4 Best Practices to Prevent Third-Party Data Breaches

Third-party data breaches are fast emerging as one of the most serious threats to enterprise security, as malicious forces find new ways to bypass internal defences and compromise sensitive information.

Oct. 15, 2025

As enterprise-scale environments become increasingly complex and interconnected, third-party vendors and service providers are now deeply embedded within operational ecosystems. While this integration enhances scalability and efficiency, it may also introduce significant data privacy and cybersecurity risks. Today’s threat actors are shifting their focus from direct attacks to infiltrating organisational supply chains. They are leveraging cutting-edge technologies to exploit vulnerabilities within multi-vendor landscapes, mishandling and manipulating sensitive data and proprietary infrastructure.

In layman’s terms, a third-party data breach occurs when an external partner such as a payroll processor, cloud service provider, or system integrator is compromised, allowing attackers to access your organisation’s data indirectly. These breaches are particularly dangerous because they exploit trust and connectivity across the supply chain. The more integrations and external services an organisation relies on, the broader its attack surface becomes, leaving it increasingly vulnerable to exploitation.

Numerous high-profile data breaches serve as stark reminders of the irreversible damage that third-party compromises can cause. With 98% of organisations maintaining relationships with at least one third party that has experienced a breach, the risks are omnipresent and all-encompassing.

Preventing Third–Party Data Breaches

Despite having strong internal cyber defences, a single compromised vendor can jeopardise the entire operational ecosystem. Alarmingly, only 42% of organisations detect breaches through their own security teams, revealing major blind spots in vendor oversight. With the average cost of a multi-environment data breach exceeding US$4.88 million, the financial, compliance and reputational risks are substantial.

Given the complexity and rapid proliferation of these risks, proactive measures are essential to minimise exposure and strengthen operational resilience, safeguard data privacy, and ensure compliance. Below are proven best practices to prevent third-party data breaches and bolster your cybersecurity capabilities.

1. Perform comprehensive third-party risk assessments:

Establishing a robust vendor risk management (VRM) framework is mission-critical to protecting organisational assets. This should include pre-engagement due diligence, security questionnaires aligned with recognised international standards such as ISO 27001 and NIST Cybersecurity Framework, as well as independent audits where appropriate. Vendors must be assessed based on the sensitivity of the data they handle, their access privileges, and their role in core business processes.

Evaluating third-party vendors, especially those with access to your network and sensitive data, during both selection and onboarding phases is mission-critical to managing information security risks. A proactive approach to due diligence ensures alignment with your organisation’s security expectations and helps prevent vulnerabilities.

To streamline assessments and reduce operational overheads, security ratings offer a practical and scalable solution. These ratings provide immediate insight into a vendor’s external security posture and highlight potential risks. Widely adopted across industries, they can complement or even replace time-consuming methods such as questionnaires, site visits, and penetration testing. Security ratings also support ongoing monitoring and can be shared with vendors to guide issue remediation, easing the burden on third-party risk management teams.

2. Embed enforceable security requirements in contracts:

Effective contract management is another cornerstone of third-party risk management. Drafting agreements that clearly define security obligations, including minimum technical controls such as encryption, multi-factor authentication (MFA), and secure development practices, helps ensure vendors meet your organisation’s expectations. Contracts should also cover data residency requirements, breach notification timelines, resolution mechanisms, and adherence to service level agreements (SLAs). Legal teams should collaborate with cybersecurity and compliance stakeholders to align contract terms with internal policies and external regulations – including General Data Protection Regulation (GDPR), Australia’s Privacy Act 1988, China's Personal Information Protection Law (PIPL), the Philippines’ Data Privacy Act, and other applicable data protection and privacy laws.

This cross-functional engagement fosters a culture of accountability and awareness at the leadership level, reinforcing the importance of protecting confidential information and adhering to evolving data privacy standards. Well-structured contracts not only set clear expectations for vendor performance but also help mitigate risks linked to poor operational security and oversharing, which are common tactics exploited in spear phishing and whaling attacks. By defining obligations upfront, you gain greater control over third-party relationships and ensure that your vendors remain accountable throughout the engagement lifecycle.

3. Implement continuous security monitoring and risk assessment:

To manage third-party risk effectively, it is critical to transcend point-in-time assessments and adopt continuous monitoring tools that offer real-time visibility into vendor security posture. By leveraging external risk scoring platforms, threat intelligence feeds, and automated alerts, teams can detect shifts in risk such as newly discovered vulnerabilities, expired certificates, exposed ports, or public breach disclosures. Automating these evaluations ensures vendors are assessed against key factors including cybersecurity, financial stability, compliance, and governance. This enables you to prioritise vendors based on their risk maturity and respond to emerging threats before they escalate.

Maintaining a complete and accurate inventory of third-party vendors is equally important. Without a centralised record, tracking vendor relationships and managing associated risks becomes difficult. Real-time monitoring provides a live view into the evolving security posture of vendors, particularly those with access to sensitive data or core systems. This proactive approach strengthens oversight, reduces blind spots, and ensures vendor environments remain aligned with your organisation’s risk tolerance and regulatory obligations.

4. Integrate third parties into your incident response lifecycle:

Third-party involvement must be built into your incident response lifecycle. Plans should define escalation paths, secure communication channels, and include joint tabletop exercises. Vendors must be contractually required to cooperate during investigations, with current contact details on file. Each vendor should maintain a clear incident response plan outlining roles and responsibilities. Well-defined protocols enable fast, coordinated action to contain threats, reduce disruption, and manage reputational impact across stakeholders.

Limiting unnecessary data exposure is equally important. Vendors should only access the information needed to perform their services, following the principle of least privilege (POLP). This reduces breach impact and strengthens data governance. In addition, it is important to close attention to sensitive tokens and credentials, especially those stored in repositories or configuration files. Understanding how secrets are exposed and implementing controls to detect and remediate them is mission-critical to reducing third-party risk across the software supply chain.

To protect against data breaches and malicious attacks, organisations must adopt a structured, risk-based approach to third-party security. This includes thorough risk assessments, enforceable contractual obligations, and continuous monitoring of vendor security posture. Real-time alerts, threat intelligence, and risk vetting are essential for identifying vulnerabilities before they escalate. Limiting vendor access to essential data and embedding them into incident response planning further reduces exposure.

All in all, a pragmatic approach supported by robust enterprise security controls is key to building resilience, safeguarding critical assets, and maintaining business continuity in the face of external cyber threats.