Conducting a Third-Party Security Assessment, Complete Guide

Introduction

The saying “you’re only as strong as your weakest link” has never been more relevant. Organizations are increasingly leaning on third-parties for a variety of services. Today, fortifying your organization’s cyber resilience isn’t just about securing your own systems. It’s also about closely examining the security posture of your vendors, partners, and service providers. This is especially crucial when you realize that a whopping 98% of organizations do business with a third party that has experienced a security breach.

Fortunately, when executed effectively, third-party security assessments can empower Information Security & Assurance teams. These assessments proactively mitigate risks tied to third-party security incidents and foster transparent, collaborative relationships with third parties and the broader organization.

This comprehensive guide from SaltyCloud delves into the nitty-gritty of third-party security assessments. It provides a clear definition, explains its importance, and walks you through the entire process—from initial planning and key assessment activities to in-depth analysis and final attestation. Ultimately, this guide equips you with the knowledge and tools to conduct a practical, effective security assessment as a key component of your Third-Party Security Risk Management (TPSRM) program.

What is a Third-Party Security Assessment?

A third-party security assessment involves a comprehensive evaluation of a third-party’s security posture, whether it’s a vendor, partner, client, contractor, consultant, or intermediary. The goal is to ensure that their security practices meet your organization’s minimum security standards.

Essentially, third-party security assessments are due diligence exercises where Information Security & Assurance teams inventory third-parties and conduct a range of activities. These activities include specialized security questionnaires, real-time risk intelligence feeds, penetration tests, vulnerability scans, certification reviews, and detailed internal policy examinations. All these efforts aim to identify the third-party’s deficiencies and ensure compliance with minimum security standards and regulatory requirements.

Moreover, Information Security & Assurance teams play a vital role in facilitating communication among all stakeholders. They bring everyone together to discuss findings, have transparent conversations with third-parties, and determine the course of action if risks are identified. The risk owners must decide whether to accept the risk, create an addendum with the third-party, or reject the third-party altogether.

Third-Party Security Assessments are a crucial component of Third-Party Security Risk Management (TPSRM) programs. TPSRM is an ongoing process that involves the identification, evaluation, and management of risks associated with third-parties.

Why is a Third-Party Security Assessment necessary?

In an era where cyber threats constantly evolve, the question is not “if” but “when” a security incident will occur. Yet, according to are recent study, 54% of businesses do not vet third-party vendors properly. Your organization may have implemented robust security controls, but can the same be said about your third-party vendors? Herein lies the necessity of third-party security assessments.

Here are some of the key reasons these assessments are an indispensable part of a comprehensive risk management program:

• Supply chain attacks and security incidents: One of the most immediate and alarming concerns is the increasing frequency of supply chain attacks. In these incidents, adversaries exploit vulnerabilities in one organization to compromise a larger network of associated companies. For example, a minor breach in a third-party vendor with limited security controls can lead to unauthorized access to your ecosystem, putting sensitive data and systems at risk. According to a recent study, although 84% of businesses claim to prioritize third-party risk management, more than 40% have insufficienct visibility into their digital supply chain. Third-party security assessments serve as a proactive approach to identify and mitigate such vulnerabilities before they can be exploited.

• Growing regulatory requirements: Regulatory compliance is another major factor driving the need for third-party security assessments. Laws and standards like GDPR, HIPAA, and PCI-DSS include specific clauses holding organizations accountable for the security posture of their third-party vendors. Non-compliance can result in hefty fines, legal repercussions, and reputational damage. Conducting regular third-party security assessments not only helps in maintaining compliance but also in demonstrating due diligence to auditors and stakeholders.

• Business continuity and resilience: A vendor-related security incident can have a domino effect, disrupting your operations and affecting business continuity. But in 2022, it took an average of 277 days to identify and contain a breach. Assessments help evaluate your vendors’ resilience against cyberattacks (including other contiengies like natural disaters), before they occur. This information is vital for your own business continuity planning and can be particularly useful in industries where uptime and data integrity are critical.

• Vendor accountability and performance metrics: Third-party assessments offer an empirical basis to hold your vendors accountable. By evaluating a vendor against predefined metrics and security controls, you can ensure they meet industry standards. This is especially crucial during onboarding new vendors and periodic review of existing partnerships.

• Risk management and strategic decision-making: Understanding the security posture of third-party vendors helps assess the level of risk they pose to your organization. This enables more informed decision-making, whether you are contemplating entering into a new business relationship or considering the renewal of an existing one. Your findings may lead to constructive dialogues with vendors about possible remediation measures or cybersecurity improvements.

Third-party security assessments are not just an optional best practice but a critical component of modern information security strategy. Given the current landscape of cyber threats, regulatory demands, and interconnected business ecosystems, these assessments offer a critical line of defense against various risks.

