10 Steps to Prevent Third-Party Data Breaches in 2023

In today’s digital landscape, third-party data breaches have become a major threat to organizations of all sizes.

As more companies outsource various functions to third-party vendors, the risk of a data breach increases significantly.

And, unfortunately, the consequences of a data breach can be severe, including financial losses, damage to reputation, as well as legal liabilities.

That’s why, in 2023, it’s more important than ever to take proactive measures to prevent third-party data breaches.

In this article, we will discuss ten practical steps that organizations can take to mitigate the risks associated with third-party vendors and partners and safeguard their sensitive information.

What Is a Third-Party Data Breach?

A third-party data breach happens when an unauthorized individual or a group of cybercriminals gains access to an organization’s sensitive data through a third-party vendor or partner.

Third-party vendors can refer to any external parties that a company shares its data with, such as cloud service providers, marketing agencies, or contractors.

As third-party vendors often have access to an organization’s most confidential information, including financial records, customer data, and intellectual property, these breaches can be extremely risky.

Check out these other types of data breaches to make sure your organization is safe from harm.

10 Steps to Prevent Third-Party Data Breach

Preventing third-party data breaches is crucial if you want to safeguard your company’s sensitive information.

The potentially severe consequences of these breaches highlight the need for a comprehensive and methodical approach to mitigate associated risks.

With that in mind, here are ten tried-and-tested steps you can take to proactively mitigate third-party data breaches and uphold your security:

#1. Perform Due Diligence on Your Vendors

To prevent data breaches resulting from unauthorized access to your sensitive data, it is critical to perform due diligence on third-party vendors.

Specifically, this involves conducting a thorough investigation of a vendor’s or supplier’s security policies and procedures before partnering with them.

Start by requesting that your vendor completes a security questionnaire covering various aspects of their security policies, access controls, and data protection practices. It would also be beneficial to review their security certifications such as SOC 2, ISO/IEC 27001, and HIPAA.

In addition to certifications, it is crucial to review your vendors’ track record and reputation. Research to determine if they have a history of data breaches or security incidents, and check references from other clients to gauge their reliability.

Maintaining an ongoing relationship with your vendor is also vital to ensure they continue to meet your security standards. Conduct periodic security audits or assessments to verify their compliance and provide training on your security policies and best practices.

By performing due diligence on your vendors, you can mitigate the risks of third-party data breaches and ensure the security of your organization’s sensitive information.

#2. Incorporate Risk Management

Integrating cybersecurity risk management into your vendor risk management program and contracts is essential to ensure accountability and reduce the risk of third-party data breaches.

One effective way to achieve this is by incorporating security ratings into your vendor contracts, demanding that vendors must maintain a minimum security rating or face contract termination.

You can also include a clause that requires vendors to promptly report and address security issues within a specified timeframe.

Incorporating Service Level Agreements (SLAs) into your vendor contracts can also be effective. SLAs allow you to specify the level of security required of your vendors and to set penalties for failing to meet those requirements.

By including SLAs in your contracts, you can enhance your control over vendor cybersecurity risk management and help safeguard your organization’s sensitive information.

#3. Secure Data in Transit And at Rest

Data can be vulnerable at different stages, including when it’s transmitted over a network or stored on devices such as servers and hard drives.

Stored data, especially if stored for a long time, is considered a very attractive target for cybercriminals, as they often assume that this data has more value and could be profitable if stolen.

However, data can be vulnerable throughout its entire life cycle, not only when it’s “resting”.

To secure data in transit, encryption is a widely used method. Encryption transforms data into an unreadable string of information that only authorized parties with the decryption key can access.

For example, organizations can use Transport Layer Security (TLS) to encrypt email messages or Virtual Private Network (VPN) connections to encrypt data transmitted over the internet.

For data at rest, a combination of access controls, encryption, and password protection can enhance security. Access controls limit the number of people who can access the data, while encryption can be applied to individual files or entire storage systems to protect against unauthorized access.

As for password protection, it should be layered, with different levels of authentication required to access different levels of sensitive information.

#4. Limit Data Sharing

Sharing data with third-party vendors is a necessary part of many business operations.

