Vendor Security Review: Key Components And Implementation

Your vendors are essential partners, but they could also be your organization's biggest hidden security risk. A robust vendor review process is the key to ensuring onboarded vendors align with your cybersecurity standards and don't increase your likelihood of suffering a data breach. 

This guide outlines everything you need to know to build a structured, repeatable, and scalable vendor security review process.

What Is a Vendor Security Review?

A vendor security review is the process of evaluating the cybersecurity posture of a new or prospective third-party organization, typically before granting them access to your systems, data, or networks, and continuing throughout the business relationship. It assesses whether a vendor's security controls meet your organization's standards for protecting sensitive information and maintaining operational resilience.

At its core, the review aims to answer one critical question: 

Can we trust this vendor with our data or system access without increasing our risk exposure beyond acceptable thresholds?

The key objectives of a vendor security review include:

• Risk identification: Uncovering vulnerabilities and threats introduced by a vendor's product, service, or access to your systems and data.
• Security practice validation: Confirming vendors implement effective safeguards, particularly when handling sensitive internal or customer information.
• Compliance verification: Verifying vendor adherence to relevant industry-specific security standards and data protection regulations (e.g., GDPR, HIPAA, PCI DSS).
• Informed decision-making: Equipping your team with the insights needed to evaluate the relationship, apply contractual safeguards, and manage ongoing risk.

Vendor security reviews are not isolated exercises. They’re a foundational component of a broader third-party risk management (TPRM) strategy, usually aligned in the due diligence phase of the TPRM lifecycle.

Why vendor security reviews are important 

Vendor security reviews are important because a third party with a poor cybersecurity posture could fall victim to a data breach, compromising the sensitive data you entrusted them to process.

These events occur more often than you might think. According to some estimates, 30% of data breaches involved a compromised third-party vendor.

According to Verizon's Data Breach Investigations Report, 30% of breaches were linked to a third party.

Vendor-related security risks don't just threaten the safety of sensitive data. They can also disrupt other critical business initiatives, which can have very costly consequences.

A structured vendor security review process helps reduce the likelihood and impact of:

• Data breaches: Vendors often store or transmit sensitive information, such as customer records, proprietary code, or financial data. Without adequate security controls, a breach at the vendor level can quickly become your problem.
• Regulatory non-compliance: Frameworks like GDPR, HIPAA, and PCI DSS require organizations to ensure that third parties handle data responsibly. A vendor’s non-compliance can lead to fines, investigations, and reputational damage for the contracting organization.
• Operational disruption: If a vendor’s systems are compromised or unavailable due to an incident, it can halt your ability to deliver services. This is especially true for critical suppliers supporting business functions such as cloud infrastructure, payment processing, or communications.

Strategic Role in Broader Cybersecurity and Compliance Programs 

Vendor security reviews are more than a risk mitigation exercise. It's a critical pillar supporting several broader organizational initiatives:

1. Vendor risk management (VRM): Vendor risk management is the overarching process of identifying, assessing, and controlling the risks associated with using third parties. Vendor security review focuses on the due diligence phase of a VRM workflow.
2. Information security: A comprehensive information security program aims to protect the confidentiality, integrity, and availability of an organization's information assets. Since vendors often handle these assets, vendor security review is crucial for extending security protections beyond the organization's perimeter.
3. Due diligence: Conducting thorough vendor security reviews demonstrates to stakeholders, customers, and regulators that the organization is taking responsible steps to protect sensitive information and manage its risks. This is vital for maintaining trust and meeting legal and ethical obligations.
4. Business continuity management: The resilience of your business operations can be heavily dependent on the reliability and security of your key vendors. Vendor security reviews help identify vendors whose failure could disrupt your operations and ensure they have adequate business continuity and disaster recovery plans in place.

Vendor reviews also play a vital role in supporting alignment with recognized security and compliance frameworks, such as:

• ISO/IEC 27001: Emphasizes third-party security controls as part of its Annex A requirements.
• SOC 2: Requires evidence of how an organization manages third-party risk under the Trust Services Criteria.
• NIST SP 800-171: Demands that contractors handling Controlled Unclassified Information (CUI) assess and manage the security posture of their supply chain.

