Third-Party Security Risks: How to Mitigate Potential Cybersecurity Threats

Cooperation is the key to success, and working with third parties helps your organization increase efficiency, offer better products and services, employ highly qualified experts, and cut costs. However, all these benefits come at the price of additional cybersecurity risks.

Even minor flaws in your third-party vendor’s security and privacy routines may lead to serious cybersecurity breaches in your organization. In this article, we analyze third-party cybersecurity risks and give advice on how to mitigate them.

Why manage third-party cybersecurity risks?

A third party is any entity your organization works and interacts with. Third parties include vendors, suppliers, partners, manufacturers, subcontractors, service providers, distributors, and resellers.

A third party could be an IT company providing you with the necessary software, an outsourced logistics firm transporting your goods, a third-party accountant helping you manage finances, etc. With such variety among third-party entities, you can never be sure which ones could jeopardize your organization’s cybersecurity.

Third-party vendors often have access to your sensitive data or systems, so cybersecurity incidents on their side can potentially impact your operations and put your data at risk.

Unfortunately, third parties may not always take their network security seriously, which makes them particularly attractive targets for hackers. Instead of attacking your company directly, cybercriminals might look for easier targets among your vendors. By exploiting a vulnerable third party, attackers can initiate a supply chain attack and compromise your security.

Third-party-related attacks are on the rise

In 2024, 47% of organizations experienced at least one data breach or attack that involved third-party network access, according to the State of Third-Party Access in Cybersecurity 2025 Report by the Ponemon Institute.

We are introducing an expanded concept of a breach involving a third party that includes partner infrastructure being affected and direct or indirect software supply chain issues — including when an organization is affected by vulnerabilities in third-party software.

Verizon’s 2024 Data Breach Investigations Report

Many organizations struggle to manage third-party security risks due to the lack of two things: visibility and control.

Organizations often don’t have the full picture of what their third-party vendors do with their critical data and systems. For example, if a third-party vendor uses a shared account to access your corporate network, you can’t determine which of their specialists has made a particular change in the system.

Are organizations liable for third-party data breaches?

The formal responsibility for securing sensitive data can extend beyond the walls of your organization. Some data security regulations, laws, and standards applicable to your organization may already specify the extent of your liabilities for third-party data breaches:

• According to Chapter 8 of the General Data Protection Regulation (GDPR), when you (the data controller) outsource data processing to another organization (the data processor), you become responsible for that organization’s compliance. If a data breach occurs, both the data controller and the data processor have specific responsibilities.

• According to Requirement 12.8 of the Payment Card Industry Data Security Standard (PCI DSS), any organization involved in payment card processing must have policies and procedures in place to manage all third-party service providers. You must pre-assess the possible effects of any potential data breaches caused by your third-party vendor. Organizations must also check the compliance status of their third parties at least once every 12 months and make sure that they meet the applicable requirements.

• According to the Health Insurance Portability and Accountability Act (HIPAA), even when a data breach happens on a third-party vendor’s side, the healthcare provider is held responsible for not ensuring the safety of patient data.

In addition to liability risks, organizations may face many other risks depending on the nature of their cooperation with third-party vendors. Let’s look at the most common risk categories and the threats you need to be prepared to mitigate.

What are third-party security risks?

The financial and cybersecurity capabilities of small service providers and subcontractors don’t always match the capabilities of their clients. Therefore, while aiming for a bigger win, cybercriminals may start small and look for an easy target within your supply chain.

A compromised third-party vendor may lead to multiple risks that can be split into five major categories:

• Cybersecurity risks — Subcontractors usually have legitimate access to their clients’ different environments, systems, and data. Attackers may use a third-party vendor as an entry point to get ahold of your valuable assets.
• Operational risks — Cybercriminals could target your internal systems and the services you use. This can lead to partial interruptions of your operations or even halt them altogether.
• Compliance risks — International, local, and industry-specific standards and regulations set strict cybersecurity criteria that organizations must meet. If a third party fails to secure your data, non-compliance with data protection requirements may have legal consequences.
• Reputational risks — Having your valuable data and systems compromised is a red flag for your partners and customers. There’s no guarantee that you’ll be able to fully recover your reputation after a severe cybersecurity incident.
• Financial risks — Any of the risks above can affect your financial success. For example, an operational disruption caused by a third-party-related cyberattack could reduce your revenue, or a data breach caused by one of your vendors might lead to fines and compensations.

Common third-party security threats

Let’s get more specific.

