In today’s digital-first business environment, companies rely on third-party vendors and service providers for everything from cloud computing to payroll management. While these relationships drive efficiency and innovation, they also introduce significant security risks—many of which go unchecked.

A lack of third-party controls can expose organizations to data breaches, financial loss, regulatory penalties, and operational disruptions. The reality is that your organization is only as secure as its least secure vendor.

In fact, 98 percent of companies work with at least one third-party vendor that has been breached. Yet, many businesses fail to monitor vendor security after onboarding, creating a dangerous blind spot.

The Growing Threat of Third-Party Security Breaches

AT&T, in 2024, paid $13 million in fines after a third-party cloud provider leaked data on 9 million customers. In another example, Marriott faced a $52 million regulatory fine after a third-party reservation system exposed data on 334 million customers. The Financial Conduct Authority has also found that increasing reliance on unregulated vendors has contributed to major operational incidents in industries like finance and healthcare.

These incidents underscore a harsh reality—if your vendors lack strong security controls, so do you.

The Top 10 Must-Have Third-Party Security Controls

To mitigate the risks of working with third-party vendors, organizations need a proactive and structured approach to vendor security. The following ten measures should be foundational to every enterprise’s third-party risk management strategy.

1. Annual Vendor and Service Provider Risk Assessments
Vendors should be reviewed annually for their security posture, compliance certifications (such as SOC 2 or ISO 27001), and exposure to risk. Initial due diligence is not sufficient without regular re-evaluation.

2. Formal Agreements on Information Transfer and Data Protection
Contracts must outline how vendors handle, store, and protect company data. This includes non-disclosure agreements, encryption requirements, and clearly defined incident response obligations.

3. Continuous Monitoring of Third-Party Access and Activity
Real-time monitoring is essential to detect unauthorized access and misuse of systems. Vendor activity should be logged and regularly reviewed to identify anomalies.

4. Strong Cloud Security and SaaS Provider Verification
Organizations must verify the certifications and security history of cloud vendors before engagement. This includes evaluating their incident response history and ensuring compliance with regulations such as GDPR, HIPAA, and CCPA.

5. Multi-Factor Authentication for Vendor Access
Vendors should only be granted access through secure methods like multi-factor authentication. Access should be role-based, with limited permissions tailored to each vendor’s function.

6. Secure Procurement and Vendor Onboarding
Before signing contracts, vendors must demonstrate that they meet baseline cybersecurity standards and comply with regulatory and data handling requirements.

7. DNS Query and External Connection Monitoring
DNS activity and external connections from third-party systems should be logged and monitored. This helps detect and prevent data exfiltration or the staging of cyberattacks.

8. Third-Party Incident Response Plans
Organizations should have predefined response procedures for vendor breaches, including revoking access, mandatory breach disclosures, and regulatory reporting requirements.

9. Prohibiting Production Data for Testing and Development
Production data must never be used by vendors for testing or development purposes. Using synthetic or anonymized data reduces the risk of accidental exposure.

10. Personal Data Handling and Compliance Verification
Vendors should be held accountable to strict data protection policies, including encryption of data in transit and at rest, compliance with industry-specific regulations, and participation in regular security audits.

The Bottom Line: Own Your Third-Party Security Risks

Vendor security is not solely an IT concern—it is a critical enterprise risk management priority. A third-party failure can trigger data breaches, lawsuits, regulatory penalties, operational outages, and long-lasting reputational harm.

Executive teams must take ownership of third-party risk by enforcing stringent controls, ensuring continuous oversight, and incorporating security obligations directly into vendor agreements.

Next Steps: Is Your Third-Party Security Up to Standard?

• How often do you assess vendor security risks?
• Do you continuously monitor vendor access and behavior?
• Are vendors contractually obligated to meet your security expectations?

If any of these questions raise concerns, now is the time to strengthen your third-party risk strategy—before the weakest link in your security chain becomes the costliest.