Key components in a vendor security review

A vendor security review isn't just about ticking boxes on a questionnaire, it's about understanding how a vendor approaches security holistically. Here are the key components that should be included in the process.

(a). Data governance and impact analysis

This initial component focuses on understanding the data a vendor will handle and the potential impact of its compromise.

Key considerations include:

• Data classification and sensitivity: Clearly identifying the types of data (e.g., PII, PHI, financial data, IP) the vendor will access, process, store, or transmit, and understanding its sensitivity level.
• Scope of access: Defining precisely how (e.g., API, direct system access, data feeds) and where (e.g., vendor's cloud environment, their physical premises, your systems) the vendor will interact with your data and systems.
• Business impact assessment (BIA): Evaluating the potential financial, operational, reputational, and legal/regulatory consequences if the vendor suffers a security incident or service disruption. This includes identifying "mission-critical" vendors whose failure or compromise would severely impact your core business operations.

(b). Vendor's information security policies and procedures

This component evaluates a vendor's documented and enforced policies. 

The review should cover:

• Core policy documentation: Examining key documents such as their information security policy, data privacy policy, acceptable use policy, incident response plan, and business continuity/disaster recovery (BCDR) plans.
• Procedural effectiveness: Verifying that policies are actively implemented, regularly updated, and that staff are aware of and adhere to them.
• Specific data handling processes: Scrutinizing procedures for managing data throughout its lifecycle, including data encryption (at rest and in transit), access controls and authorization, data segregation (especially if handling data for multiple clients), secure data disposal, and breach notification procedures

(c). Technical security controls and infrastructure

This component dives into the actual technical safeguards the vendor has implemented. 

• Access control mechanisms: Assessing how the vendor controls system and data access, looking for multi-factor authentication (MFA), adherence to the principle of least privilege, role-based access control (RBAC), and strong password policies.
• Network security: Evaluating their network architecture and protective measures, including firewalls, intrusion detection/prevention systems (IDS/IPS), network segmentation, and secure configurations of network devices.
• Endpoint security: Reviewing how devices (laptops, servers) that access or store your data are protected, such as through antivirus/anti-malware solutions, endpoint detection and response (EDR) tools, and mobile device management (MDM) policies, if applicable.
• Encryption standards: Verifying the strength of encryption used for data at rest (e.g., AES-256) and data in transit (e.g., TLS 1.2+), along with their key management practices.
• Vulnerability management: Examining their program for regular patch management, vulnerability scanning, periodic penetration testing by independent third parties (including review of recent test summaries and remediation efforts).
• Secure software development lifecycle (SSDLC): If the vendor provides software (including SaaS), assess how they integrate security into their development process (e.g., secure coding training, code reviews, SAST/DAST tools, open-source software vulnerability management).
• Cloud security posture (if applicable): If the vendor uses cloud services (e.g., AWS, Azure, GCP), evaluate their cloud security practices like secure configuration management, identity and access management (IAM), use of native cloud security services, and data residency considerations.

(d). Incident response and business continuity

How a vendor prepares for and responds to incidents is critical to their resilience. This involves assessing:

• Incident response plan (IRP): Whether the vendor has a documented and regularly tested plan that defines roles and responsibilities, communication protocols (internal and external), containment strategies, eradication procedures, and recovery steps.
• Business continuity/disaster recovery (BCDR) plans: How the vendor plans to maintain or restore critical services during major disruptions. Key elements to review include recovery time objectives (RTOs), recovery point objectives (RPOs), backup strategies and frequency, failover capabilities, and results of recent BCDR plan testing.
• History of security incidents: Inquiring about past security breaches or significant security events, understanding their nature and impact, and, importantly, the remedial actions taken to prevent recurrence.

(e). Legal, compliance, and governance

This area ensures the vendor meets legal obligations and has a sound governance structure for security. 

