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How to Mitigate Risks from Third-Party Data Breaches

Tony Caccavo, Esq. is a former educator, attorney, and the CEO of TeamPassword, a password management company. He believes cybersecurity tools and information should be made accessible, to better protect individuals, companies, and society at large.

2024-04-01T16:47:00.000Z9 min read


Picture this: You're going about your business as usual when suddenly, your organization faces a serious cyber threat. This sneaky attack that appears to come from almost nowhere? A third-party data breach that can wreak havoc on your business faster than you can say “Password123”. In fact, the average cost of a data breach in the United States in 2023 amounted to an eye-watering $9.48 million.


Third-party data breaches can happen to anyone, at any time. The scary part? By the time they happen, they are largely out of your control. This type of breach happens when a third-party vendor or partner who holds your company data suffers a cyber attack themselves, and your sensitive data is exposed.


So, while you might have all the right defenses in place to protect your data within your business, how do you keep your precious data safe from prying eyes once it’s in the hands of a third party?


Don’t panic. There are practical steps you can take to protect your business from a third-party data breach.

[Table of Contents]

Understand the Enemy

Before we get into how to protect yourself from third-party data breaches, let's take a look at what we’re up against. These breaches happen when cyber attackers gain unauthorized access to the systems of your partners or vendors, allowing them to get their hands on sensitive information, such as customer data or financial records.


Now, you might wonder, "Why target my vendors?" Well, this is a strategic tactic for third-party breaches. They give hackers a way to sneak through the backdoor into your organization, bypassing your usual defenses. So, even if you have the right cyber security measures in place, a weak link in your supply chain could still spell disaster for your business.

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Common Data Breaches Caused by Third-Party Vendors


  • Unauthorized Access: Third-party vendors with excessive access privileges might accidentally or intentionally access sensitive data, leading to breaches. 

  • Misconfigured Services: Misconfigurations in third-party services or cloud environments can expose sensitive data to unauthorized access. For example, if storage or databases are set up incorrectly, they could be accessed by the public or unauthorized parties.

  • Supply Chain Attacks: Attackers may compromise third-party vendors to gain access to their clients' networks or data. They could do this by sneaking malware into software updates or finding weaknesses in the vendor's systems to infiltrate their clients' networks.

  • Vendor Compromise: If hackers break into a third-party vendor's systems, they could get into their clients' sensitive data. This might happen through tricks like phishing emails, spreading malware, or finding other ways to trick the vendor's employees or systems.

  • Insufficient Security Measures: Third-party vendors might not have sufficient security measures to safeguard sensitive data, including encryption, access controls, or intrusion detection systems. As a result, the data becomes vulnerable to exploitation by malicious attackers.

  • Data Sharing Practices: Sometimes, third-party vendors may share or transfer data without proper authorization or security measures, leading to data breaches or unauthorized disclosures.

Assess Your Risks

Now that you know what we're dealing with, it's time to assess any potential vulnerabilities in your supply chain and strengthen your defenses. It can be easy to think, “It won’t happen to me” – until it does, and you’re left dealing with the repercussions. Leaked customer data can cripple your reputation, while unauthorized access to sensitive financial information could have devastating financial consequences for your business.


Start with a thorough review of your third-party relationships, identifying all vendors and partners who have access to your sensitive data. Once you've got your list, categorize your vendors based on the level of risk they present to your organization.


For example, a cloud service provider who has access to your financial data would pose a much higher risk than your ae TLD provider with limited access to such sensitive information.

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Prevent Third-Party Vendor Data Breaches

Once you've identified your high-risk vendors, it's time to come up with a defense plan to protect yourself from potential breaches.

Strict Security Protocols

Start by setting strict security protocols and standards for all third-party relationships. Clearly outline your expectations for data protection, access controls, and incident response. Reputable partners should have no problem complying with these measures and ideally, they ought to have their own strong security measures already in place to safeguard your sensitive data.


Then, work closely with your vendors to ensure they stick to your security standards and implement adequate safeguards for your data. This might involve regular security assessments, encryption protocols, or multi-factor authentication measures to prevent unauthorized access.


Information security should be top of your priority list when choosing new vendors to work with, particularly those who will be granted access to sensitive data. It's crucial to discuss security measures with potential vendors from the start and have a good understanding of how they handle both their own data security and what measures they have in place to protect your information. Only work with vendors whose security practices match your own standards.