However, it’s important to be cautious when sharing sensitive information, as it increases the risk of data breaches. To minimize the risk, organizations should assess what data needs to be shared and with whom.

Sharing too much data can put an organization’s sensitive information at risk.

For example, vendors may only require access to one or two servers or databases, but get more access than necessary, such as broad VPN access. This practice can enhance efficiency for the vendor, but can also increase the likelihood of a third-party data breach.

To address this issue, Vendor Privileged Access Management (VPAM) is an approach that can limit and contain vendor permissions while also granting them sufficient access to fulfill their duties.

By implementing VPAM, businesses can reduce the risk of data breaches and maintain control over their sensitive information.

It’s important to remember that sharing data with third-party vendors should be minimized to the amount necessary for them to perform their intended role. #5. Keep Documentation Maintaining comprehensive records of third-party management is crucial for several reasons.

Firstly, it enables you to monitor the cyber posture of your suppliers over time, allowing you to assess their security practices and track any changes or potential security risks.

Secondly, documentation aids in ensuring proper cyber hygiene, including timely patch management and regular testing.

Lastly, documentation plays a pivotal role in compliance, serving as an audit trail that demonstrates the implementation of a robust third-party security risk management process.

By maintaining documentation, you can mitigate the risk of data breaches by ensuring that essential cyber maintenance tasks are completed, as well as use it as evidence that your organization has taken necessary measures to prevent such incidents.

In a nutshell, keeping documentation provides assurance that your organization has proactively managed third-party risks and taken steps to protect sensitive information.

#6. Take Into Account Fourth-Party Risk

Fourth-party risk is the risk that arises when your company’s suppliers outsource parts of their operations to other suppliers, thereby creating a chain of suppliers.

To identify fourth-party risks, you can use your vendors' System and Organization Control (SOC) reports.

The responsibility for managing fourth-party risk lies with your information security team, just as it does for third-party risk management.

Even if a third party provides additional security, your company is still accountable for implementing a comprehensive attack surface management strategy to avoid regulatory, financial, or reputational consequences from a fourth-party data breach.

#7. Wave Goodbye to Unreliable Vendors

When it comes to managing third-party risks, it’s crucial to have a clear plan in place for cutting ties with unreliable vendors. This means being able to identify when a vendor is not meeting your standards or is at risk of a data breach.

Terminating a relationship with a vendor may be a difficult decision, particularly if they provide critical services. However, the potential consequences of a data breach or loss of sensitive information far outweigh any benefits of working with an unreliable vendor.

Therefore, it is essential to have a contingency plan in place to ensure that the termination of a vendor relationship does not cause any disruption to your organization’s operations. This plan should involve finding alternative vendors or in-house solutions to replace the services provided by them.

#8. Implement Strict Password Policies and Multi-Factor Authentication

According to Verizon Data Breach Investigations, most cyber attacks are a result of passwords that are either weak or have been compromised. Not just that, but the probability of credentials being exposed on the dark web increases when the same password is utilized across various accounts.

Implementing strict password policies and requiring multi-factor authentication (MFA) for vendors accessing your systems is essential if you want to avoid that.

To implement strict password policies, start by setting requirements for password length. According to the OWASP ASVS, passwords should be at least twelve characters long.

In addition to password policies, multi-factor authentication adds an extra layer of security to vendor access. Multi-factor authentication requires vendors to provide additional authentication factors beyond just a password, such as a fingerprint, a token, or a one-time code sent to their mobile phone.

This reduces the risk of a data breach even if they have a vendor’s password.

#9. Train Employees on How to Identify and Report Suspicious Vendor Activity

One of the key steps to preventing third-party data breaches is to train employees on how to identify and report suspicious vendor activity.

While technical measures can go a long way towards securing your systems, human error and oversight can still leave your organization vulnerable to attack.

By educating your employees on how to recognize and report suspicious activity, you can create an additional layer of protection against third-party breaches. This can include training on how to identify phishing emails, social engineering attacks, and other forms of cybercrime

It’s also important to have clear protocols in place for reporting and investigating suspicious activity.