Key aspects include:

• Compliance certifications and attestations: Reviewing common certifications (e.g., SOC 2 Type II, ISO 27001, PCI DSS, HIPAA, FedRAMP) as indicators of security posture. Crucially, remember these are a starting point; always scrutinize the report's scope, noted exceptions or deviations, relevance to the services provided, and recency (ideally within 6-12 months, or covered by a bridge letter).
• Regulatory adherence: Verifying the vendor's compliance with specific industry regulations or data protection laws applicable to your data (e.g., GDPR requirements for data processors).
• Contractual review: Ensuring the vendor contract codifies security expectations through key clauses covering data ownership, clear security responsibilities, data breach notification timelines and procedures, right to audit, service level agreements (SLAs) for security and availability, liability limitations, and data return/destruction procedures upon contract termination.
• Organizational security governance: Assessing the vendor's internal structure for security, including who is responsible, the expertise of their security team, employee security awareness training, and whether background checks are conducted for personnel in sensitive roles.
• Physical and environmental security: If the vendor processes or stores your data in their own physical facilities, evaluate the physical security controls for those locations, such as access controls, surveillance, and environmental safeguards.

(f). Fourth-party risk (vendor's vendors)

Your vendor likely uses its own set of vendors (sub-processors or fourth parties) to deliver their services. Their risks can become your risks.  

Key areas to assess include:

• Vendor's own vetting process: Whether the vendor has a formal program for assessing the security posture of their critical suppliers.
• Sub-processor transparency: The vendor's willingness and ability to provide visibility into which fourth parties will be involved in handling your data.
• Flow-down of security requirements: Confirmation that the vendor contractually obligates their sub-processors to meet security standards comparable to those they have committed to you.

By addressing these components in a vendor security review, organizations can gain a deep understanding of a vendor's security capabilities and make well-informed decisions to manage third-party risk effectively.

Common challenges in vendor security reviews (and how to overcome them)

Vendor security reviews are prone to challenges that can impede efficiency. Addressing these common issues is crucial for a successful program.

Challenge 1: Handling a large volume of vendors with varying risk profiles

It's common for organizations to engage with numerous vendors. Applying the same review process to all of them is impractical and can result in inconsistencies and  "questionnaire fatigue" for both your team and the vendors.

Some solutions to combat this include:

• Vendor tiering: Categorize vendors (e.g., High, Medium, Low risk) based on factors such as the sensitivity of data they access, the criticality of their service to your operations, and the potential impact of an incident involving them. This allows you to tailor the depth and frequency of security reviews, focusing more rigorous risk assessments on high-risk vendors.
• Using standardized questionnaires (where appropriate): For common information gathering, especially with lower-risk vendors or for initial screenings, utilize industry-standard questionnaires like SIG, CAIQ, or HECVAT. This can streamline data collection and simplify the process for vendors familiar with these formats.
• Leveraging a third-party risk management platform: Modern TPRM platforms provide tools to automate and efficiently manage large vendor portfolios, aiding in the consistent application of tiered review processes.

Challenge 2: Time-consuming and manual review cycles

Traditional vendor security review processes relying on spreadsheets, emails, and manual follow-ups often lead to lengthy review cycles, delayed vendor onboarding, strained internal resources, and the risk of assessments becoming outdated before completion.

To address this:

• Automate repetitive tasks: Utilize TPRM tools to automate tasks like questionnaire distribution, evidence collection, risk scoring based on predefined rules, and sending reminders for responses or remediation.
• Leverage pre-filled questionnaires and vendor risk intelligence: Access repositories where vendors have already completed standard questionnaires or published security documentation to significantly reduce initial information gathering. When new questionnaires are required, using pre-built templates can save you the effort of building them from scratch.
• Focus on exceptions and high-risk areas: Instead of meticulously reviewing every control for all vendors, use risk-based methodologies to prioritize deep dives on high-risk areas, anomalies, or responses that deviate from your expectations.

Challenge 3: Limited internal resources or technical expertise

Not all organizations possess large, dedicated security teams with deep technical expertise in every domain. This can hinder thorough technical assessments of vendor controls and the accurate interpretation of complex vendor responses or documentation (like SOC 2 reports).

