Modern businesses depend on a network of vendors and third-party providers to keep operations running smoothly. It’s a whole symbiotic ecosystem. While these partnerships create the supply chain and surface innovations, they also introduce significant cybersecurity risks.
A single weak link in your vendor can expose sensitive data, disrupt workflows, and lead to costly compliance violations.
The financial consequences are real. Breaches tied to third parties often result in regulatory fines, legal fees, and reputational damage that can take years to recover from. Understanding these risks—and implementing strong vendor cybersecurity practices—is critical to protecting both your data and your profitability.
Learn more about keeping your operations running smoothly and avoiding cyber incidents in Impact’s webinar, Keys to Cybersecurity in Manufacturing: Prevent Downtime, Stop Threats.
Understanding Vendor and 3rd Party Data Sharing
Every business relationship involves some level of data exchange. Vendors may need access to customer records, financial information, or operational systems to deliver their services. While this sharing is often necessary, it creates additional points of vulnerability that attackers can exploit.
The challenge is that data rarely stays in one place. It moves across platforms, applications, and networks, often outside your direct control. If a vendor lacks strong security protocols, your sensitive information can be exposed through their systems—even if your own defenses are robust.
Key considerations when evaluating vendor data sharing include:
- Type of Data Shared: Customer PII, payment details, intellectual property, and operational data all carry different levels of risk.
- Access Controls: How vendors authenticate users and restrict access to sensitive systems.
- Storage and Transmission Practices: Whether data is encrypted in transit and at rest.
- Compliance Alignment: Vendors should meet the same regulatory standards your organization is required to follow.
- Understanding these factors is the first step toward reducing exposure and ensuring that third-party relationships don’t become liabilities.
The Risk of Connected Networks
When you integrate vendors and third-party providers into your systems, you expand your attack surface. Each connection—whether through APIs, shared platforms, or remote access—creates potential entry points for cybercriminals. The more interconnected your network becomes, the harder it is to maintain visibility and control.
One of the most serious risks is lateral movement. If an attacker compromises a vendor’s system, they can use that foothold to move across connected networks, escalating privileges, and accessing sensitive data within your environment.
This type of attack often goes undetected because it exploits trusted relationships rather than brute-force methods.
Supply chain compromises amplify this risk. A single breach in a widely used vendor can cascade across hundreds or thousands of organizations, as seen in high-profile incidents like SolarWinds. These attacks exploit the inherent trust businesses place in their partners, making them difficult to prevent without proactive measures.
Weak lateral networks, those with poor segmentation and insufficient access controls, make these scenarios even more dangerous. If your systems allow broad access between internal and external environments, a breach in one area can quickly spread.
To reduce these risks, organizations should:
- Implement network segmentation to limit movement between systems.
- Enforce least privilege access for vendors and third parties.
- Continuously monitor for unusual activity across all connected endpoints.
- Require vendors to adhere to strong authentication and encryption standards.
Connected networks are essential for modern business, but without proper safeguards, they can become the fastest route to a costly breach.
CMMC 2.0 Implications
For organizations working with the Department of Defense (DoD) or handling Controlled Unclassified Information (CUI), the Cybersecurity Maturity Model Certification (CMMC) 2.0 is a requirement.
This framework sets clear expectations for how contractors and their vendors must protect sensitive data, and non-compliance can result in lost contracts and significant financial penalties.
CMMC 2.0 emphasizes three key levels of cybersecurity maturity, ranging from basic safeguarding to advanced practices aligned with NIST standards. Vendors and third parties that fail to meet these requirements create compliance gaps for your organization, which can put your eligibility for DoD work at risk.
Stats on 3rd Party Cyber Breaches
Third-party breaches have become a growing trend with measurable financial impact, and recent studies highlight just how costly these incidents can be:
- 51% of organizations experienced a data breach caused by a third party in the past two years.
- The average cost of a third-party breach is estimated at $4.76 million, slightly higher than the global average for all breaches.
- Supply chain attacks increased year-over-year.
- Breaches involving third parties take 26 days longer to identify and contain compared to internal incidents, adding to remediation costs.
- 62% of breaches linked to vendors involved stolen or compromised credentials, underscoring the need for strong authentication practices.
These numbers illustrate how vendor and third-party risks can cause costly breaches. The longer detection times and higher average costs make proactive vendor risk management essential for protecting your bottom line.
Final Thoughts on The Importance of 3rd Party Cybersecurity Practices
Vendor and third-party cybersecurity is a business-critical issue. Every external connection introduces potential vulnerabilities that can lead to financial loss, regulatory penalties, and reputational harm. These risks aren’t theoretical—they’re documented in rising breach statistics and costly incidents across industries.
Organizations that prioritize vendor risk management strengthen their resilience and protect their bottom line. Cybersecurity is about maintaining trust and ensuring operational continuity in an increasingly interconnected world.
Learn more about how you can avoid costly cyber incidents in Impact’s webinar, Keys to Cybersecurity in Manufacturing: Prevent Downtime, Stop Threats.
