular, supply chain risk management is no longer just a strategic best practice—it’s a prerequisite for doing business. For example, companies in the defense industrial base (DIB) must now ensure their subcontractors meet CMMC contractual requirements in order to compete for and retain defense contracts.

To help organizations prepare for this growing and evolving risk, this guide breaks down what supply chain risk management is, why it matters and how to establish an effective process and policy with the right tool.

What is supply chain risk management?

Supply chain risk management (SCRM) is the systematic process organizations use to identify, assess, mitigate, and monitor risks across their supply chains in order to protect the integrity, trustworthiness, and authenticity of the products and services they rely on.

This is not as simple as it sounds.

Supply chain risk management is not just about managing risk, but about continuously identifying, assessing, and mitigating a wide range of risk exposures, threats, and vulnerabilities. And it’s not limited to a single type of risk. Supply chain risk can include cybersecurity risk, operational risk, compliance risk, reputational risk, financial risk, and more.

It’s also not confined to a single location or moment in time. Modern supply chains consist of hundreds of third-party and fourth-party providers—including hardware, software, operating systems, cloud services, open-source components, logistics partners, and contractors. Risk can emerge at any point in the supply chain lifecycle, from design and development to production, deployment, operation, maintenance, and eventual disposal.

In short, supply chain risk management is about understanding where your organization depends on others, and ensuring those dependencies don’t become single points of failure.

Types of supply chain risks

OMB A-130 defines supply chain risks as “risks that arise from the loss of confidentiality, integrity, or availability of information or information systems and reflect the potential adverse impacts to organizational operations (including mission, functions, image, or reputation), organizational assets, individuals, other organizations, and the Nation.”

Here are some specific types of supply chain risks that must be managed. 

Cybersecurity risk

This type of risk involves the susceptibility of a supplier to damage from cyber attacks resulting in loss of data and reputational harm. Cybersecurity risks include ransomware attacks, malware, phishing, denial-of-service attacks, counterfeit file sharing, and even insider threats, to name a few. 

Economic risk

A company faces this type of risk by doing business with a supplier that could face economic issues like bankruptcy, a recession, or work stoppage.

Environmental risk

Environmental risk refers to environmental hazards that may affect your supply chain. Natural disasters, extreme weather, port closures, and man-made disasters are all examples. 

Reputational risk

Reputational risk refers to the potential damage to the public perception of an organization in the aftermath of an incident like a data breach. An organization takes on reputational risk when working with third-party suppliers. For example, if it’s discovered that one of your suppliers produces significant carbon emissions or waste, then your company’s reputation may suffer as a result.

Operational risk

Operational risk could involve the business interruption of a third-party supplier that disrupts your own organization’s operation or flawed process, procedures or policies. An example is a truck breaking down for one of your suppliers, which could affect the entire supply chain.

Strategic risk

This type of risk refers to changes to technology, personnel, or events that could impact your company’s business strategy or objective. For example, changes to one of your supplier’s operations might not align with your company’s objectives or security requirements. 

Compliance risk

Compliance risk comes from a violation of laws, regulations, and internal processes that a company must follow. For example, any business that accepts, handles, stores, transmits, or could impact the security of cardholder data must comply with PCI DSS. Failure to comply with these regulations often comes with a hefty fine, so it’s important that any third-party suppliers you work with are also in compliance.

Compliance risk also comes into play depending on the frameworks your organization pursues. If your organization pursues compliance with NIST 800-53, there’s an entire control family around supply chain risk management. Many other federal frameworks (and commercial ones) have requirements around third-party vendors and suppliers as well.

NIST supply chain risk management: Who is responsible for this risk?

Federal guidance makes it clear that organizations cannot outsource accountability for supply chain risks.

According to NIST SP 800-37, modern organizations increasingly rely on externally provided systems, products, and services to carry out their missions. While this reliance can reduce costs, accelerate innovation, and improve efficiency, it also introduces supply chain risk that the organization remains fully responsible for managing.