To make cooperation with subcontractors more secure, you need to understand the threats they it pose to your company’s cybersecurity. Let’s focus on six common types of threats:

• Privilege misuse — Third-party vendors may violate access privileges you grant them in various ways and for multiple reasons. For example, your subcontractor’s employees may misuse their privileges in order to engage in malicious activity or try to escalate their privileges in order to get unauthorized access to your sensitive assets.
• Human error — Your subcontractor’s inadvertent mistakes can cause just as much damage as intentional attacks. Common mistakes include accidentally deleting or sharing files and information, inputting the wrong data, and misconfiguring systems and solutions. These seemingly innocuous mistakes can still lead to data leaks, service outages, and significant revenue losses.
• Data theft — Alongside unintentional data damage, there’s a high risk of targeted data theft by third parties. Employees of your vendors, subcontractors, and even partners can steal valuable business information and use it to their advantage.
• Social engineering — Hackers may perform phishing attacks by pretending to be one of your third parties. They can then trick your employees into revealing sensitive information or downloading a malicious attachment to infiltrate your network.
• Software supply chain attacks — Cybercriminals may compromise the software or hardware provided to you by third parties. Injecting malicious code or hardware components into products your organization uses can lead to vulnerabilities and backdoors that can be exploited.
• Fourth-party threat — Fourth parties or second-tier third parties are subcontractors of your subcontractors. Ensuring that your third-party vendors meet your cybersecurity requirements and follow cybersecurity best practices isn’t enough. You also need to understand how they manage their own supply chains.

Examples of third-party security incidents

To get a better understanding of what challenges your organization might encounter, let’s take a look at a few examples of cybersecurity incidents in 2024 that involved third parties:

1. AT&T

In March and April 2024, AT&T faced two significant data breaches that collectively affected more than 100 million current and former account holders. The first breach, revealed in March, involved a dataset that exposed customers’ sensitive information, such as Social Security numbers, that allegedly ended up on the dark net. It’s not quite clear whether the incident originated from AT&T or its vendor.

The second breach, disclosed in July, compromised nearly all cellular, landline, and wireless network customers from May 2022 to January 2023, revealing telephone numbers and cell site identification numbers. AT&T confirmed that the April breach originated from a third-party cloud platform.

The incidents led to financial losses, including a ransom payment of $370,000 to delete stolen data. Additionally, AT&T faced severe reputational damage and is currently dealing with lawsuits from affected customers. These breaches highlight the critical need for strong cybersecurity measures within organizations and their third-party vendors.

2. UnitedHealth Group

In February 2024, UnitedHealth Group faced a significant ransomware attack that targeted its subsidiary, Change Healthcare, a major provider of healthcare technology solutions. The attack exposed sensitive patient data, including medical records and payment information. The breach was linked to compromised credentials through a third-party Citrix portal, which allowed malicious actors to access critical systems. As a result, UnitedHealth Group had to shut down operations temporarily to safeguard sensitive data, disrupting healthcare billing systems across the United States.

The company reportedly paid a ransom of approximately $22 million to regain access to their systems, but some data was still leaked on dark web forums. This incident resulted in substantial financial losses and raised concerns about the company’s cybersecurity practices, prompting regulatory scrutiny and potential fines.

3. Sisense

In April 2024, Sisense, a prominent business intelligence and analytics platform, experienced a supply chain breach that compromised sensitive customer data. The breach was traced back to a third-party vendor’s GitLab repository, where hackers exploited hardcoded credentials to gain unauthorized access to Sisense’s Amazon S3 buckets in the cloud. This allowed the attackers to steal sensitive business intelligence data from Sisense’s platform, affecting major clients.

The incident raised serious concerns about the security practices of third-party vendors and the risks associated with hardcoding credentials in software development. Following the breach, Sisense had to reset customer credentials and thoroughly audit its systems and integrations. The exposure of customer data not only led to operational disruptions but also significantly impacted Sisense’s reputation as a trusted provider of analytics solutions.

To avoid similar incidents and manage third-party security risks effectively, consider following this set of supply chain security best practices for significantly improving your company’s cybersecurity posture.

Third-party security risk management: 7 best practices

A systematic approach can help you mitigate potential cybersecurity threats and manage risks coming from third parties. Third-party risk management (TPRM) is an example of such an approach.

In a nutshell, TPRM is the process of determining, analyzing, and managing third-party risks. This process can cover different aspects of your organization’s operations: work with sensitive data and intellectual property, access management, financial operations, and so on.

There are several international standards and commonly used frameworks that can serve as a basis for outlining your third-party risk management strategy. The following resources will prove particularly helpful:

• National Institute of Standards and Technology (NIST) Cybersecurity Framework
• NIST Special Publication 800-53
• DORA, Chapter V
• ISO/IEC 27000:2018
• ISO/IEC 27001:2022
• ISO/IEC 27002:2022

The recommendations in these resources can be summarized as seven supply chain security best practices:

1. Make an inventory of your third parties

Start by making an inventory of all your third-party vendors and service providers. Next, classify them as low, medium, or high, according to the level of their potential impact on your organization. The more critical data that is exposed to a particular vendor, the higher the damage of a potential cybersecurity breach. Consider developing a framework for categorizing vendor impact and use it when starting to work with new subcontractors.