Vendor Risk Management

Establishing that your third-party vendor has a security program in place is just the first step. When you’re trusting a partner with highly sensitive data, you need to know that they're serious about managing risks and investing resources into protecting themselves from any vulnerabilities.


Ask for their latest internal risk assessments, penetration testing, and compliance frameworks. They should have a comprehensive risk management plan, a strategy for mitigating supply chain risks, and protocols for addressing potential data breaches.


Continuously monitoring third-party risks provides ongoing visibility into the vendor's cybersecurity practices. Conduct quarterly assessments to assess the vendor's performance metrics and overall security stance.


Keep an eye on their cybersecurity practices regularly. Check how they're doing every few months with quarterly assessments of the vendor's performance metrics and overall security stance.

Free to use image sourced from Pexels


Regular Audits

Don’t just take your vendor's word for it when it comes to data security. Conducting audits is crucial to understand the true state of your vendor's security. Perform audits regularly, especially when dealing with highly sensitive data entrusted to a vendor. 


These audits assess how well the organization adheres to its security compliance framework and its track record from previous audits. Look out for any signs of compromise and evaluate how effectively the vendor manages cybersecurity risks.

Secure Data Storage and Transfer

Working with third-party vendors often involves exchanging or sharing data. For example, consider a company that uses an automated customer service system provided by a third-party vendor. The customer details and interactions logged by the system are likely to involve data exchange. 

Without a well-defined policy in place, the storage and transfer of data within this system could pose a whole host of risks for the organization. They could find themselves exposed to unauthorized access, non-compliance with data protection laws, and even a data breach.


Establishing clear guidelines enables companies to outline boundaries and expectations for data storage and transfer. This makes sure that the third-party vendor handles your customer data with the same level of care and security standards as you do. 


Free to use image sourced from Pexels

Least-Privileged Access

Granting excessive access to third parties is a common cause of data breaches. To better protect yourself, it's important to be strict when it comes to access management. It might take a little more thought and management, but it could protect you from a lot of trouble further down the line.


Implementing least-privileged access ensures that third-party service providers have only what they absolutely need for their tasks, minimizing the risk of breaches.


Consider a situation where a company implements a third-party contact center integration into its operations. If this third-party provider is given unrestricted access to customer data, it would pose a huge security risk. Their representatives might gain access to sensitive personal details, including names, addresses, and credit card details. In this scenario, a data breach would be devastating. 


To mitigate this, the company can use least-privileged access. This means the provider only gets access to what they absolutely need, like customer contact details for making calls and access to customer support tickets. 

Monitoring and Vigilance

Third-party vendors play vital roles in your supply chain, but they also bring risks like data breaches and compliance issues if not properly monitored. Just checking vendors at the beginning of your relationship isn't enough; ongoing monitoring is key. Keep a close watch on your third-party relationships for any unusual activity that could mean there's been a breach.


For example, if you see a sudden increase in data transfers or access requests from a vendor's account at odd times, it could be a red flag. You should investigate any anomalies like this straight away to determine if they represent a security threat or indicate a breach in progress.


Additionally, set up robust systems to monitor who can access critical data. This helps you quickly spot and stop any unauthorized access.



Free to use image sourced from Pexels

Secure Your Company's Data

While it might feel daunting to try to protect data that is outside your control, there are plenty of sensible precautions you can take to keep your company data safe.


To help reduce your chances of becoming the next victim of a third-party data breach, it’s important to implement strong security protocols and conduct regular assessments to catch any issues.


Stay alert, keep on top of any new security trends or threats as they emerge, and adapt your security measures to address evolving risks. By being proactive, businesses can handle third-party data breaches better, protecting their valuable data.

Use a Password Manager

A great way to mitigate the risks from third-party data breaches is by using a password manager like TeamPassword. A password manager provides one secure location to store your company's online account information and other sensitive data. TeamPassword enables users to share records in groups, thereby limiting who has access to the login credentials. Creating a strong unique password for every account is made easy with TeamPassword's built-in password generator that can create a complex thirty-two-character password in milliseconds. Admins can also use TeamPassword's activity log to monitor who has accessed and changed each record to monitor access and meet compliance standards. 

Whether you use TeamPassword or another password manager, a password manager is an essential tool to protect yourself from third-party data breaches. 


On a final note, think about getting cybersecurity insurance to lessen the financial blow of a possible breach. While insurance can't stop a breach, it can give valuable protection against the expensive fallout of data loss or theft.

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