You’ve invested in cybersecurity. Your employees receive security training. You’ve put safeguards in place to protect your systems and sensitive information.
But what about the companies you work with?
Your payroll provider. Your accounting software. Your cloud storage platform. Even the contractor who needs access to your files.
Outside vendors help keep your business running. But they can also introduce cybersecurity risks you may not see coming.
Because protecting your business isn’t just about the security measures you control. It’s also about understanding the risks that come with the companies you trust.
What Is Third-Party Cybersecurity Risk?
Third-party cybersecurity risk is the potential for a security problem at an outside company to affect your business.
Think about how many businesses have access to some part of your operations.
Your payroll provider handles employee information. Your accounting software stores financial records. Your cloud platforms may contain confidential documents. Your technology partners may have administrative access to important systems.
Now imagine what could happen if one of those providers experienced a cyberattack.
Depending on the relationship, your business could face exposed information, interrupted operations, or unauthorized access to its systems.
And here’s the tricky part: You don’t have to be the direct target of a cyberattack to experience its consequences.
When a Vendor's Security Problem Becomes Your Problem
Third-party cybersecurity risks aren’t just hypothetical.
In 2024, a ransomware attack against Change Healthcare, a major healthcare technology provider, disrupted payment processing and other healthcare services across the United States.
Hospitals, pharmacies, healthcare providers, and patients experienced the consequences of an attack on a company many relied on behind the scenes.
The lesson extends far beyond healthcare.
When businesses depend on outside providers for essential services, a disruption at one company can affect many others.
And the risk isn’t limited to large corporations.
A small business might depend on a single payroll provider, cloud platform, or IT partner to keep everyday operations running. If that provider experiences a serious security incident, even a temporary disruption can create challenges.
The size of your business doesn’t determine whether you’re exposed to third-party risk. Your dependencies do.
How to Identify High-Risk Vendors
Let’s be clear: working with outside vendors isn’t inherently dangerous.
Businesses need technology partners, software platforms, service providers, and contractors to operate efficiently.
The goal isn’t to eliminate those relationships. It’s to understand which ones could create the greatest exposure.
Consider the difference between a vendor delivering office supplies and a software provider storing sensitive customer information.
Both are business relationships, but their cybersecurity risks are very different.
When evaluating vendors, consider:
- Data access: Does the vendor store, process, or access sensitive information?
- System access: Can the vendor connect to your network, applications, or administrative accounts?
- Business dependency: Would an outage significantly interrupt your operations?
- Security practices: What protections does the vendor have in place?
- Incident response: How would the vendor communicate with your business if something went wrong?
These questions can help you identify which relationships deserve a closer look.
For more on evaluating suppliers and service providers, read Is Your Supply Chain Secure? Why Cyber Risk Assessments for Vendors Matter.
5 Cybersecurity Questions Every Business Should Ask Its Vendors
You don’t need to become a cybersecurity auditor to have better conversations with your technology partners.
But there are five questions worth asking before giving a company access to sensitive information or critical systems.
1. How Do You Protect Our Information?
Ask what safeguards are in place to protect the information a vendor stores, processes, or accesses.
These might include encryption, multifactor authentication (MFA), access controls, and employee security training.
You don’t need to know every technical detail. But you should feel confident that the vendor understands its security responsibilities and can explain how your information is protected.
2. Who Has Access to Our Systems or Data?
Not every employee or contractor at a vendor organization needs access to your business information.
Ask how access is granted, monitored, and removed when it’s no longer necessary.
Limiting unnecessary access can help reduce your exposure if an account is compromised.
3. What Happens If You Experience a Security Incident?
This is a big one.
Does the vendor have an incident response plan? How and when would they notify your business? What steps would they take to contain the incident and restore services?
A vendor’s ability to respond and communicate matters just as much as the preventive measures they have in place.
4. Do You Work With Other Vendors That Access Our Information?
Your vendors may rely on additional providers to deliver their services.
For example, a software company might use another cloud platform to host its application or store customer information.
Those additional providers create another layer of dependency, sometimes called fourth-party risk.
Understanding who else may handle your information helps you get a clearer picture of how it’s protected.
5. How Do You Demonstrate Your Security Practices?
Ask whether the vendor can share relevant security documentation, independent assessments, or certifications.
Depending on the service, this could include a SOC 2 report, applicable ISO certifications, or other evidence of security controls.
These documents don’t guarantee that an incident will never happen. But they can help you evaluate how a provider manages security and where you may need to ask more questions.
Why Third-Party Cybersecurity Risk Management Is Ongoing
Here’s a common challenge: businesses evaluate a vendor when the relationship begins and rarely revisit the conversation.
But things change.
Vendors introduce new services. Employees change roles. Software integrations expand. A provider that originally had limited access might eventually become essential to daily operations.
That’s why managing third-party cybersecurity risks shouldn’t be a one-time task.
Start with three practical steps:
- Know who’s connected. Make a list of vendors that access sensitive information or support important business functions.
- Review their access. Confirm what systems and information each vendor can access, whether that access is still needed, and which relationships need more frequent reviews.
- Close the loop. When a vendor relationship ends, remove unnecessary accounts, integrations, and permissions.
You don’t have to review every vendor on the same schedule. Focus more attention on the relationships that could have the greatest impact on your business.
And remember: sometimes reducing risk isn’t about adding another security tool. It’s about understanding who already has access.
Cybersecurity Doesn't Stop at Your Company's Front Door
Cybersecurity Doesn't Stop at Your Company's Front Door
Your business doesn’t operate in isolation, and neither does your cybersecurity strategy.
Every vendor relationship, software integration, and outside service provider becomes part of your larger technology environment.
That doesn’t mean you should stop trusting the companies you work with.
It means trust should come with visibility, accountability, and ongoing communication.
By asking better questions, reviewing vendor access, and understanding which services your business depends on, you can make more informed decisions about protecting your organization.
At Applied Innovation, we know that cybersecurity goes beyond individual devices and networks. A thoughtful security strategy considers the people, technology, and outside relationships that keep your business moving.
Not sure where your biggest cybersecurity risks might be hiding?
Your vendors are a good place to start. Applied Innovation’s Technology team can help you take a closer look at your security approach, identify potential gaps, and find practical ways to better protect your business.