This can include establishing a clear chain of command and outlining the steps to be taken in the event of a security incident. By involving employees in this process, you can create a culture of security awareness and reduce the risk of third-party data breaches.

#10. Have a Clear Incident Response Plan

In the event of a third-party data breach, it’s important to have a well-defined data breach response plan in place to quickly and effectively respond to the situation.

The response plan should outline the roles and responsibilities of the incident response team, the steps to be taken to contain the breach, and the process for notifying affected parties.

To create an incident response plan, start by identifying potential security incidents that could impact your organization. This should include third-party breaches, but also other types of cyberattacks, such as phishing scams, malware infections, or ransomware attacks.

Regular testing and updating of the incident response plan is crucial to ensure that it remains effective and up-to-date. The plan should be reviewed and updated at least annually, as well as after any major changes to the organization’s infrastructure or vendor relationships.

Didn’t manage to prevent a data breach from happening to your organization? Learn what to do in the aftermath of a data breach to mitigate the risks as much as possible.

How Do Third-Party Data Breaches Happen?

Third-party data breaches can occur in many ways.

According to a study by Risk Based Security, over 60% of data breaches in 2020 involved a third party, while according to a report by Verizon, 82% of data breaches are caused by human error, such as employees falling for phishing scams, sharing login credentials, or losing devices containing sensitive information.

Here are some examples:

• In 2016, a data breach at Dropbox exposed the email addresses and passwords of 68 million users. The breach was caused by a Dropbox employee who had reused their company password on a third-party website that had been hacked. Hackers were then able to use this password to gain access to Dropbox’s network and steal user information.
• In 2013, Target was exposed to a data breach caused by poor security practices. In this case, hackers gained access to Target’s point-of-sale system by stealing login credentials from a third-party vendor that provided refrigeration HVAC services to Target. The hackers were able to use these credentials to install malware on Target’s system, which allowed them to steal the credit and debit card information of millions of customers.

The examples above, emphasize the significance of thoroughly vetting third-party vendors and partners and regularly evaluating their security practices.

Additionally, it highlights the importance of providing comprehensive training to employees on how to recognize and avoid phishing scams, enabling 2FA everywhere, and enforcing strong password policies to mitigate the risk of third-party data breaches.

Wondering whether you can afford a potential data breach? Learn all about data breach costs in our post.

3 Examples of Third-Party Data Breaches

Curious about some other examples of third-party data breaches that “made headlines?”

The following will convince you just how important it is for your business to have a strong data breach response plan in place:

• Microsoft: In early 2021, Microsoft experienced a major data breach that exposed sensitive information from its Exchange email service. The hackers were able to access email accounts and other data by installing web shells, which are malicious scripts that allow them to remotely control a compromised server. The web shells enabled hackers to steal sensitive data, such as email messages, contact lists, and calendar entries.
• Uber: In December 2022, Uber, the global ride-hailing giant, suffered a third-party data breach due to a compromised vendor. Teqtivity, an IT asset tracking, monitoring, and management service provider, confirmed that a hacker had breached its systems and accessed email addresses and other information relating to more than 77,000 Uber employees.
• SolarWinds: In December 2020, SolarWinds confirmed that its network had been breached and a malware program was inserted into software updates of its technology platform. The malware scanned downstream customer networks, detected security tools, and connected to the attacker’s command and control servers. 18,000 customers were impacted, including government agencies and 14% of the Fortune 1000.

A Data breach insurance policy can also help mitigate some of the damage of a data breach. Having a comprehensive policy in place provides you with the financial resources to respond to the incident effectively.

Breachsense Can Help You Avoid Third-Party Data Breaches

Are you worried about the security of your company’s sensitive data?

Breachsense can help you avoid third-party data breaches by alerting you in real-time when your user’s credentials appear in data breaches on the dark web, allowing you to proactively reset stolen credentials before hackers can exploit them.

Breachsense provides flexible integration with virtually any application, SIEM, or browser, making it easy for businesses to implement the service into their existing security tools.

With over 30 billion breached credentials and growing, Breachsense has the data and expertise to help organizations of all sizes and industries prevent account fraud.

Let Breachsense’s offense become your defense.

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