Reducing Data Security Risks From Third Party Vendors

Third party vendors provide invaluable services to organizations, but also introduce significant data security risks that must be managed appropriately. Here is an in-depth look at strategies for reducing data security risks from third party vendors:

What Are The Main Data Security Risks From Third Party Vendors?

Third party vendors typically get access to sensitive customer, employee, or business data. This introduces several key risks:

• Data theft or exposure – Vendors may expose data accidentally through poor security practices or intentionally steal data for financial gain.

• Unauthorized data use – Vendors may use data for purposes beyond what is contractually allowed, such as selling data to other parties.

• Loss of data control – Organizations lose visibility and control over how data is managed, secured, and used when in the hands of vendors.

• Non-compliance – Vendors may fail to comply with regulatory requirements around data security and privacy, leading to violations.

• Access by malicious actors – Third party environments can provide a backdoor for cyber criminals to gain access to sensitive data.

• Limited security expertise – Vendors may not have the same level of cybersecurity maturity as the organization they serve.

Proper oversight and risk management is crucial when sharing data with third parties.

Developing A Third Party Data Security Risk Management Program

Managing risks from third party vendors requires an ongoing program that includes:

Security Assessments

• Conduct due diligence on a vendor’s data security posture before contracting. Require completion of standardized security assessment questionnaires.

• Perform site visits and audits to validate security controls, identify gaps, and develop remediation plans. Conduct periodic security reassessments.

Contractual Security Requirements

• Include stringent cybersecurity, data management, and data governance clauses in contracts. Clearly define security expectations, liabilities, and penalties for non-compliance.

• Require vendors to adopt relevant organizational security policies and frameworks. Mandate regular security reporting.

Security Monitoring

• Monitor vendor environments for signs of compromise like unexpected data flows. Log and inspect vendor access.

• Require vendors to report security incidents promptly. Conduct forensic investigations when warranted.

Access Management

• Only provide access to the minimum data and systems necessary. Limit access duration.

• Control vendor credentials and authentication centrally. Enforce separation of duties and least privilege access.

Security Awareness

• Provide security training for vendors. Ensure they understand organizational security policies, asset classification, and other key issues.

Business Continuity And Risk Planning

• Require vendors to maintain robust business continuity and disaster recovery plans, with regular testing.

• Classify data and systems shared with vendors based on sensitivity. Prioritize higher risk relationships for additional oversight.

Key Considerations For Managing Third Party Security Risks

• Align vendor selection with security – Consider security capabilities from the start of the vendor selection process.

• Maintain ultimate responsibility – Organizations must own responsibility for data security, not fully entrust it to vendors.

• Promote transparency – Require open communication from vendors on security practices and incidents.

• Standardize vendor management – Take a consistent, standards-based approach across all vendors.

• Enforce security requirements – Contractual obligations must be upheld, with enforcement mechanisms like penalties.

• Manage access closely – Follow zero trust principles and limit vendor access drastically.

• Provide security guidance – Clearly communicate security policies and requirements to vendors.

• Audit continuously – Routinely verify vendor security controls through audits and monitoring.

With proper vigilance and oversight, organizations can effectively reduce the data security risks inherent with third party vendors. A comprehensive program builds security into vendor relationships from the start.