Compliance & Audit Services

Vendor – Third-Party Risk Audit

  • May 8, 2025
  • 0

Sherlocked Security – Vendor / Third-Party Risk Audit

Comprehensive Assessment of Third-Party Risks to Safeguard Sensitive Data and Ensure Compliance

1. Statement of Work (SOW)

Service Name: Vendor / Third-Party Risk Audit
Client Type: Organizations with third-party relationships handling sensitive or critical business data, including financial, healthcare, technology, and government sectors
Service Model: Third-Party Risk Identification + Due Diligence + Compliance Verification + Remediation Guidance
Compliance Coverage: GDPR, CCPA, SOC 2, ISO 27001, HIPAA, and other industry-specific standards

Assessment Types:

  • Third-Party Risk Identification & Categorization
  • Vendor Due Diligence Review
  • Security and Compliance Controls Assessment
  • Contractual and Data Protection Review (e.g., Data Processing Agreements, BAAs)
  • Third-Party Access and Authentication Control Evaluation
  • Incident Management and Breach Reporting Procedures

2. Our Approach

[Scope Identification] → [Vendor Data Categorization] → [Risk Assessment] → [Due Diligence Review] → [Compliance & Security Control Review] → [Incident Response & Breach Handling Evaluation] → [Final Report and Recommendations]

3. Methodology

[Vendor Identification & Risk Categorization] → [Due Diligence Process] → [Security & Compliance Review] → [Access Control & Data Protection Verification] → [Third-Party Breach History & Monitoring] → [Recommendations for Risk Mitigation]

4. Deliverables to the Client

  1. Third-Party Risk Assessment Report
  2. Vendor Risk Categorization & Sensitivity Matrix
  3. Due Diligence Review Findings
  4. Compliance Controls Evaluation Report
  5. Incident Response and Breach Management Recommendations
  6. Data Protection and Security Review Summary
  7. Actionable Risk Mitigation Recommendations for Vendor Relationships
  8. Updated Vendor Management Process & Procedures

5. What We Need from You (Client Requirements)

  • A list of third-party vendors and service providers with access to sensitive data or systems
  • Existing contracts, Service Level Agreements (SLAs), and Data Processing Agreements (DPAs)
  • Vendor security assessments, certifications, or audit reports (e.g., SOC 2, ISO 27001)
  • Historical incident reports or breach notifications related to third-party services
  • Access to vendor-related data access policies, system integrations, and authentication protocols
  • A list of data types shared with vendors and their data processing responsibilities
  • Confirmation of the scope for the audit (e.g., critical vendors, subcontractors)

6. Tools & Technology Stack

  • Risk Assessment & Vendor Management Tools: BitSight, SecurityScorecard, UpGuard
  • Compliance & Security Control Mapping: OneTrust, TrustArc, VComply
  • Contract Management & Review Tools: Ironclad, Agiloft, ContractWorks
  • Data Loss Prevention (DLP) Solutions: Symantec DLP, Forcepoint DLP
  • Incident Management Tools: ServiceNow, PagerDuty, Splunk
  • Security Testing & Vulnerability Scanning: Nessus, Qualys, Rapid7

7. Engagement Lifecycle

1. Kickoff & Scope Definition → 2. Vendor Identification & Risk Categorization → 3. Due Diligence and Compliance Review → 4. Security Controls & Breach Management Evaluation → 5. Vendor Risk Mitigation Recommendations → 6. Final Report & Action Plan

8. Why Sherlocked Security?

Feature Sherlocked Advantage
Proven Third-Party Risk Expertise Extensive experience in evaluating vendor risks, ensuring data protection, and compliance.
Holistic Risk Assessment Comprehensive assessment that includes security, privacy, compliance, and incident response.
Actionable Remediation Guidance Clear, prioritized recommendations to mitigate vendor risks and strengthen partnerships.
Vendor Security & Compliance Tools Use of advanced tools to assess security certifications and contractual compliance (e.g., SOC 2, ISO 27001).
Ongoing Monitoring Support Continuous monitoring and regular reviews of third-party risk profiles to maintain ongoing security.

9. Real-World Case Studies

Data Breach Due to Insecure Vendor Access

Issue: A third-party vendor’s insecure cloud storage led to the exposure of sensitive customer data.
Impact: Breach of contractual obligations and violation of privacy regulations (GDPR, CCPA).
Fix: Implemented stricter access controls, improved vendor training on secure cloud usage, and ensured vendor compliance with data protection standards.