To mitigate this, consider:

• Co-sourcing or outsourcing specialized reviews: Engage third-party cybersecurity experts or specialized firms to conduct certain assessments (especially for high-risk or highly technical vendors) or to augment your internal team during peak periods.
• Leveraging tool-based expertise: Utilize TPRM platforms offering built-in risk intelligence, automated analysis of questionnaire responses against known vulnerabilities or compliance standards, or even managed services where their experts assist with reviews.
• Investing in continuous training and skill development: Provide ongoing training for your internal team on vendor security review best practices, how to interpret audit reports, and emerging cybersecurity threats relevant to third parties.
• Establishing cross-functional teams: Form a vendor security review team that includes representatives from IT, security, legal, procurement, and the relevant business units, allowing each function to contribute unique perspectives and expertise.

5 Steps to conduct a vendor security review

Step 1. Identify requirements & define scope

The first step in any vendor security review is defining the why. Without a clear understanding of your objectives, it’s challenging to determine what to assess or how deep to go. Start by establishing goals that reflect your organization’s broader priorities, such as:

• Regulatory compliance (e.g., GDPR, HIPAA, PCI DSS)
• Data protection and privacy assurance
• Operational integrity and service resilience

Then, clarify how the vendor supports specific business objectives. Are they providing infrastructure, processing sensitive data, or enabling a critical function? A vendor risk management best practice is limiting third-party relationships to those that are absolutely necessary for meeting critical business objectives. If you haven't yet established a VRM program, this checklist will help get you started.

Every new third-party relationship expands your attack surface, so intentionality is key.

Next, identify all internal stakeholders who will play a role in the review process. This typically includes:

• Security, to evaluate controls and risk posture
• Procurement, to verify the business need and manage the sourcing process
• Legal, to define contractual requirements and liabilities.‍
• Compliance, to ensure regulatory alignment and audit readiness

Also, determine whether the vendor will be handling sensitive data. This may not always be obvious at first, especially in complex environments where integrations and data flows are indirect.

If there is uncertainty, this can be clarified in the next step by issuing a structured security questionnaire. These questionnaires often uncover hidden dependencies or access pathways that would otherwise go unnoticed.

Finally, tailor your review based on vendor type and function. A vendor providing core infrastructure services (e.g., cloud hosting or identity management) will need a different level of scrutiny than a SaaS platform used for internal collaboration.

Aligning your assessment criteria with the nature of the service ensures a more efficient and risk-relevant review process.

Step 2. Gather vendor data

With your requirements defined, the next step is to collect the information needed to evaluate the vendor’s security posture. The depth and quality of data gathered at this stage directly affect the speed and accuracy of the overall review.

Start by requesting relevant documentation. These may include:

• Completed security questionnaires
• Audit reports (e.g., SOC 2 Type II, ISO 27001)
• Internal policies and procedures (e.g., access control, encryption standards)
• Vulnerability assessment or penetration test summaries
• Compliance attestations and certifications
  

The more comprehensive the documentation a vendor provides upfront, the more streamlined and efficient the review process becomes. However, not all vendors, particularly smaller or newer providers, will have complete or current records.

In cases where documentation is limited or unclear, send out custom or standardized security questionnaires. These help fill in knowledge gaps by probing into data handling, third-party dependencies, and incident response readiness.

Even when initial documentation seems robust, questionnaires offer a structured way to validate claims and surface issues that may not be evident in policy documents.

To further improve coverage, consider using auto-discovery tools to identify shadow vendors or unapproved integrations. Vendors may be introduced into your environment via API calls, embedded widgets, or unmanaged procurement processes, especially in large or decentralized organizations.

Identifying these blind spots early prevents unvetted services from slipping through the cracks.

This process becomes much easier when vendors publicly display their security posture via a trust page or portal. Platforms like UpGuard’s Trust Exchange make it easier for vendors to share up-to-date security information in a centralized, verified space. This reduces back-and-forth communication and allows your team to focus on high-value analysis rather than document collection.

Step 3: Assess security measures

Once you’ve gathered the vendor’s documentation and questionnaire responses, the next step is to evaluate the strength of their security controls. This assessment should cover technical safeguards and organizational maturity, giving you a complete picture of how well the vendor can protect your data and systems.