NIST emphasizes that organizations must determine whether the risk of acquiring products or services from external providers is acceptable. That determination depends on the level of assurance an organization can obtain, which is based on two key factors:

• The degree of control the organization can exert through contracts, service-level agreements, or other formal mechanisms
• The quality of evidence suppliers provide demonstrating the effectiveness of their security and privacy controls

This distinction is critical. Organizations purchasing commodity or commercial off-the-shelf products often have limited control over suppliers. In contrast, organizations operating in regulated or government environments can—and are often legally obligated to—impose explicit security, privacy, reporting, and monitoring requirements through contractual clauses.

For example:

• OMB A-130 and FISMA mandate that external providers handling federal information or operating systems on behalf of the U.S. government must meet the same security and privacy requirements as federal agencies, including controls aligned with NIST SP 800-53 and NIST CSF.
• The National Defense Authorization Act for Fiscal Year 2022 mandates that cloud service providers processing or storing federal data obtain authorization through FedRAMP.
• In the defense industrial base, the DFARS final rule requires organizations handling sensitive unclassified information to meet CMMC requirements—including flowing these requirements down to subcontractors.

This makes supply chain risk management not just a best practice, but a contractual obligation for federal agencies and contractors alike. Organizations that fail to manage supplier risk effectively may face severe consequences, including loss of contract eligibility, enforcement actions, or removal from federal supply chains entirely.

While the regulatory stakes are highest in the public sector, poor supply chain risk management exposes every organization—in the public and private sector—to operational disruption, financial loss, reputational damage, and security incidents.

Let’s take a closer look at why managing supply chain risk has become essential for organizations across all sectors and industries.

Supply chain risk management process

A supply chain risk management process is a series of repeatable steps for identifying, assessing, mitigating, and monitoring risks that can compromise the integrity, trustworthiness, and authenticity of services and products within a supply chain. Having a defined process in place can help your organization minimize the likelihood and magnitude of these risks to the supply chain.

Below is an overview of the steps involved in a supply chain risk management process.

Step 1: Identify and document known risks. 

To start, identify potential risks that could affect the supply chain, focusing on known risks. Known risks can be identified, measured, and managed over time. For example, you can estimate the likelihood of a supplier going bankrupt by looking at its financial history and quantifying the impact it would have on your organization. Unknown risks are harder to identify, measure, and manage. For example, you may not be able to predict some natural disasters that affect your supply chain, like the explosion of a long dormant volcano. 

A list of potential risks to your supply chain should include natural disasters, geopolitical issues, supplier failures, demand fluctuations, technological disruptions, and regulatory changes, among other risks. These should be documented in one place, often known as a risk register. 

In defense supply chains, this step includes identifying which suppliers handle CUI or FCI and where sensitive data flows across subcontractors and cloud environments.

Step 2: Assess risks. 

Once identified and documented, each risk should be assessed based on the probability and potential impact from threat events that may occur if the risk is unmanaged, such as:

• the insertion of counterfeits
• unauthorized production
• tampering
• theft
• insertion of malicious software and hardware,
• poor manufacturing and development practices in the supply chain.

This assessment will allow you to identify the products and supply chain nodes with the greatest risk or failure potential and prioritize resources to manage them accordingly. 

For DIB organizations, this step involves evaluating whether suppliers meet CMMC level and assessment requirements.

Step 3: Develop strategies for mitigating risks.  

Next, develop strategies to mitigate these identified risks. Examples are diversifying suppliers so you aren’t reliant on a single one, creating redundancy in critical processes, and developing contingency plans if a disaster occurs.

When developing these strategies, consider both their feasibility and cost. These will help determine which risks should be mitigated and which should be accepted, avoided, or responded to in another way. 

These mitigation strategies should be documented in a supply chain risk management plan, according to NIST 800-37.

Step 4: Respond to risks. 

Now it’s time to implement your chosen risk mitigation strategies. This might include:

• establishing cybersecurity compliance standards for all third-party suppliers
• finding nearshore suppliers
• conducting internal risk awareness training
• investing in technology to improve supply chain visibility 
• creating a disaster recovery plan

For primes under CMMC, mitigation strategies may include replacing noncompliant suppliers or limiting sensitive data flow down to the subcontractor to require a lesser CMMC assessment level.

