[Blog](/blog) Show links Resources [Blog](/blog) [Breaches](/breaches) [eBooks, reports, & more](/resources) [Events](/events) [News](/news) [Third-Party Risk Management](/category/third-party-risk-management) Show links Categories [Attack Surface Management](/category/attack-surface-management) [Company News](/category/company-news) [Compliance and Regulations](/category/compliance-and-regulations) [Cybersecurity](/category/cybersecurity) [Data Breaches](/category/data-breaches) [DevOps](/category/devops) [Human Cyber Risk](/category/human-cyber-risk) [Risks and Vulnerabilities](/category/risks-and-vulnerabilities) [Third-Party Risk Management](/category/third-party-risk-management) [Vendor Risk Management](/category/vendor-risk-management) [Evaluating & Managing Service Provider Security Risks](/blog/evaluating-managing-service-provider-security-risks) Publish date December 9, 2025 {x} minute read # Evaluating & Managing Service Provider Security Risks [Get a demo](/contact-sales) [Free trial](/demo) [Download the PDF guide](#) [Free trial](/demo) Written by [Edward Kost](/team/edward-kost) Senior Cybersecurity Writer Edward is a cyber writer with a mechanical engineering background. His work has been referenced by academic institutions and government bodies. Reviewed by [Tulin Sevgin](/team/tulin-sevgin) Director of Third-Party Risk Management Tulin's expertise in third-party risk management has been featured in cybersecurity podcasts, industry conferences, and specialized panel discussions. Table of contents Free resource ### [Download now](#) 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 >](https://upguard.navattic.com/wf03gnb?ref=blog) ## 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.](https://www.upguard.com/blog/third-party-breach) 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. 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)](https://www.upguard.com/blog/what-is-an-advanced-persistent-threat). > 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 >](https://www.upguard.com/blog/creating-a-cyber-security-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 >](https://www.upguard.com/blog/protecting-employee-credentials-from-ransomware-compromise) ## 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](https://www.upguard.com/blog/cost-of-data-breach) 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 >](https://www.upguard.com/blog/encouraging-vendor-risk-assessment-responses) ## 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 >](https://www.upguard.com/blog/inherent-risk-vs-residual-risk) 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 >](https://www.upguard.com/blog/risk-appetite-calculation-third-party-risk-management) ### 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](https://www.upguard.com/product/security-ratings). [Learn more about vendor due diligence >](https://www.upguard.com/blog/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](https://www.upguard.com/blog/siem), [firewall configurations](https://www.upguard.com/blog/web-application-firewall), user authentication within [Zero Trust Network Access](https://www.upguard.com/blog/prevent-supply-chain-attacks-with-zero-trust-architecture) (ZTNA), and [removing false positives](https://www.upguard.com/blog/how-to-reduce-false-positives-in-data-leak-detection). 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 tool](https://www.upguard.com/product/vendor-risk) is an excellent optionfor 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 >](https://www.upguard.com/blog/choosing-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. 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. ### 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. Free resource ### [Download now](#) ## Related posts Learn more about the latest issues in cybersecurity. Third-Party Risk Management #### [The Evidence Is In: UpGuard Named a Leader in the IDC MarketScape for Worldwide Third-Party Risk Management](/blog/upguard-named-leader-in-idc-marketscape) UpGuard has been named a Leader in the IDC MarketScape: Worldwide Third-Party Risk Management Services 2026 Vendor Assessment. Find out why. [](/team/cassy-van-eeden) [Cassy van Eeden](#) October 26, 2026 Third-Party Risk Management #### [We Researched Four AI Evidence Analysis Tools for TPRM. Here’s What We Found.](/blog/ai-evidence-analysis-tools-for-tprm) We researched four AI evidence-parsing tools against four criteria that security teams often overlook. None nailed all four. [](/team/cassy-van-eeden) [Cassy van Eeden](#) September 29, 2026 Third-Party Risk Management #### [The Vendor Assurance Confidence Gap: Why It’s Widest With Your Most Critical Vendors](/blog/vendor-assurance-confidence-gap) Vendor assurance efforts are rising while confidence in them is falling. This gap is widest with the vendors that matter most. Here’s why. [](/team/cassy-van-eeden) [Cassy van Eeden](#) August 25, 2026 Third-Party Risk Management #### [Higher Education TPRM in 2026: New Research Maps the Vendor Visibility Gap](/blog/higher-education-tprm-2026) Explore UpGuard’s latest research into higher education third-party risk, including supplier concentration and systemic vendor exposure. [](/team/cassy-van-eeden) [Cassy van Eeden](#) August 10, 2026 Third-Party Risk Management #### [Ongoing TPRM Success: Continuous Security Monitoring with AI](/blog/continuous-security-monitoring-with-ai) Is manual work weighing down your security team and limiting your ability to scale? Learn how UpGuard and its AI features can help. [](/team/nicholas-sollitto) [Nicholas Sollitto](#) September 29, 2026 Third-Party Risk Management #### [Report Writing Solved: Generating Actionable Assessment Reports](/blog/report-writing-solved) Is manual report writing slowing down your security team? Learn how UpGuard’s AI can help. [](/team/nicholas-sollitto) [Nicholas Sollitto](#) April 2, 2025 [All posts](/blog) Experience superior visibility and a simpler approach to cyber risk management [Get a demo](/contact-sales) [Free trial](/demo)