Due diligence is also essential for understanding your third parties’ reliability, so conduct background checks and third-party security risk assessments. When assessing and documenting the potential level of impact and security of your third parties, ask the following questions:

2. Delineate responsibilities

To legally protect your organization and set the right expectations, it’s vital to establish robust contracts and agreements that clearly outline every security aspect of your cooperation with third parties.

Consider signing service-level agreements (SLAs) to determine your own and your vendors’ responsibilities in ensuring your mutual cybersecurity. Document everything: the kinds of sensitive information your third-party vendor can access and store, security precautions they should take to protect that data, compliance requirements to follow, frequency of security audits, and so on.

3. Establish cybersecurity policies

Set clear cybersecurity rules for third-party vendors and your employees cooperating with them. Develop an internal policy that clarifies each party’s responsibilities and outlines standard actions for different procedures and cases. And make sure to familiarize both your employees and your subcontractors with these rules.

Additionally, you can implement a vendor management policy (VMP) designed specifically to guide you in mitigating third-party risks within your IT infrastructure. A VMP describes how to identify and manage third parties carrying potential risks.

4. Limit third-party access

If you grant third parties access to your IT infrastructure to provide them with information or let them perform their services, do it wisely. Base your access management strategy on the principle of least privilege, giving third-party users the minimum level of access. Restricting access to what’s essential to perform a specific task will reduce the risk of unauthorized third-party activity and potential security breaches.

Consider deploying a privileged access management (PAM) solution to make sure that only legitimate users can access your company’s sensitive information. Two-factor authentication (2FA) tools or continuous authentication solutions can also secure your critical accounts even if user credentials get stolen. When choosing an access management solution, opt for one that can generate one-time passwords and put time limits on third-party access.

Privileged Access Management with Syteca

5. Enable continuous third-party activity monitoring

Many IT regulations, laws, and standards commonly require continuous monitoring of user activity. Tracking a third-party vendor’s activity within your network lets you see who does what with your critical assets and detect threats.

Look for a solution that can monitor and record user sessions in a comprehensive format suitable for further auditing of your third-party vendors’ activity. Reports based on the results of third-party vendor security monitoring can help you pass external audits, evaluate your cybersecurity during internal audits, and investigate cybersecurity events.

6. Plan for third-party incident response in advance

Preparing for a vendor-related cybersecurity incident saves you time and money on incident remediation. To do this, analyze the scope of third-party cybersecurity risks relevant to your company and then develop formalized procedures for responding to security events caused by third parties.

To detect cybersecurity threats promptly, use a dedicated solution that can alert you about security events and suspicious third-party activity. Choose responsible personnel to be notified in case of a third-party-related cybersecurity incident, and add their names and contact information to your incident response plan.

Real-time User Activity Alerts & Incident Response with Syteca

7. Work with your third-party vendors to improve security

Performing regular audits and evaluations of your third-party vendors’ cybersecurity can help mitigate many risks. You can also use reports from your third-party monitoring solution and incident response system to analyze the way your vendors interact with your critical systems and sensitive data.

In addition, consider performing a regular cybersecurity threat assessment using vendor risk management questionnaires. You can compose questionnaires from scratch or use templates that match your company’s requirements. Having third parties fill out questionnaires will help you evaluate their cybersecurity approaches and identify vulnerabilities.

Common challenges of third-party security risk management

While implementing the aforementioned third-party risk management best practices, you may face challenges. The most common are:

1. Limited visibility

It’s quite difficult to assess the implemented security practices and detect the network vulnerabilities of your third-party vendors. Self-assessments performed by your vendors are frequently subjective and might not reveal the actual state of a third party’s security. The number of third parties your organization interacts with also plays a crucial role, as keeping track of hundreds or even thousands of vendors, suppliers, and subcontractors is challenging.

To address this issue, your organization can employ continuous monitoring solutions. This might not give you the complete picture of your third-party vendors’ security systems, but it will provide visibility into many activities and security practices of third-party vendors within your infrastructure.

2. Negotiation difficulties

Negotiating security terms and enforcing security clauses in contracts with third parties can be difficult, especially when dealing with large vendors who may resist these terms. Furthermore, your third-party vendors’ security standards and procedures may differ from yours. Aligning these standards with your organization’s security needs might be challenging, potentially resulting in security vulnerabilities.