Step 5: Continuously monitor and improve.

Supply chain risk management is an ongoing process. You have to continuously monitor your supply chain for changes in risk factors and external conditions and regularly review the effectiveness of your risk mitigation strategies and make changes as needed. 

This step is especially critical for prime contractors in the DIB that have to verify their suppliers are submitting annual affirmations and assessment results and scores either annually or triennially.

Using automated tools to monitor your vendors’ controls and compliance reports over time can be hugely beneficial. These tools can automate data collection, analysis, and reporting where possible, enabling your organization to monitor a greater number of vendors with fewer resources. 

Supply chain risk management policy + template

A supply chain risk management process is only effective if it’s formally documented, governed, and enforced. Without a written policy, SCRM activities often remain ad hoc, inconsistently applied across teams, and difficult to defend during audits or assessments.

According to NIST SP 800-37, organizations should document supply chain risk management activities in a dedicated policy that defines how risk is managed across the full system and vendor lifecycle. This policy serves as the foundation for consistent decision-making, accountability, and continuous monitoring.

At a minimum, NIST recommends that a supply chain risk management policy:

• Be guided by applicable laws, executive orders, directives, and regulations
• Support related organizational policies, including procurement, information security, privacy, logistics, and quality management
• Align with the organization’s strategic objectives, mission requirements, and customer obligations
• Define how supply chain risk management integrates with the organization’s risk management process and system development life cycle (SDLC)
• Clearly establish SCRM roles, responsibilities, dependencies, and oversight mechanisms

In 2026, an effective supply chain risk management policy align with NIST guidance and today’s threat and regulatory landscape, codifying:

• Supplier selection criteria: Technical, security, and compliance requirements that suppliers must meet before onboarding.
• Lifecycle risk management: How suppliers are assessed, monitored, and reviewed from onboarding through renewal and eventual decommissioning or disposal.
• Flow-down requirements: Contractual clauses requiring suppliers to apply the same security and compliance standards to their own subcontractors.
• Incident response and escalation: Defined procedures for detecting, reporting, and responding to third-party security incidents, including coordination with internal incident response teams.
• Monitoring and accountability: Ongoing review mechanisms, ownership assignments, and reporting structures to ensure supply chain risks remain within acceptable tolerance levels.

Supply chain risk management best practices

Following the best practices below can help limit your organization’s risk exposure and enhance supply chain security:

1. Create a supply chain risk management policy. 

A supply chain risk management policy is designed to define and support the protection and controls of supply chain procedures and processes. It should specify roles and responsibilities and what supply chain risk management capabilities will be implemented.

Unsure of what your supply chain risk management policy should look like? Download this auditor-approved template that you can use as a foundation for building your own SCRM policy. 

2. Create a supply chain risk management plan.

A supply chain risk management plan should provide an overview of the security requirements for your company and describe what supply chain cybersecurity controls are already in place or planned for implementation.

3. Take a multidisciplinary approach.

The most effective supply chain risk management programs distribute responsibilities and accountabilities for risk management activities and risk across a diverse group of stakeholders that includes IT, Security, Legal, and more.

4. Map out your supply chain and identify the most critical systems, networks, and information. 

Map out your supply chain end-to-end, including suppliers, plants, warehouses, and transport routes. Then, identify the most critical systems, networks, and information in your supply chain and prioritize resources to manage risks to those parts of the chain.

5. Incorporate supply chain risk management into employee training.

For a supply chain risk management program to be successful, every employee in the organization must adhere to best practices. Organization-wide training can help empower senior stakeholders as well as other employees to identify, assess, and mitigate supply chain risks. 

6. Complete scenario planning and simulation exercises.

Simulate various risk scenarios to understand their potential impact on the supply chain and test the effectiveness of your response strategies. This can be an excellent way to identify and fill in gaps in your supply risk management program before a disaster occurs.

7. Track and report key metrics.

It’s essential to track and report key metrics that measure the performance of your supply chain risk management program against your organization’s risk appetite and tolerance. Risks should also be tracked and regularly reported to executives and/or a risk board. 