Planning the assessment

Conducting a third-party security assessment isn’t an impromptu activity; it requires meticulous planning and a collaborative approach. Before diving into the assessment, understanding the scope, objectives, and stakeholders involved is crucial.

By carefully planning each element, you set the stage for a well-executed third-party security assessment. This foundational work helps ensure that the subsequent steps in the process—actual evaluation, risk identification, and remediation planning—are conducted efficiently and yield actionable insights.

Here’s how to lay the groundwork for an effective assessment:

Stakeholder identification

Third-party security assessments are not a one-team show; they require the involvement of multiple stakeholders both within your organization and from the third-party vendor. Involving a diverse group of stakeholders fosters a culture of risk awareness, bringing different perspectives into the evaluation process, and making the assessment more comprehensive and insightful.

Here are some of the key players to identify:

• • Information security professional: Designate an individual or team who is responsible for data analysis and synthesis.
  • Third-party contact: Know who will represent the vendor during the assessment. This could be either a technical or non-technical role, so plan accordingly.
  • Internal risk owner: A person or team within your organization responsible for owing risks associated with third-party vendors. Typically the requesting individual or team.
  • Support teams: Various internal teams such as procurement, compliance, enterprise risk, and privacy may also play key roles in the assessment.
  • Data stewards: In the likely event of handling regulated data, you may have an Individual or team responsible for the data’s security. For example, a HIPAA Compliance Officer.
• Leadership: Any relevant senior executives who may need to provide strategic direction, ensure alignment with organizational goals, and support necessary resources for the assessment.

Setting clear objectives

Understanding why you’re conducting the assessment and what you aim to achieve is essential. Are you looking to onboard a new vendor, or is this a periodic review? Oftentimes, the objective is to establish a baseline of the vendor’s security posture to facilitate informed decision-making and risk management. Ultimately, your goals should be established in your TPSRM policies.

Next, designate a central location—perhaps a shared drive or a GRC collaboration platform like Isora—where all stakeholders can access the assessment, answer questionnaires, submit evidence, and review reports. This will help streamline communication and accountability so that everyone is on the same page with your overall objectives.

Creating a timeline

Without a set timeline, assessments can drag on, causing delays in decision-making. Creating a timeline helps keep internal and external stakeholders accountable, giving you a higher chance of identifying security risks before they become a reality.

Here are some important steps to take:

• Define the start and end dates for the assessment.
• Allocate specific durations for each phase of the assessment—questionnaires, interviews, testing, etc.
• Ensure all stakeholders are aware of and agree on these deadlines.

Key assessment activities

Assessment activities comprise a series of procedures and tasks aimed at evaluating and measuring the security posture of a third party. The key assessment activities detailed below are crucial for assessing the security posture of external partners. Each activity is designed with a distinct purpose and significance, and not all are necessary for every organization or third party. By implementing a tailored set of these activities, you can gain a more profound understanding of each third party’s security posture and determine if it aligns with your minimum security and regulatory requirements. Then, through careful analysis and synthesis, you can equip yourself and your organization with the essential data needed to make informed decisions about third-party relationships.

Here’s a closer look at each key activity:

Control-based questionnaires

Various industry standards, such as SIG (Standardized Information Gathering), CAIQ (Consensus Assessments Initiative Questionnaire), and HECVAT (Higher Education Community Vendor Assessment Toolkit), offer questionnaire templates designed to assess varying levels of risk and control maturity. These templates often cover multiple aspects of security, including data protection, network security, and incident response, among others.

When selecting a questionnaire, the key is customization. While off-the-shelf questionnaires from reputable standards are a good starting point, tailoring them to suit your organization’s specific needs can provide insights that generic questionnaires may miss. This might involve adding or removing questions, or even developing a new questionnaire that targets your organization’s unique landscape.

The process of distributing, collecting, and analyzing questionnaires can vary significantly in its level of sophistication. At the most basic level, this might involve manual processes such as sending questionnaires via email and tracking responses in spreadsheets. However, manual processes are labor-intensive, prone to error, and can create bottlenecks in your assessment process.

A GRC Collaboration Platform like Isora provides a workspace where teams can design custom questionnaires, launch assessments with multiple stakeholders, and centralize evidence management among other powerful features. Automation not only increases efficiency but also adds a layer of reliability and depth to the assessment.

Intelligence feeds

Automated intelligence feeds can provide real-time updates on new vulnerabilities and other risks. But this isn’t just a passive inflow of information; it’s a proactive approach that equips your security team with actionable insights for immediate response and long-term planning.

By configuring customized alerts for specific conditions, such as a new data breach involving one of your third-party partners or the sudden discovery of a security vulnerability, your team gains the ability to act swiftly and decisively. These intelligence feeds can also offer nuanced data that can be analyzed to guage both immediate and long-term impact on your security posture.

