A third-party vendor is a person or company that provides services for another company (or that company’s customers).
While vendors are considered “third parties,” some industries differentiate a “third-party vendor” specifically as a vendor under written contract. However, not all vendors work under a contract. For clarity’s sake, the term “third-party vendor” in this article refers to any individual or company that provides services to another company with or without a contract.
Third-party vendors in the tech world include cloud hosts, cloud-based software solutions, business partners, suppliers and agencies. Any person or business that accesses and processes company data is also considered a third-party vendor. This can include tax professionals, accountants and email list services.
Goods and services obtained from third-party vendors can include, but aren’t limited to:
In today’s world, it’s impossible to avoid using third-party vendors. No matter how many departments your company creates, you’ll never cover every service you’ll ever need. Nor should you.
You’ll save time. Nobody has time to learn every skill or hire every person necessary to run a business. Third-party vendors make it possible to run a business smoothly by obtaining all the professional services required to operate and fulfill orders for your customers.
You’ll save money. Perhaps the biggest benefit is the cost savings. Contracting third parties for work as needed is significantly cheaper than always having professionals on company payroll. For instance, it’s far cheaper to hire a lawyer when you need one rather than keep a lawyer on retainer.
Another way third parties save money is through competition. Firms that provide common services usually have decent competition, which keeps fees reasonable.
You’ll get expertise. Your company doesn’t have time to develop a new team of experts. The time and cost of doing so would be enormous. Hiring a third-party vendor for expertise will get you better results.
If your vendors fail to deliver, you’ll fail to deliver. However, risk is inherent in any business relationship. Using third-party vendors comes with many risks, most of which can be mitigated.
The biggest risk is choosing the wrong third-party vendor that doesn’t hold your high security standards. For instance, your network security team needs to follow security protocols that live up to your specific standards. If your company is bound by regulations like HIPAA, you can’t afford to hire a network security company that doesn’t use high-level encryption. You need a vendor that understands regulations and is willing to adapt to meet those regulations.
When you’re bound by data privacy regulations, you need to know exactly what security standards are being implemented and if they aren’t on par with your security standards, you need to find a new vendor. Otherwise, you’re risking a data breach.
Data breaches are a big deal when you’re protecting personal information regulated by big industries. Unfortunately, data breaches due to lax security are on the rise and are more common than ever before. In just the first quarter of 2020, 8.4 billion records were exposed in data breaches.
Data breaches can cause disruptions to operations, devastating financial consequences, legal action and a damaged reputation. To avoid these, you can’t let your guard down.
Just because data breaches are on the rise doesn’t mean your business has to be next. The best way to protect your data is to manage vendor security.
Every vendor you do business with should meet or exceed your company’s security standards. You also need to perform risk assessments periodically to find out where your company is vulnerable so you can fix those problem areas quickly.
Risk assessments can be cumbersome and time-consuming, especially with multiple vendors. That’s where we can help.
With Panorays’ vendor assessments, you’ll get a 360-degree view of just how secure your vendor’s assets are. We’ll check on assets from a hacker’s point of view to uncover any possible cyber gaps, and provide remediation plans to mitigate them.
We’ll also check to see if your vendors are adhering to regulations like GDPR, CCPA, NYDFS and SIG, based on their responses to an automated security questionnaire. Your vendors will then be continuously monitored, and you will be alerted of any issues.
Are you unsure whether your vendors are adhering to your security standards? Sign up for a free Panorays demo, or contact us to learn more.