Third-Party Cyber Risk Management: The Hidden Dangers of Vendor Relationships

Most organisations rely on third-party vendors for essential services, from cloud hosting and software providers to contractors and supply chain partners. While these partnerships improve efficiency and reduce costs, they also introduce hidden cyber security risks. With more IT functions outsourced and increased reliance on cloud services, attackers are targeting vendors as a pathway to bypass internal security. Without clear visibility and structured governance, even trusted vendors can become a source of risk.

Identifying and Prioritising Third-Party Cyber Risks

Not all vendors present the same level of risk. Some have access to sensitive systems or customer data, while others provide non-critical services. The key is identifying which suppliers are most vital to your organisation and operations.

A criticality assessment helps organisations focus their cyber security efforts where they’ll have the greatest impact. By evaluating the importance of each vendor’s services and the systems they support, you can make smarter, risk-based decisions about oversight, access controls, and mitigation strategies.

Importantly, this isn’t a one-time exercise. As your business evolves, technology changes, or new services are introduced, the criticality of vendors may shift. What was once essential may become less central, and new suppliers may take on a pivotal role. Regular review ensures your vendor risk management remains relevant and effective.

Common Gaps in Third Party Cyber Risk Management

Even with trusted partners, several risks often go unnoticed:

• Weak access controls – Third parties may retain ongoing remote access without proper monitoring.
• Unpatched or outdated systems – Legacy applications or integrations can create exploitable vulnerabilities.
• Shadow IT and unvetted services – Teams may adopt new tools or cloud platforms outside formal procurement.
• Poor data handling – Inadequate encryption or informal data sharing increases exposure.
• Limited incident response planning – Some vendors lack mature processes for detecting and reporting breaches.

These issues are often not malicious but stem from gaps in governance, unclear responsibilities, or inconsistent oversight.

When these gaps go unchecked, they can quickly escalate into incidents that disrupt operations and damage trust.

The Business Impact of a Third-Party Related Cyber Incident

A cyber incident linked to a third-party vendor can have serious consequences:

• Business disruption and financial losses: Cyber incidents may interrupt operations, causing direct and indirect financial damage.
• Loss of customer trust: Customers expect their data to be secure; vendor security failures can erode confidence.
• Business disruption and financial losses: Cyber incidents may interrupt operations, causing direct and indirect financial damage.
• Long-term reputational damage: News of breaches can harm your brand and make future partnerships more difficult.
• Regulatory penalties: Non-compliance or breaches may lead to fines or sanctions.

How to Strengthen Third-Party Risk Management

Effective management starts with visibility. Organisations need to understand which vendors they use, what data or systems they access, and how those services support critical business functions.

Practical steps include:

• Conduct thorough vendor risk assessments to evaluate each supplier’s potential impact.
• Include cyber security clauses in contracts to define responsibilities and audit rights.
• Continuously monitor vendor performance and compliance rather than relying on one-time onboarding checks.
• Limit vendor access rights to only what’s necessary for their role or service.
• Maintain regular communication with vendors about their security practices and improvements.

Conclusion

Third-party vendors are vital to modern business, but they also bring hidden cyber risks. Taking proactive steps to manage these risks protects both your organisation and your supply chain partners, turning potential vulnerabilities into a managed part of your overall security strategy.

At Kaon Security, we help organisations take control of their third-party cyber risks by providing the expertise, structured processes and tools needed to strengthen vendor oversight. From third party risk cyber assessments through to policy frameworks and ongoing governance, our approach ensures your supply chain partners don’t become your weakest link.