Intelligence feeds can easily be integrated into Isora, enhancing your visibility before during and after an assessment.

Penetration testing & vulnerability scanning

While tools like security questionnaires and automated intelligence feeds offer crucial insights, they often rely on self-reported or external data. This is why conducting penetration testing and vulnerability scanning is so critical: these assessments provide an unfiltered, hands-on test of a third-party’s security controls, revealing potential weaknesses that could impact your organization.

Several options are available to organizations looking to conduct these tests. Penetration Testing as a Service (PtaaS) offers a scalable and customizable solution, often providing a suite of tests tailored to assess different aspects of a third party’s security architecture. Alternatively, some risk intelligence solutions bundle penetration testing and vulnerability scanning services as part of their comprehensive security offerings. These platforms not only conduct tests but also integrate the findings into their broader risk assessments, providing a more holistic view of the third party’s security posture.

Reviewing certifications

Certifications like SOC2, ISO27001, HITRUST, and CMMC are industry-recognized benchmarks that provide a third-party verification of a vendor’s cybersecurity controls and practices. However, while these certifications offer valuable insight into a third-party vendor’s security posture, it’s crucial to dig deeper for a more thorough understanding.

First, always ensure that these certifications are current. An expired or outdated certification is essentially meaningless and could indicate a lapse in the vendor’s commitment to maintaining strong security controls. Your due diligence process should include confirming the validity period of each certification and whether it’s currently in the renewal process.

Secondly, pay attention to the scope of the certification. Certifications can vary in what they cover, and it’s essential that the scope aligns with your specific engagement requirements as well as any industry-specific regulations.

The status of the certification is another key factor. Certifications often come with qualifiers, so make sure that the certification status is ‘unqualified,’ which means it is fully certified without reservations. Some vendors may have a ‘qualified’ certification status, indicating limitations in the scope or effectiveness of their security controls. This could be a red flag requiring further investigation.

However, a word of caution: certifications should rarely be your only yardstick for assessing a third-party’s security. While they offer an excellent starting point, they are typically just a snapshot in time and may not reflect their current security posture. A well-rounded, multi-layered approach that combines these certifications with other assessment methods like security questionnaires, real-time risk intelligence feeds, and hands-on penetration tests will give you a far more in-depth and dynamic view of the third-party’s security landscape.

In-depth analysis and risk identification

Once the key assessment activities are complete, the next step is to dive into the data and findings to perform an in-depth analysis. Correctly identifying and interpreting risks is central to the effectiveness of a third-party security assessment.

Here’s how to go about it:

Deciphering control-based questionnaire reports

Start by reviewing the scores allocated to each control category, as this can give you an immediate sense of the third party’s areas of strength and weakness. Identifying any patterns or alarming trends that could indicate a systemic issue with the vendor’s security controls is crucial.

Beyond the scores, diving into the details matters. This involves scrutinizing the textual clarifications provided and evaluating any attached evidence or artifacts to validate or challenge the allocated scores.

Finally, organize your findings in a meaningful way. Ideally, you’ll sort findings based on how critical each control is, particularly in your specific engagement with the third party.

Making the most of intelligence reports

Cross-reference the third-party security ratings from external intelligence feeds with your internal evaluations. However, while external intelligence reports are valuable, they shouldn’t be the sole basis for your final decision. But they can help identify additional risks that may have been overlooked.

Consolidating and documenting findings

Aggregate all the data, findings, and analyses into a comprehensive risk report. This report should be accessible to all relevant stakeholders and be a foundational document for future assessments and risk management.

Here’s what to include:

• • A summary of findings
  • Risk scores
  • Recommendations for remediation or further action
  • Vendor’s comments and clarifications

Open dialogues and recommendations

Once the data collection and analysis phases are complete, the next crucial step is facilitating open dialogues with the relevant stakeholders and formulating actionable recommendations.

By engaging in open dialogues and offering clear, actionable recommendations, you make the third-party security assessment not just a compliance activity but a driving force for continual improvement in your security posture and that of your vendors.

Here’s a closer look at each of these areas:

Engaging with stakeholders

Share the preliminary findings of the assessment with internal teams involved in the process. This ensures transparency and allows different departments to offer their perspectives on the assessment’s implications.

Here are some best practices to consider:

• Use non-technical language for stakeholders who may not be versed in cybersecurity jargon.
• Employ visual aids like charts and graphs to help convey the level of risk associated with each vendor.
• Prioritize findings to focus discussions on the most critical vulnerabilities and controls.

Initiating conversations with third-parties

Initiate a dialogue with the third-party to discuss the findings. Present your findings and allow them to clarify, challenge, or offer remediation steps for any issues discovered. The tone should be collaborative rather than accusatory; remember, the goal is strengthening security postures for both parties.

