How to Conduct Vendor Security Assessments and Third-Party Risk Reviews
In today’s interconnected digital world, third-party vendors play a vital role in operations—but they can also introduce risk. A strong vendor security assessment process ensures that external partners meet your organisation’s security requirements and regulatory obligations.
Below is a structured approach to evaluating third-party risk and conducting periodic security audits.
🔍 1. Define Your Assessment Criteria
Before engaging with vendors, clearly outline what you’re assessing. This includes:
- Data sensitivity: What type of data will the vendor access or process?
- Regulatory requirements: e.g. GDPR, HIPAA, PCI-DSS.
- Business impact: Would a compromise affect your operations or reputation?
Create a vendor classification system:
- Tier 1: High-risk vendors (access to sensitive data or systems).
- Tier 2: Medium-risk (limited access, non-critical services).
- Tier 3: Low-risk (no data or system access, e.g. office supplies).
📄 2. Distribute Security Questionnaires
Send a tailored security questionnaire (or use a framework like CAIQ or SIG) that covers:
- Access controls and user management
- Data encryption (at rest and in transit)
- Incident response capability
- Vulnerability management
- Business continuity and disaster recovery
- Compliance with standards (ISO 27001, SOC 2, etc.)
Tools such as OneTrust, Prevalent, or Whistic can streamline this process.
🔐 3. Review Evidence and Validate Claims
Don’t just take answers at face value. Ask for:
- Security policy documentation
- Third-party audit reports (SOC 2 Type II, ISO 27001, etc.)
- Penetration test summaries
- Data flow diagrams
Validate that controls align with your risk tolerance. Look for gaps or red flags, such as unencrypted backups or poor access control.
🔁 4. Perform Periodic Security Audits
For high-risk vendors, schedule annual or semi-annual audits. These can include:
- Onsite assessments (if possible)
- Vulnerability scans
- Review of logs or access records
- Interviews with vendor security personnel
Document findings and track remediation progress through a risk register or GRC platform.
🛡 5. Manage and Track Risk
Assign a risk rating to each vendor (e.g. low, medium, high) and maintain a Vendor Risk Register. Actions include:
- Requiring remediation plans
- Applying compensating controls
- Terminating the relationship if risk is unacceptable
Use tools like ServiceNow VRM, Archer, or even Excel + SharePoint for tracking if budget is limited.
📆 6. Reassess on Contract Renewal or Major Changes
Re-evaluate security posture when:
- A contract is renewed
- The vendor experiences a breach
- Services or scope of data changes
Always include security terms in your contracts, such as breach notification timelines, right to audit, and data handling clauses.
✅ Summary
Vendor security assessments help reduce your organisation’s exposure to third-party risk. A mature process should include:
- Clear risk classification
- Structured questionnaires
- Evidence review
- Periodic audits
- Ongoing risk tracking and governance
Implementing this process ensures compliance, builds trust, and enhances your overall cybersecurity posture.