Third-party vendors are a significant source of security risk. Supply chain attacks, vendor breaches, and insecure integrations can expose your organization. A robust vendor risk management (VRM) program is required by SOC 2, ISO 27001, and most enterprise customers.
Why Vendor Risk Management?
Extended Attack Surface: Each vendor is a potential entry point for attackers
Data Exposure: Vendors often have access to sensitive customer or employee data
Compliance Requirements: Regulations require due diligence on third parties
Recent Incidents: SolarWinds, Kaseya, and other supply chain attacks highlight the risk
Vendor Tiering
Tier 1 (Critical): Access to sensitive data or critical systems—full assessment required (SOC 2 report, security questionnaire, on-site audit)
Tier 2 (Important): Limited data access or operational dependency—security questionnaire and compliance attestation
Tier 3 (Standard): No data access, limited impact—basic due diligence, standard contract terms
Assessment Process
- Request and review SOC 2 Type II reports, ISO 27001 certificates, or other attestations
- Send security questionnaires (SIG, CAIQ, or custom) for areas not covered by reports
- Review public breach history and security reputation
- Assess data handling practices, encryption, and access controls
- Evaluate business continuity and disaster recovery capabilities
- Document findings and risk acceptance decisions
Ongoing Monitoring
Annual Reviews: Reassess Tier 1/2 vendors at least annually
Continuous Monitoring: Use tools like SecurityScorecard or BitSight for real-time risk signals
Breach Monitoring: Track vendor security incidents and require notification
Contract Expiration: Trigger reassessment before renewals
Contract Requirements
Security Requirements: Specify encryption, access controls, and security certifications
Breach Notification: Require notification within 24-72 hours of incidents
Audit Rights: Reserve the right to audit vendor security practices
Data Handling: Specify how data is stored, processed, and deleted
Subcontractors: Require same security standards for downstream vendors