Vendor and Third-Party Risk Management Policy (SEC-POL-005)

1. Objective

The objective of this policy is to establish requirements for assessing, managing, and monitoring security risks associated with vendors and third-party service providers. This policy ensures that [Company Name] maintains appropriate oversight of external parties who access, process, store, or transmit company information while maintaining SOC 2 compliance.

2. Scope

This policy applies to all [Company Name] workforce members involved in vendor selection, contract negotiation, or ongoing vendor management. It encompasses all external parties including vendors, service providers, consultants, and contractors that have access to [Company Name] information systems, data, or facilities. This policy covers the entire vendor lifecycle from initial assessment through contract termination.

3. Policy

[Company Name] shall implement a vendor risk management program to ensure that all third-party relationships meet security and compliance requirements.

3.1 Vendor Classification and Risk Assessment

All vendors shall be classified based on their risk level and subject to appropriate due diligence and ongoing monitoring.

3.1.1 Vendor Risk Classification

Vendors shall be classified into risk categories based on the following factors:

  • Type and sensitivity of data accessed (Confidential, Internal, Public)
  • Level of system access required (network, applications, databases, privileged access)
  • Business criticality and financial impact
  • Duration and scope of engagement

Risk Classifications:

  • High Risk: Vendors with access to Confidential data or critical systems; cloud service providers; vendors with privileged access
  • Medium Risk: Vendors with access to Internal data or providing business-critical services
  • Low Risk: Vendors with limited access to Internal data or no direct system access; vendors providing non-critical services

3.1.2 Pre-Engagement Risk Assessment

Prior to engaging any vendor, appropriate risk assessment shall be conducted based on the vendor’s risk classification.

High-Risk Vendor Requirements:

  • Comprehensive security questionnaire
  • Security assessment report (SOC 2, ISO 27001, or equivalent)
  • Financial stability assessment
  • Reference checks with existing customers
  • Cyber insurance verification

Medium-Risk Vendor Requirements:

  • Standard security questionnaire
  • Third-party assessment report or self-attestation
  • Financial stability review
  • Reference checks
  • Insurance verification

Low-Risk Vendor Requirements:

  • Comprehensive security questionnaire or assessment
  • General insurance verification

3.2 Contractual Security Requirements

All vendor contracts shall include appropriate security provisions based on the vendor’s risk level and data access requirements.

3.2.1 Standard Security Contract Provisions

All vendor contracts shall include security provisions appropriate to the risk level:

Essential Security Clauses:

  • Data protection and confidentiality requirements
  • Incident notification and response procedures with defined timeframes
  • Right to audit and conduct security assessments when appropriate
  • Personnel security requirements for vendor staff
  • Insurance and liability provisions
  • Compliance with applicable laws and regulations
  • Requirement for secure data return or destruction upon contract termination

Additional High-Risk Vendor Clauses:

  • Specific security control requirements (encryption, access controls, logging)
  • Regular security reporting requirements
  • Breach notification procedures with specific timelines
  • Subcontractor approval and oversight requirements
  • Business continuity and disaster recovery provisions
  • Right to terminate for security violations

3.3 Vendor Security Monitoring and Ongoing Assessment

Ongoing monitoring shall be conducted to ensure vendors maintain appropriate security posture throughout the engagement lifecycle.

3.3.1 Continuous Monitoring Requirements

  • Annual security questionnaire updates for High-risk vendors
  • Review of updated security certifications and assessment reports
  • Monitoring of vendor security incidents and breach notifications
  • Performance and service level monitoring
  • Compliance with contractual security requirements

3.3.2 Periodic Assessments

  • High-Risk vendors: Annual security assessment
  • Medium-Risk vendors: Assessment every two years or upon contract renewal
  • Low-Risk vendors: Assessment upon contract renewal

3.3.3 Vendor Security Incident Management

  • Vendors shall notify [Company Name] of security incidents within contractually specified timeframes
  • [Company Name] shall assess the impact of vendor incidents on company operations and data
  • Incident response coordination with vendors shall follow documented procedures

3.4 Vendor Access Management

Access granted to vendors shall be controlled and monitored in accordance with the principle of least privilege.