8. Perform supplier risk assessments. 

A risk assessment is a key part of due diligence. This assessment process is used to identify any potential risks and better understand how data is shared before entering into a legal agreement with a supplier. It can include anything from reviewing supplier’s compliance reports and the attestations of compliance to requesting suppliers to perform a security questionnaire and reviewing results.

9. Add security requirements in third-party contracts. 

In addition to cost, schedule, and performance requirements, add security requirements to your contracts with third parties. These requirements might cover access control, incident response, personnel security, and other areas and should be part of how you evaluate a supplier’s compliance with the contract. 

10. Use risk management and/or supply chain software.

Software can help you continuously monitor your infrastructure to detect and remediate any issues as quickly as possible to minimize the impact of an attempted disruption or attack on your supply chain. It can also help you monitor suppliers’ compliance to security and compliance requirements throughout the supply chain lifecycle and simplify supplier risk assessments.

Supply chain risk management software

Supply chain risk management software can help reduce the time and effort required to perform supply chain risk management activities, like conducting risk assessments, onboarding suppliers, and continuously monitoring their compliance.

The best supply chain risk management software can help simplify and streamline the following tasks:

• Supplier reviews: Risk management software can allow you to easily store, manage, and review supplier documentation to ensure they’re compliant.
• Supplier risk assessments: Some tools can provide risk recommendations based on the supplier’s assessment information you provide to help simplify the risk assessment process.
• Supplier access tracking: You can easily monitor and track third-party personnel system access using risk management software. 
• Supplier Notifications: You should be able to notify suppliers, or be notified by suppliers, in case of any issues or alerts that may affect the supply chain. 
• Continuous monitoring: A risk management tool can continuously monitor your suppliers’ security posture and their compliance with regulatory and industry frameworks such as NIST 800-53, FedRAMP, NIST CSF 2.0 and more.

When evaluating supply chain risk management software, look for a solution that offers an easy-to-use platform in addition to a team of security and compliance experts to guide your organization through every step of the supply chain risk management process.

How Secureframe can help companies manage supply chain risk 

Secureframe provides tooling for complete third-party risk management (TPRM), simplifying the process of identifying, mitigating, and continuously monitoring risks associated with suppliers as well as vendors, contractors, partners, software providers, open source projects, and other external entities..

Secureframe is able to integrate with dozens of suppliers and vendors you're already using, retrieve their security information on your behalf, and provide a detailed report of their risk profile. Secureframe also allows you to document other details such as owners, types of data, and any due diligence notes from your supplier review as well as attach all relevant documents, such as compliance reports and policies, to the supplier’s profile for easy review. 

Automating the repetitive, labor-intensive process of supplier risk assessments can greatly speed up the process for evaluating and onboarding suppliers. Secureframe also simplifies continuous monitoring, enabling you to assign owners to each supplier and schedule annual or one-time reviews to ensure ongoing risk management. 

For organizations with more complex third-party ecosystems, Secureframe offers an Advanced TPRM option that includes the following powerful features:

• Comply AI for TPRM: Automatically extract answers from documents like compliance reports, contracts, and policies to save time and reduce the manual effort of security reviews.
• Auto-Detect Shadow Vendors: Identify unauthorized applications and vendors accessed by your employees through Single Sign-On (SSO) to help ensure your vendor list is up-to-date and prevent shadow IT.
• Customizability: Tailor your third-party risk management program with custom scores, tags, departments, and risk assessments.

In addition to these features and functionalities, Secureframe also offers supply chain policies and plan templates that can be customized and distributed for employees to review and accept directly in the platform. Secureframe also supports dozens of frameworks out-of-the-box that includes supply chain controls and tests, including NIST 800-53, CMMC, Microsoft SSPA, and more, to help your organization protect itself as you acquire and use technology products and services. 

To find out more about how Secureframe can improve your supply chain risk management process, request a demo of our platform today.

This post was originally published in August 2023 and has been updated for accuracy and comprehensiveness.