Start by examining key technical security measures, such as:

• Encryption standards for data at rest and in transit. Ensure strong encryption protocols (e.g., AES-256, TLS 1.2+) are in use, especially for sensitive data.
• Multi-factor authentication (MFA) and robust identity management to reduce unauthorized access risk.‍
• Patch and vulnerability management cadence, confirming whether the vendor applies security updates promptly and has defined remediation timelines.
  

Next, assess the vendor’s people and process maturity, which plays a crucial role in day-to-day risk exposure:

• Employee security training programs should be regular and role-specific, especially for personnel with access to customer data or administrative systems. Ideally, such programs should be a component of a broader human cyber risk management program.
• Vendors providing software solutions should follow Secure Software Development Life Cycle (SDLC) practices, including code review, static analysis, and security testing prior to release.
  

To build a reliable risk profile, use a combination of:

• Internal review by your security team to interpret documentation and flag issues.
• Risk scoring platforms that provide external validation through continuous monitoring and threat intelligence.
• Security questionnaires that clarify ambiguous areas and offer standardized comparisons across vendors.
  

Step 4: Mitigate gaps

After assessing a vendor’s security posture, the next step is to determine whether the identified risks are acceptable, and if not, how they can be addressed. This involves comparing the vendor’s current risk level to your organization’s internal risk tolerance and deciding whether to remediate, accept, or reject the risk.

If gaps are identified, your options typically fall into three categories:

• Remediation: Request the vendor implement specific security controls, such as enabling encryption at rest, enforcing multi-factor authentication, or updating an outdated incident response plan. In some cases, these changes may need to be made before onboarding is approved.
• Contractual controls: If technical remediation is not immediately feasible, you can mitigate risk through legally binding agreements. This may include:
  
  • Clearly defined service level agreements (SLAs)
  • Breach notification clauses with specific timelines
  • Data deletion requirements at contract termination
  • Audit rights or on-site assessment permissions
    

• Rejection or substitution: If the vendor cannot meet minimum security requirements and the risk exceeds your organization's tolerance, you may need to reject the engagement or seek a more secure alternative.

This step can be complex and time-consuming, especially for high-risk vendors or those involved in sensitive workflows. To streamline this process, UpGuard uses AI in its TPRM platform to automatically flag critical vendor control gaps in minutes.

For a quick overview of UpGuard's AI-powered TPRM workflow, watch this video:

For an overview of this process, watch this video:

Learn how UpGuard is reimagining TPRM >

Step 5: Continuously monitor vendors

A vendor security review isn’t a one-time event. Once a vendor is onboarded, continuous monitoring is essential to ensure their security posture remains aligned with your expectations and risk tolerance, especially as their role or regulatory environment evolves.

Start by defining reassessment cycles based on risk level. 

For example:

• High-risk vendors: Review quarterly or biannually.
• Medium-risk vendors: Review annually.
• Low-risk vendors: Review every 18–24 months or when significant risk exposure changes happen.

Establish alerts and monitoring triggers to identify vendor environment changes that could increase risk. This may include:

• Expired or revoked security certifications
• Emerging vulnerabilities in the vendor’s technology stack
• Publicly reported breaches or security incidents
• Changes in hosting locations or data processing regions

It's also important to track vendor responsiveness to new requirements. For example, if new regulations like the Digital Operational Resilience Act (DORA) or updates to NIST guidelines impact your operations, vendors must demonstrate timely adaptation. Poor communication or delayed compliance can be an early warning sign of broader security deficiencies.

Next steps for proactive security

A successful vendor security review isn’t just about identifying the security risks of new vendors; it's about building a system that proactively manages throughout each third-party relationship.

While continuous monitoring plays a key role in supporting such a proactive stance, a commonly overlooked capability that's equally as important is robust vendor collaboration.

Strong collaboration underpins the overall efficiency of a vendor security review program. It ensures vendors are consistently aware of your security requirements and facilitates tracking their risk management efforts and remediation progress.

Such a deep visibility into vendor response actions offers additional context to continuous monitoring initiatives and highlights opportunities for further optimizing your vendor security review process.

Rather than building these collaboration workflows from scratch, it's faster and more scalable to use a TPRM platform with built-in vendor collaboration tools.

To preview how established collaboration tools could save you from the headache of back-and-forth messages with vendors, watch this video: 

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