3.4.1 Access Provisioning

  • Vendor access requests shall be formally approved by the business owner and [Role Title, e.g., IT Manager/Security Officer]
  • Access shall be limited to the minimum necessary to perform contracted services
  • Vendor personnel shall be individually identified and authenticated
  • Multi-factor authentication shall be required for High-risk vendor access

3.4.2 Access Monitoring and Review

  • All vendor access shall be logged and monitored for inappropriate activity
  • Annual access reviews shall be conducted for all vendors with system access
  • Access shall be promptly revoked upon contract termination or personnel changes

3.5 Vendor Onboarding and Offboarding

Formal processes shall be established for vendor onboarding and offboarding to ensure security requirements are met.

3.5.1 Vendor Onboarding Process

  1. Risk assessment and classification
  2. Security questionnaire and documentation review
  3. Contract negotiation including security provisions
  4. Security orientation (if required)
  5. Access provisioning and testing
  6. Ongoing monitoring setup

3.5.2 Vendor Offboarding Process

  1. Access revocation and account deactivation
  2. Data return or secure destruction verification
  3. Equipment and credential return
  4. Final security assessment and documentation
  5. Contract closure and relationship termination

3.6 Cloud Service Provider Management

Cloud service providers shall be subject to enhanced security requirements due to the sensitivity of data and critical nature of services.

3.6.1 Cloud Provider Requirements

3.6.1 Cloud Provider Requirements

  • SOC 2 Type II certification or equivalent (ISO 27001)
  • Data encryption at rest and in transit
  • Geographic data location controls where required
  • Incident response and breach notification procedures
  • Business continuity and disaster recovery capabilities
  • Regular security assessments and vulnerability testing

3.6.2 Cloud Service Monitoring

  • Regular review of service provider security posture and certifications
  • Monitoring of provider security advisories and incident notifications
  • Assessment of configuration changes and security updates

3.7 Subcontractor Risk Management

Vendors shall be required to manage risks associated with their subcontractors and ensure equivalent security standards.

  • Vendors shall obtain written approval before engaging subcontractors for services involving [Company Name] data
  • Subcontractors shall be subject to the same security requirements as primary vendors
  • Vendors shall maintain oversight of subcontractor security practices
  • Notification requirements for subcontractor changes or incidents

4. Standards Compliance

This policy is designed to comply with and support the following industry standards and regulations.

Policy Section Standard/Framework Control Reference
All SOC 2 Trust Services Criteria CC9.1 - Vendor Management
3.1, 3.3 SOC 2 Trust Services Criteria CC9.2 - Vendor Risk Assessment
3.2 SOC 2 Trust Services Criteria CC9.3 - Vendor Agreements

5. Definitions

Cloud Service Provider: A company that offers network services, infrastructure, or business applications in the cloud.

Due Diligence: The investigation or exercise of care that a reasonable business is expected to take before entering into an agreement or contract.

Service Level Agreement (SLA): A contract between a service provider and customer that defines the level of service expected.

Subcontractor: An entity engaged by a vendor to perform functions or activities on behalf of the vendor.

Vendor Risk Assessment: The process of evaluating the potential risks associated with engaging a third-party vendor.

6. Responsibilities

Role Responsibility
IT Manager/Security Officer Develop vendor security requirements, conduct risk assessments, and monitor vendor security compliance.
Legal/Contracts Team Negotiate security contract provisions, ensure legal compliance, and manage contract lifecycle.
Business Owners Define business requirements, approve vendor selections, and monitor service delivery performance.
IT Department Implement technical controls for vendor access, monitor vendor system activity, and manage vendor integrations.
All Workforce Members Report vendor security concerns, comply with vendor interaction policies, and protect company information shared with vendors.