Formulating recommendations

Formulate actionable recommendations based on the data collected and the insights gained during stakeholder discussions. These could range from suggesting specific remediation steps to considering termination of the vendor relationship for extreme risk cases.

It’s essential to weigh the advantages and disadvantages of continuing the vendor relationship. Consider factors such as:

• The cost of remediation vs. the risk of as security breach.
• The impact on business operations.
• The availability of alternative vendors who meet your security standards.

Auditable Attestations & Acknowledgments

Gathering evidence and assessments is incomplete without proper attestations and acknowledgments. These serve as formal verifications of the data gathered and provide an essential layer of accountability and legal safeguarding for both parties involved.

Collecting attestations and acknowledgments is not merely a bureaucratic step but is key to building a culture of risk awareness and accountability. This practice helps make well-informed decisions and provides an added layer of legal safeguarding, making your organization more resilient and capable of effectively managing risks across the board.

Third-Party Attestations

Attestations from third parties confirm the accuracy and factual nature of the provided data, which is essential for legal protection and bolstering confidence in the decision-making process. It is imperative that these attestations are collected formally, either through digitally signed documents or a secure, auditable platform like IsoraGRC.

Internal Acknowledgments

Attestations are not exclusive to third parties; it is equally important for internal stakeholders to acknowledge the findings. This buy-in ensures a universal understanding of the evaluation’s significance and outcomes. Similar to third-party attestations, internal acknowledgments can be collected digitally, facilitating easy storage and reference.

Specialized Sign-Offs

Certain industries or types of data may necessitate specialized sign-offs. For instance, a HIPAA Compliance Officer may be required to approve the use of protected health information (PHI). These specialized sign-offs act as an additional layer of compliance, ensuring that domain-specific laws and regulations are considered during the assessment process.

Additional Documents

Other essential documents include Business Associate Agreements (BAAs), Legal and Regulatory Compliance documents, Data Processing Agreements (DPAs), Non-Disclosure Agreements (NDAs), and Contractual Agreements. These documents are pivotal in ensuring that all parties understand and agree to their responsibilities, expectations, and requirements, and that the organization complies with all applicable laws and regulations.

Risk tracking, monitoring, and future assessments

Completing a third-party security assessment is not the end of the road. In fact, it’s merely a snapshot in time. Risks evolve, new vulnerabilities surface, and third-party vendors may undergo changes that affect their security posture. Continuous monitoring and periodic reassessments are essential for an effective TPSRM program.

Completing a third-party security assessment is not the end of the road. In fact, it’s merely a snapshot in time.

By actively tracking and monitoring risks and planning for future assessments, you can better manage the lifecycle of third-party risks. It ensures you stay agile in adapting to new challenges, maintain compliance, and protect sensitive data and systems.

The role of a risk register

A risk register is a centralized database where you can log all identified risks, their severity, and plans for mitigation or remediation. Using a risk register, you can track the progress of risk mitigation activities and ensure accountability. This is invaluable for demonstrating due diligence and compliance, as well as for internal auditing.

Assigning ownership and responsibilities

Every risk identified should have an owner—an individual or team responsible for managing that risk. Ownership is often best assigned based on expertise and capacity. For example, IT risks should be owned by the IT department, compliance risks by the compliance team, and so on.

Setting reassessment intervals

Risks are not static, and neither should be your assessments. Determine a sensible frequency for reassessment based on the level of risk, compliance requirements, and contractual obligations. In addition to scheduled reassessments, establish triggers for immediate reevaluation. For instance, a security breach at a third-party vendor would warrant an immediate reassessment.

An effective and collaborative Third-Party Security Risk Management (TPSRM) Program is essential for defending an organization’s most critical data against escalating supply chain attacks.

But it’s about more than just security—it’s about building trust in your partnerships and empowering internal and external stakeholders to participate.

Isora empowers Information Security & Assurance teams to create a collaborative workspace where their TPSRM program can thrive and scale.

By centering GRC around people, Isora not only facilitates risk reduction and regulatory compliance but also promotes program adoption, participation, and, most significantly, a risk-aware culture.

With Isora, Information Security & Assurance teams of all sizes can:

✔ Build a data-focused, organization-wide third-party inventory, where assessments, documents, and risks are centralized and metadata details like data classification, owners, users, contacts, and risks can be tracked.

✔ Launch custom or prebuilt security questionnaires (e.g., SIG, CAIQ, HECVAT, and others) where internal teams and third-parties can answer questions, collaborate, collect evidence, and sign attestations.

✔ Produce insightful risk reports and scorecards based on completed questionnaires that help you identify compliance gaps and perform statistical comparisons.

✔ Connect with any other platforms, including existing procurement, risk intelligence, and GRC platforms to enable the flow of information.

Join dozens of innovative teams who trust Isora to help them build and scale their GRC programs.

Discover how Isora can help your team build a TPSRM program everyone can trust.