By Leonard McAuliffe, Partner, Cybersecurity practice, PwC Ireland.
Irish businesses are being urged to look beyond third-party suppliers to tackle emerging “Nth party” risks.
Today’s supply chains are complex ecosystems of interconnected technologies and relationships. As Irish organisations increasingly rely on a growing network of suppliers to deliver critical operations, the potential for disruption has expanded well beyond traditional third-party relationships. This has given rise to the concept of “Nth party risk”, which refers to vulnerabilities stemming from fourth, fifth or even sixth-party suppliers.
Unlike third-party risk, which focuses on direct suppliers, Nth party risk demands visibility into the extended supply chain. This deeper view is essential for identifying hidden dependencies and mitigating threats that could compromise operations, data security and compliance. A disruption at any level can cascade through the supply chain, amplifying its impact — that’s why we need to look deeper.
Staying ahead of regulations and real-world threats
Regulators across Europe, including in Ireland, are increasingly mandating that organisations manage risks beyond their immediate suppliers. Legislation such as the General Data Protection Regulation (GDPR), the Digital Operational Resilience Act (DORA) and the EU’s updated Network and Information Systems Directive (NIS 2) reflect a broader EU drive to strengthen digital security and operational resilience. These frameworks hold businesses accountable for downstream risks, reinforcing Ireland’s commitment to safeguarding data and infrastructure.
Failure to manage Nth party risk can have severe consequences. In one recent incident, attackers targeted a cloud hosting provider’s infrastructure, stealing authentication credentials and gaining unauthorised access to customer environments. The breach exposed sensitive data linked to over 560 million individuals, including contact details and financial records. Such incidents not only pose reputational and financial risks, they also increase the likelihood of secondary attacks like phishing and identity fraud.
Critical challenges in managing Nth party risk
Irish business leaders face several challenges in managing Nth party risk effectively. Chief among these is the difficulty in gaining visibility into suppliers beyond the third-party level. Mapping out fourth and fifth-party relationships requires significant resources and a tailored approach to assessment and oversight.
Another challenge lies in understanding the dependencies between suppliers. A cybersecurity breach or technology outage at one level can have ripple effects across the supply chain. Maintaining accurate and timely information about these relationships is both labour-intensive and critical to resilience.
Unleashing the power of AI in Nth party risk management
Advanced technologies are emerging as key tools in addressing these challenges. Artificial intelligence (AI), for example, can provide real-time insights and automate monitoring across the supply chain. AI-driven platforms can detect anomalies, enhance reporting and support proactive risk mitigation.
Developing a structured Nth party risk management framework is also essential. This includes defining assessment criteria for deeper-tier suppliers and establishing governance protocols. AI can further support this process by executing supplier risk assessments and questionnaires, allowing teams to focus on strategic analysis.
Identifying concentration risks, where multiple suppliers rely on the same downstream provider, is another area where technology adds value. AI capabilities can highlight clusters of dependency, helping organisations anticipate and address potential points of failure.
Achieve a competitive edge with advanced risk strategies
For Irish organisations, the shift towards Nth party risk management is not just a regulatory requirement but a strategic imperative. By gaining deeper visibility into your supply chains, you can improve operational efficiency, reduce the likelihood of disruption and achieve long-term cost savings.
Moreover, robust risk management practices can serve as a competitive differentiator. Customers and partners increasingly value transparency and resilience, making organisations with strong supply chain oversight more attractive in the marketplace.
By investing in technology that enhances supply chain visibility, building tailored frameworks, and identifying critical suppliers and dependencies, you’ll ensure compliance while strengthening your organisation’s ability to navigate the increasingly complex risk environment.