To solve this problem, establish clear security requirements in SLAs, engage in open dialogues, and compromise where necessary while minimizing potential risks.

3. Poor engagement

Engaging vendors in cybersecurity discussions can be tough, especially when they have different perspectives and priorities. The struggle often involves persistent follow-ups to obtain questionnaire responses that can extend for months.

Centralizing all third-party risk management activities is essential to foster better engagement. This approach can help you streamline the process, eliminating issues like cumbersome spreadsheets and version control problems, which will result in a more efficient and scalable third-party risk security assessment process.

4. Incident response coordination

Coordinating incident response is a major difficulty in third-party security risk management. Time is critical when a security breach or event involving a third party occurs. Effective communication and collaboration are essential for quickly containing and mitigating the breach. The challenge lies in coordinating several parties, including your organization, the third-party vendor, incident response teams, and sometimes, legal entities.

Therefore, it’s vital to establish clear lines of communication and incident response protocols ahead of time to streamline the coordination process and reduce response times.

5. Supply chain complexity

Managing security in organizations with complex supply chains can be extremely difficult. These intricate networks frequently involve numerous tiers of third-party vendors and providers, each with its own set of cybersecurity procedures and vulnerabilities. This intricacy can make risk management more difficult because it requires a solid understanding of security throughout the whole supply chain.

To succeed in managing your supply chain risks, your organization should monitor each level of third-party interaction, identify any security gaps, and implement the appropriate security controls.

Trends and the future of third-party risk management 

As the digital landscape evolves, so do the challenges associated with managing third-party risks. Let’s explore the main third-party risk management trends you can leverage in the near future:

Increasing emphasis on supply chain resilience

Organizations should focus more on third-party security risks in the supply chain, as these risks are here to stay for the foreseeable future.

“In 2025, cyberattacks will primarily arrive via sub-tier supply chains, where criminals can more easily exploit common programming errors and vulnerabilities. They can then leapfrog into top-tier corporations via phishing, software connection links, or other methods.”

2025 Supply Chain Annual Risk Report, Everstream Analytics

Your third-party risk management program should define all inherent risks posed by your supply chain and ensure that you implement the relevant cybersecurity measures.

Addressing AI threats

Gartner predicts that more than 80% of enterprises will deploy generative artificial intelligence by 2026, up from less than 5% in 2023, which will influence third-party risks as well. For example, a third-party vendor could potentially compromise your sensitive data by using it in a prompt in generative AI tools.

Forbes also emphasizes that risks from generative AI tools like ChatGPT, Gemini, and Copilot will persist in 2025.

Implementing zero trust 

 Zero trust security is the future of cybersecurity.

By 2026, 10% of large enterprises will have a comprehensive, mature and measurable zero-trust program in place, up from less than 1% today.

The Gartner Top Cybersecurity Predictions 2023-2024 (Subscription required)

The zero trust security approach assumes that both your and your third-party vendors’ accounts can be compromised and, therefore, requires verification from anyone trying to access your sensitive data. By implementing zero trust, you can significantly enhance your third-party risk management and minimize the chance of data breaches.

Leveraging automation

As the volume and complexity of vendor relationships continue to expand, organizations will increasingly turn to automation to reduce third-party risks. Using dedicated software can improve the efficiency of your third-party risk management processes while reducing manual workloads and increasing your security team’s productivity.

Automation and risk assessment technologies can be of great help, so read on to learn more about them.

Monitor third-party security risks with Syteca

As a comprehensive cybersecurity platform, Syteca can help you manage third-party security risks. Among other things, Syteca enables your organization to:

• Granularly manage access for your third-party users, providing them with time-bound, on-demand access to your organization’s infrastructure
• Verify third-party user identities with the help of two-factor authentication to protect your critical accounts from unauthorized access
• Monitor the activity of your third-party vendors and service providers on your servers and endpoints in real time
• Collect and review records of third-party user sessions in a searchable screen capture recording format
• Detect and respond to security threats with the help of customizable user activity alerts
• Generate detailed reports on your organization’s user activity based on a wide selection of criteria

Syteca can help make the actions of every user in your network visible and transparent. The Syteca platform is easy to deploy, scale, and manage and can integrate with your current SIEM and ticketing systems.

Conclusion

Your third-party vendors often have legitimate access to your organization’s critical systems and sensitive data. Yet, many subcontractors’ cybersecurity measures aren’t on par with your expectations. For this reason, cybercriminals may target your third-party vendors and service providers instead of attacking you directly.

The best way to mitigate these threats is to implement regular third-party risk assessments, follow the third-party vendor risk management security best practices described in this article, and deploy a sophisticated monitoring solution. Syteca offers a rich selection of user activity monitoring, access management, and incident response functionalities to help you effectively manage third-party security risks.