Moving to the cloud improves flexibility and productivity, but to get these benefits, you must send your (and your customers’) data to third parties somewhere in the cloud. This introduces new security responsibilities, as every cloud provider, software vendor, or managed service you rely on becomes part of your cybersecurity ecosystem, whether you like it or not.
This means that if one of those partners mishandles your data, your business may face legal, financial, and regulatory consequences, even if you had nothing to do with the mistake.
What are "third-party risks" in the cloud?
For your technology partners to perform the services you need them to, you must upload your data to cloud providers, SaaS vendors, IT consultants, payment processors, and managed service providers (MSPs). Third-party risk refers to the cybersecurity, privacy, and operational risks introduced by these outside organizations as they store, process, or access your business data.
Even if your own systems are well protected, this data must leave the confines of your network, so a vulnerable vendor can easily become an entry point for attackers. Cybercriminals know this, so they increasingly target suppliers. If they can compromise just one trusted partner, they can get access to your systems and those of dozens or even hundreds of other customers.
Common third-party cloud risks include:
- Weak security controls at the vendor
- Excessive permissions granted to external users
- Poor identity and access management
- Data breaches affecting shared cloud environments
- Service outages that cause data loss
- Failure to comply with industry regulations
If any of these incidents happen to a partner that stores confidential data, you’re on the hook even if you weren’t involved or even aware.
Regulatory compliance: Your data, your responsibility
It is a common misconception among business owners that migrating data to the cloud transfers all responsibility to the cloud provider. Unfortunately, the reality is that most regulations and cloud providers follow a shared responsibility model.
Under this model, the provider only needs to secure underlying cloud infrastructure, while you remain responsible for how your organization stores, accesses, shares, and protects its data. If your vendor experiences a breach because you failed to perform reasonable due diligence or granted unnecessary access, regulators will still hold your organization accountable.
Think of the provider as a security guard at your office. They will bar anyone without an access badge from entering your building as instructed. However, if you hand out badges to unreliable people who allow them to fall into the wrong hands, that’s on you.
Regulators expect organizations to evaluate vendors, manage risks, and ensure appropriate safeguards remain in place.
Failing to do so and ignoring third-party risk can result in:
- Regulatory investigations
- Financial penalties
- Expensive data breaches and remediation
- Contract disputes
- Damage to customer trust and your reputation
Accountability following data: An example
A well-known example is the Target data breach in 2013. Attackers initially gained access to Target's network by compromising credentials belonging to a third-party HVAC contractor. Once inside, they moved through the network and stole payment card information from approximately 40 million customers.
Although the initial compromise occurred through a vendor, Target remained accountable for protecting customer data. The company faced regulatory scrutiny, significant legal settlements, remediation costs, and long-term reputational damage that ultimately totaled hundreds of millions of dollars.
How to mitigate third-party cloud risks
Managing third-party risk requires continuous oversight and enforcing strong policies. Before allowing any provider to access sensitive systems or data, evaluate its security practices, certifications, and compliance history. You should also establish clear security requirements in vendor agreements.
Times and technologies change, though, so periodically reassess your providers as your business grows and regulations change.
As part of your third-party risk management strategy, in addition to increased vendor scrutiny, you should:
- Grant vendors only the minimum access they need.
- Enable multifactor authentication for external accounts.
- Monitor third-party activity for unusual behavior.
- Maintain an inventory of all vendors with access to sensitive data.
- Develop an incident response plan that includes third-party breaches.
To simplify this process and ensure peak security, partner with an experienced managed IT services provider like us. XBASE’s cloud specialists will help you assess vendor security, implement access controls, monitor cloud environments, and ensure your third-party relationships align with regulatory requirements.
Contact XBASE for a consultation and ensure that a vendor's mistake doesn’t become your expensive problem.