Non-Compliant Subprocessor

Issue: A vendor subcontractor did not meet required privacy safeguards as per the Data Processing Agreement (DPA).
Impact: Violation of vendor security obligations and potential exposure to legal consequences.
Fix: Strengthened subcontractor clauses in DPAs and conducted regular security assessments for all subprocessors.

10. SOP – Standard Operating Procedure

  1. Scope Definition

    • Identify vendors and service providers with access to sensitive business data or critical systems.
    • Define the criticality of the vendor relationship (high, medium, low-risk vendors).

  2. Vendor Risk Categorization

    • Categorize vendors based on the sensitivity of data handled, access granted, and criticality of service.
    • Determine the level of scrutiny required for each vendor (e.g., full audit, questionnaire, certification review).

  3. Due Diligence Review

    • Review vendor security posture, certifications, past audits, and incident history.
    • Assess the vendor’s ability to comply with industry standards (e.g., ISO 27001, SOC 2, GDPR, CCPA).
    • Evaluate the vendor’s data protection measures, including encryption, access controls, and incident response plans.

  4. Compliance & Security Controls Review

    • Analyze the security policies and controls in place at the vendor, ensuring they align with the client’s requirements and regulatory obligations.
    • Review contract terms, SLAs, and Data Processing Agreements (DPAs) for data protection obligations.
    • Assess vendor’s breach notification procedures and security incident response plans.

  5. Vendor Access & Authentication Review

    • Ensure that appropriate access controls are implemented, such as role-based access and multi-factor authentication (MFA) for vendor systems.
    • Verify that vendor access to sensitive systems and data is logged and monitored.

  6. Incident Response & Breach Management Review

    • Evaluate the vendor’s breach notification process and ensure it aligns with your internal breach response protocols.
    • Review historical data breach incidents, if applicable, and the vendor’s corrective actions.
    • Test the effectiveness of the vendor’s breach management procedures through simulated incident scenarios.

  7. Vendor Risk Mitigation & Monitoring

    • Develop actionable risk mitigation strategies for high-risk vendors (e.g., more frequent audits, stronger contractual clauses).
    • Establish a continuous monitoring and review process for vendor security and compliance.

  8. Final Vendor Risk Report

    • Prepare a comprehensive report detailing vendor risk assessments, security controls evaluation, compliance gaps, and remediation actions.
    • Provide recommendations for improving vendor management processes and ensuring compliance.

11. Vendor Risk Audit Checklist

1. Vendor Identification & Risk Categorization

  • Ensure a comprehensive list of all third-party vendors with access to sensitive data or systems is documented.
  • Categorize vendors based on risk (critical, high, medium, low) and service type.
  • Evaluate the scope of access provided to each vendor and its alignment with business needs.

2. Due Diligence & Vendor Review

  • Confirm that vendors have completed security questionnaires or assessments.
  • Review security certifications (e.g., SOC 2, ISO 27001) and audit reports.
  • Assess the vendor’s incident history, including any data breaches or privacy violations.
  • Verify that the vendor adheres to data protection standards (e.g., GDPR, CCPA, HIPAA).

3. Compliance & Security Control Evaluation

  • Review the vendor’s data protection policies and procedures.
  • Ensure that vendor contracts include data protection clauses, such as Data Processing Agreements (DPAs).
  • Evaluate the effectiveness of technical safeguards (encryption, firewalls, access controls).
  • Confirm that vendors are conducting regular security audits and vulnerability assessments.

4. Data Protection & Access Control

  • Verify that the vendor has implemented adequate data access controls, including role-based access and least privilege principles.
  • Confirm that all vendor access is logged and subject to regular monitoring.
  • Ensure that data shared with vendors is minimized and protected by encryption.

5. Incident Response & Breach Notification

  • Ensure the vendor has an established incident response plan that includes breach detection, containment, and notification.
  • Confirm that breach notification timelines align with legal requirements (e.g., GDPR Article 33).
  • Assess the vendor’s process for handling and mitigating breaches, including corrective actions taken after past incidents.

6. Continuous Monitoring & Remediation

  • Set up regular vendor risk monitoring and assessment schedules.
  • Ensure that high-risk vendors are subject to more frequent audits and evaluations.
  • Establish a process for continuous improvement in vendor risk management, addressing emerging threats and changes in vendor practices.
Interactive Application Security Testing (IAST)
SOC 2 Type I & II Audit