7 Third-Party Risk Assessment Best Practices You Can’t Afford to Ignore
In today’s interconnected business world, your security is only as strong as your weakest link—and increasingly, that link is a third-party vendor. From the cloud provider that stores your customer data to the marketing analytics tool on your website, your organization relies on a complex web of outside partners. While these relationships are essential for growth, they also create significant risk.
Consider this: 98% of organizations have at least one third-party vendor that has suffered a data breach. In 2023 alone, 61% of companies experienced a third-party data breach, a figure that has tripled since 2021. These aren’t just abstract numbers; they represent real financial and reputational damage.
This is where a robust Third-Party Risk Assessment (TPRA) process becomes a strategic necessity. It’s no longer a check-the-box compliance task but a critical function for business resilience. A strong TPRA program helps you proactively identify, evaluate, and mitigate the cybersecurity, operational, and financial risks introduced by your vendors.
Feeling overwhelmed? We’ve broken down the process into seven essential best practices to help you build a modern and effective third-party risk management framework.
1. Create a Comprehensive Vendor Inventory
You can’t protect what you don’t know you have. The first and most critical step is to create a complete, centralized inventory of every third-party relationship in your organization. Without full visibility, you’re operating with blind spots. This process often uncovers “shadow IT”—unauthorized software or services used by employees that pose a significant, unmanaged threat.
Start by forming a cross-functional team with members from IT, procurement, legal, and finance to consolidate vendor data. Your central register should document key details for each vendor, including the services they provide, the data they access, their importance to business operations, and a designated internal owner.
2. Tier Your Vendors Based on Risk
Not all vendors pose the same level of risk, so a one-size-fits-all assessment is both inefficient and ineffective. The best practice is to categorize, or “tier,” your vendors based on their potential impact on your business. This allows you to focus your most rigorous assessment efforts where they matter most.
A common method is a three- or four-tiered system based on factors like access to sensitive data and operational criticality:
Tier 1 (Critical/High-Risk): These are vendors essential for your core operations or those with access to sensitive customer or company data (e.g., payment processors, cloud infrastructure providers). They require the most stringent and frequent assessments.
Tier 2 (Medium-Risk): This tier includes vendors that are important but not critical, or those who have limited access to sensitive data.
Tier 3 (Low-Risk): These are vendors providing non-critical services with no access to sensitive systems or data (e.g., office suppliers).
By tiering vendors, you can allocate resources more effectively, dedicating deep-dive reviews to the high-risk partners while streamlining assessments for the low-risk ones.
3. Standardize and Automate Security Questionnaires
Security questionnaires are a cornerstone of due diligence, but manual, spreadsheet-based processes are slow, error-prone, and frustrating for everyone involved. To create a scalable program, standardize your assessments using established frameworks like the NIST Cybersecurity Framework (CSF), ISO 27001, or SOC 2.
However, standardization doesn’t mean rigidity. Questionnaires should be tailored to the vendor’s tier and services. Sending a 300-question assessment to a low-risk vendor is a waste of time and goodwill. The real game-changer here is automation. Modern TPRM solutions use AI to streamline the entire process. For your team, this means automated distribution and analysis. For your vendors, AI-powered tools can pre-populate answers by referencing existing security documentation, reducing completion time by as much as 80%.
At Targhee Security, we see firsthand how AI-driven questionnaire automation eliminates the friction that slows down sales cycles and vendor onboarding. By replacing manual efforts with intelligent automation, security teams can focus on strategic risk mitigation instead of administrative tasks.
4. Implement Continuous, Real-Time Monitoring
Risk is not static. A vendor that is secure today could be breached tomorrow. That’s why point-in-time assessments are no longer enough. Adopting a continuous monitoring strategy is essential for detecting emerging threats that annual or quarterly reviews will miss. In fact, continuous monitoring can help you detect threats and vulnerabilities far more quickly than periodic reviews.
Effective continuous monitoring includes:
Automated Threat Scanning: Real-time tracking of a vendor’s security posture for new vulnerabilities, data leaks, or malicious activity.
Dynamic Risk Scoring: Adjusting a vendor’s risk score based on live events. A data breach or a drop in security rating should trigger an immediate alert and review.
This proactive approach allows you to identify and mitigate issues as they arise, rather than discovering them months after the fact.
5. Establish Ironclad Contracts and SLAs
Your contracts are your primary enforcement tool. They must clearly document expectations and responsibilities for both your organization and the vendor. Vague agreements leave you exposed when an incident occurs.
Work with your legal and procurement teams to ensure all vendor contracts include specific, enforceable clauses on:
Security & Compliance: Mandate adherence to specific security standards and regulations relevant to your industry (e.g., GDPR, HIPAA).
Service Level Agreements (SLAs): Define clear, measurable performance metrics, including uptime, response times, and breach notification windows (e.g., 72 hours).
Right to Audit: Include a clause that gives you the right to assess the vendor’s security controls.
Exit Strategy: Outline a clear plan for data retrieval, service transition, and secure data deletion upon contract termination.
6. Create a Centralized Hub for Security Documentation
Fragmented documentation stored in emails and shared drives creates chaos during audits and security reviews. A modern best practice is to establish a centralized, secure “Trust Center” where all compliance and security information is managed. This creates a single source of truth for both your internal teams and your external partners.
For instance, Targhee Security’s Trust Center provides partners with passwordless, self-service access to real-time compliance documentation. This dramatically reduces the back-and-forth of inbound security inquiries—by up to 50%—and provides a transparent, auditable trail of your security posture. It streamlines vendor reviews, accelerates sales cycles, and builds a foundation of trust with your partners.
7. Develop a Proactive Incident Response Plan
Even with the best preventative measures, third-party incidents can still happen. A well-rehearsed incident response plan is critical to minimizing the damage. This plan should be developed specifically with third-party scenarios in mind.
Key elements include:
Cross-Functional Collaboration: Your IT, legal, and communications teams must be prepared to work together to contain the incident.
Vendor Communication Channels: Establish clear and immediate lines of communication with your critical vendors for incident reporting.
Tabletop Exercises: Regularly conduct simulations of third-party breach scenarios (like a ransomware attack via a supplier) to test and refine your response protocols.
By preparing for the worst, you can ensure a coordinated, effective response that protects your customers, your data, and your reputation.
Implementing these best practices requires a strategic shift from manual, periodic reviews to a proactive, automated, and continuous approach. If you’re ready to streamline your security assessments, reduce questionnaire fatigue, and accelerate your sales cycle, discover how Targhee Security can help you build a more efficient and trusted compliance program.
