If you’re considering partnering with a service provider, it’s essential also to consider the security risks they could introduce to your organization. In this post, we outline the primary cybersecurity risks associated with service providers and provide tips for managing them to help you safely benefit from this strategy for reducing operational costs.

Take a tour of UpGuard’s Vendor Risk Management solution >

Top 4 Security Risks Associated with Service Providers

The primary security risks associated with service providers are as follows.

1. Sensitive Data Access

The main disadvantage of outsourcing internal operations to a service provider is the likelihood of providing access to your sensitive data. Increasing sensitive data access could violate regulatory compliance requirements and increase the chances of significant security events, such as ransomware attacks and third-party data breaches.

A third-party breach happens when you're organization is impacted when a third-party vendor suffers a data breach. During these events, a vendor entrusted with processing your sensitive data is compromised, so when they get breached, you get breached.

Third-party processor, fourth party and your company categories intersecting at a central point with credit card data .

A service provider with a poor security posture is more likely to suffer a data breach. Even if service level agreements (SLAs) significantly limit access to sensitive resources, an MSSP with poor security practices could, at the very least, serve as a pathway into your private network, opening the door to sophisticated cyber threats like Advanced Persistent Threats (APTs).

A poor security posture makes you and your vendors less resilient to sophisticated cyberattacks.

When partnering with a Managed Service Provider, the likelihood of providing sensitive data access increases since these businesses actively manage IT services, which include critical technology such as network security, infrastructure, and application management. The likelihood increases further when outsourcing security program tasks to a Managed Security Service Provider (MSSP) since these operations address security operation center (SOC) tasks that interact with sensitive resources.

Because privileged access is usually unavoidable in MSP and MSSP relationships, these vendors should be classified as critical and prioritized in Vendor Risk Management efforts.

2. Inadequate Security Controls

The risks associated with inadequate security standards keep compounding. Poor overall security measures mean all security threats cannot be detected, leading to insufficient threat detection, threat intelligence, and increased response times, ultimately increasing the impact on your business if the service provider is compromised.

Learn how to design an Incident Response Plan >

Inadequate security controls include poor risk management practices, superficial cyber metrics, inefficient remediation workflows, and poor internal awareness training. Don’t assume the IT security teams in an MSP or MSSP have good cybersecurity hygiene. We’re all human. Anyone can make an unintentional error leading to a malware infection, even information security personnel.

Learn how to defend against ransomware attacks >

3. No Transparency

Service providers may not be completely transparent with their security policies, data security standards, security management practices, or their strategy for mitigating third-party cloud service risks - a critical attack vector category.

Without security information transparency, you won’t know how a service provider’s data is handled or, worse, how they plan to handle your sensitive data.

4. Poor Communication

Like all third-party vendors, the quality of service provider relationships is proportional to how well they communicate with your information technology team. Efficient communications will reduce incident response times, which will significantly impact damage costs should a data breach occur.

The quality of the communication process goes beyond metrics like availability, stakeholder engagement, and query response times. The communication quality of a third-party relationship in the context of cybersecurity is determined by how quickly risk assessments are completed when your IT team sends security assessments. The faster a service provider can complete risk assessments and questionnaires, the quicker you can confirm that they meet your specified security requirements.

Learn how to get vendor risk assessments completed faster >

How to Manage Service Provider Security Risks

The objective of a third-party vendor cybersecurity program is to reduce each service provider's inherent risks to acceptable levels through the strategic application of security controls. The final ratio between inherent risks (a service provider’s risk profile before security controls are applied) and residual risks (resultant risk levels after security controls are in place) should sit well inside your defined risk appetite.

Learn the difference between inherent and residual risks >

Security controls push inherent risk levels within your defined risk appetite boundary.
Security controls push inherent risk levels within your defined risk appetite boundary.

Your risk appeite is the cornerstone of all risk management efforts, so if you haven’t yet calculated it, be sure to do so before following these management tips.

Learn how to calculate your risk appetite >

1. Perform Proper Due Diligence

Proper service provider due diligence will ensure you’re aware of a prospective service provider's inherent risk levels before onboarding. This advanced awareness will help security teams decide if the resources required to reduce a service provider’s inherent risks to acceptable levels are worth the effort.

Due diligence involves collecting evidence to form a vendor’s initial risk profile through multiple sources, including security questionnaires, certifications, and security scans of public-facing IT resources.

Learn more about vendor due diligence >

2. Don’t Outsource all Security Resources to MSPs and MSSPs

Managed security services are helpful for taking care of time-consuming tasks, such as SIEM management, firewall configurations, user authentication within Zero Trust Network Access (ZTNA), and removing false positives. However, these services should be augmented with internal cybersecurity initiatives and not completely replace them.

A managed security service should supplement your internal security operations and not entirely replace them.

Even when a cybersecurity program is outsourced to a managed service, such as Third-Party Risk Management, connectivity with internal cybersecurity staff should still be maintained to monitor access levels and sensitive data handling by the MSP. An all-in-one Vendor Risk Management platform is an excellent tool for these scenarios as it allows internal security teams to maintain visibility and control of all managed TPRM processes.

An MSP handling the overflow of cybersecurity tasks reduces the risk of downtime and SLA violations.

Learn how to choose security questionnaire automation software >

3. Implement a Vendor Risk Management Program

Implementing a Vendor Risk Management program will remove the bulk of your vendor-related security concerns. A VRM program ensures vendor inherent risks remain within acceptable levels throughout the entire vendor relationship.

A VRM program gathers insights about a Vendor’s security posture from questionnaires and assessments. When these assessments map to popular regulations and frameworks, such as NIST and PCI DSS, they highlight compliance gaps, reducing cyber threat resilience - awareness that helps you track the security posture changes of service providers over time.

Security posture changes over time on the UpGuard platform.
Security posture changes over time on the UpGuard platform.

Cyber framework and regulation compliance gap detection increase the efficiency of risk remediation efforts, ensuring your service providers recover from security posture declines faster. To further enhance the benefits of cyber risk criticality awareness, an ideal VRM platform should project the impact of selected remediation tasks on an organization’s security posture. This will help internal and external security teams prioritize remediation tasks with the most significant security posture benefits, helping you manage your service provider security risks more efficiently.

Compliance gap detection on the UpGuard platform.
Compliance gap detection on the UpGuard platform.

Third-Party Risk Management Service by UpGuard

UpGuard offers a third-party risk management service for your critical vendors or your entire TPRM process to help you efficiently scale your TPRM program.

By including a TPRMs portal within its platform, UpGuard ensures your internal security team remains informed and in control of its TPRM program within the context of Vendor Risk management and internal data breach prevention initiatives.

Watch this video for an overview of UpGuard’s Third-Party Risk Management services.

Ready to see
UpGuard in action?

Ready to save time and streamline your trust management process?