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Third-Party Risk Management for MSPs: Safeguarding Clients’ Data

Navigating the Cybersecurity Minefield: Third-Party Risk Management for MSPs

Managed Service Providers (MSPs) are constantly evolving, expanding their offerings, and taking on greater responsibility in securing their clients’ digital assets. One area of growing importance is third-party risk management, an area where MSPs will likely find themselves central in helping their clients navigate the complex web of vendors, subcontractors, and supply chain vulnerabilities. This post dives into the critical aspects of third-party risk management, highlighting key takeaways and actionable insights for MSPs looking to strengthen their security posture and deliver comprehensive protection to their clients.

The Expanding Attack Surface: Vendors, Subcontractors, and the Supply Chain

The modern IT landscape is a complex ecosystem of interconnected systems and services. MSPs often rely on a vast network of vendors and subcontractors to deliver their services, and this reliance creates a significant expansion of their and their client’s attack surface. It’s becoming increasingly vital for MSPs to have a deep understanding and robust management of the security practices of every organization that has access to their data or their client’s data. This can include everything from SaaS vendors to specialized subcontractors.

Key Takeaways: Essential Strategies for Third-Party Risk Management

1. Contractual Due Diligence: The Foundation of Protection

One of the most crucial steps in mitigating third-party risk is robust contractual due diligence. This involves carefully reviewing all agreements with vendors and subcontractors before signing. MSPs should look for specific provisions related to:

Warranties: Ensure that vendors guarantee the security and performance of their services, including conforming to any marketing materials.
Data Security: Confirm that vendors have implemented adequate technical, administrative, and operational controls to protect data.
Audit Rights: Negotiate the right to audit vendors’ security practices, whether through questionnaires, documentation reviews, or, in some cases, on-site assessments.
Incident Response: Establish clear protocols for incident notification and response, including timelines and responsibilities.
Liability Limits: Carefully consider liability limitations to avoid being left holding the bag in case of a security incident.

2. Know Your Vendors’ Security Posture

A thorough understanding of your vendors’ security practices is critical. Consider:

Data Access: Identify all vendors and subcontractors that have access to your data or your client’s data.
Security Controls: Assess the security controls implemented by vendors, including those related to access control, data encryption, and vulnerability management.
Security Awareness Training: Ensure that subcontractors are included in any security awareness training programs, or that they have their own sufficient security awareness training.

3. Subcontractor Agreements: Extending Responsibility

MSPs are responsible for the actions of their subcontractors. Subcontractor agreements should mirror the core security and contractual requirements as vendor agreements. This should also include the ownership of intellectual property.

4. Vendor Management as a Core Function

Third-party risk management should be treated as a core business function, perhaps even a standalone role or committee within the MSP. Implementing a vendor management program enables constant, careful oversight.

5. Reselling vs. Service Delivery: Understanding Your Role

Clearly define your role in relation to each vendor. If you are reselling a service, your liability and responsibilities will be different than when you bundle vendor services into your own managed service offerings. In the latter, it’s critical to pass through appropriate end-user license agreements.

The Future is Now: AI, LLMs, and Vendor Data

The rise of Artificial Intelligence (AI) and Large Language Models (LLMs) is creating new opportunities for vendors, but also new risks. MSPs must understand how vendors are using data and insist on their agreements that the vendors only use the data to deliver services. Vendors should also have a protocol on using aggregated, de-identified, and anonymized data.

Conclusion: Proactive Protection for a Secure Future

Third-party risk management is no longer optional for MSPs; it’s a critical component of delivering secure, reliable services. By implementing the strategies outlined above, MSPs can protect themselves, their clients, and their businesses from the growing threat landscape, while also exploring new billable revenue streams.