Third-Party Risk Management: Private Cloud Best Practices

98% of organisations have faced a third-party data breach in the past year, and 74% of these incidents were due to excessive access permissions. Managing third-party risks in private cloud environments is critical for protecting sensitive data, maintaining compliance with UK regulations like GDPR, and avoiding costly breaches.

Here’s what you need to know:

• Key Risks: Supply chain vulnerabilities, excessive access permissions, data exposure, and lack of vendor transparency.
• UK Regulations: Compliance with UK-GDPR and frameworks like ISO 27001 is mandatory, with fines reaching up to £17.5 million for violations.
• Best Practices:
  • Conduct thorough vendor assessments and categorise risks.
  • Implement strict access controls, including Zero Trust principles and multi-factor authentication.
  • Continuously monitor third-party activities with automated tools.
  • Establish clear incident response plans and conduct regular access reviews.
• Tools to Use: Identity and Access Management (IAM) systems, Privileged Access Management (PAM), and monitoring platforms like SIEM or XDR.

NIST, ISO, SIG: Which TPRM Framework Should You Choose?

Third-Party Risks in Private Cloud Environments

Private cloud setups come with a web of dependencies that can amplify security risks for UK businesses. Recognising these risks is essential for staying resilient and compliant in today’s interconnected digital world. Below, we dive into some of the key third-party risks that businesses in the UK face.

Common Third-Party Risk Types

Supply Chain Vulnerabilities are a major concern for organisations. Research shows that over half of breaches are linked to weaknesses in vendor security, making third parties a common target for attackers [5]. The interconnected nature of private cloud systems means that if one vendor is compromised, it can ripple across the entire network.

Access Control Weaknesses arise when vendors hold unnecessary or outdated permissions. These gaps often stem from poor authentication practices or a lack of consistent monitoring of third-party activities within the cloud environment.

Data Exposure Risks become an issue when sensitive information flows through multiple third-party systems. UK organisations must comply with data sovereignty rules, ensuring they know exactly where and how data is stored or processed. Without transparency from vendors, hidden vulnerabilities can emerge, leaving critical data at risk.

Recent figures reveal that 98% of organisations have worked with at least one third-party partner that experienced a data breach in the last two years. Additionally, over half of these organisations have indirect ties to more than 200 fourth parties that have also been breached [6].

Lack of Transparency from vendors only worsens the problem. When providers fail to share details about their security protocols, past incidents, or subcontractor relationships, businesses are left in the dark about their true risk exposure [2]. This lack of clarity makes it challenging to implement effective safeguards or prepare for potential issues.

UK Regulatory Requirements

Navigating the UK regulatory landscape is a critical part of managing third-party risks in private cloud environments. The Data Protection Act 2018 (DPA 2018) and the UK General Data Protection Regulation (UK-GDPR) set the standard for compliance [4].

Under the UK-GDPR, businesses must ensure that third-party providers offer adequate guarantees for secure data processing before granting them access to personal data. Contracts with these providers must also include specific obligations under Articles 32 to 36, covering security measures and data protection impact assessments [3].

Failing to comply with these regulations can lead to steep fines - up to £17.5 million or 4% of global annual turnover, whichever is higher [4]. Furthermore, adhering to frameworks like ISO 27001 is essential. This standard requires businesses to document risk management practices, conduct regular security reviews, and continuously improve their information security processes.

Third-Party Risk Management Process

Managing third-party risks requires a proactive and ongoing approach, starting well before a vendor is engaged and continuing throughout the partnership.

Vendor Due Diligence is the first step. This involves thorough background checks, security evaluations, and reviewing vendor policies [1].

Risk Categorisation helps businesses prioritise their efforts by identifying which vendors pose the greatest potential threats. High-risk vendors may require stricter contracts and closer monitoring, while lower-risk ones can be managed with lighter oversight [6].

Clear Contractual Expectations are essential. Contracts should outline security responsibilities, mandatory standards, and incident reporting requirements [1]. These agreements should also specify data protection obligations, access controls, and compliance checks.

Continuous Monitoring is key to staying ahead of risks. Automated tools can help conduct routine assessments, vulnerability scans, and penetration tests to identify problems before they escalate [1].

Incident Response Planning ensures businesses are prepared to handle breaches involving third-party vendors. This includes defining roles, responsibilities, and communication protocols to respond swiftly to high-risk threats [1][6].

Regular vendor audits are another layer of protection, ensuring compliance with security and regulatory standards [1]. Additionally, training employees to recognise third-party risks and potential security issues strengthens overall defences [1].

Risk comes from not knowing what you're doing. – Warren Buffett [1]

Managing Third-Party Risks in Private Cloud

Once you've pinpointed the risks within your private cloud environment, the next step is to establish strong strategies to tackle them head-on. This involves a structured approach that spans from initial vendor evaluations to ongoing monitoring and swift incident response.

Vendor Risk Assessment Methods

Starting with a thorough vendor evaluation process is key to protecting your private cloud. With 98% of organisations relying on third-party operations [10], ensuring a solid risk assessment is critical for maintaining business continuity.

Begin by creating a vendor inventory. This should include details like each vendor's security measures, compliance status, and risk profile [7]. Think of it as your go-to database for all third-party partnerships - a centralised resource that keeps everything in check.

Not all vendors pose the same risks, so categorising them is essential. Vendors handling sensitive data or providing critical infrastructure services are naturally higher risk and require more rigorous scrutiny compared to those offering basic support services [7]. This tiered approach ensures you focus your resources where they’re needed most.

When assessing vendors, consider nine key risk areas: strategy, financial health, compliance, geographic location, technical setup, resource availability, replacement difficulty, operational impact, and reputation [8]. For instance, technical risks might reveal outdated security measures, while geographic risks could flag data sovereignty issues for UK businesses.

Industry standards like FAIR, NIST, ISO 27001, or SOC 2 can further strengthen your assessment process. These frameworks not only help you follow best practices but also make it easier to demonstrate compliance to regulators and stakeholders [7].

Vendor risk assessments shouldn’t be a one-time task. Nearly 80% of organisations now have formal programmes in place [8], and the most effective ones use automated tools and AI insights for continuous monitoring of high-risk vendors [7].

Access Control Implementation

Once vendor risks are mapped out, the next step is managing third-party access. Here’s why it’s crucial: 74% of organisations have faced breaches due to excessive privileged access granted to third parties [11], and 81% of data breaches stem from weak or stolen credentials [13].

Adopting Zero Trust Network Access (ZTNA) principles is a must. This means granting access based on the least privilege model - only what’s necessary for the task at hand - rather than allowing broad access [12]. The old trust but verify approach no longer cuts it.

Privileged Access Management (PAM) adds another layer of security by acting as a gatekeeper between third parties and your sensitive systems [12]. Even if a third party's credentials are compromised, PAM can limit the damage.

Implement just-in-time access controls, which automatically revoke permissions after a set period. This reduces the time frame attackers have to exploit access while still allowing legitimate work to proceed [12].

Multi-factor authentication (MFA) is non-negotiable for all third-party access [9]. With misconfigurations causing 80% of cloud security issues [13], strong authentication measures can block many common attack methods.

Regularly review and update access policies to adapt to evolving operational needs and security threats. This ensures outdated permissions are revoked, keeping your systems secure [9].

Monitoring and Incident Response

Effective third-party risk management doesn’t stop at assessments and access controls - it requires continuous monitoring and a robust incident response plan. This ensures vulnerabilities are quickly spotted and addressed.

Tools like Security Information and Event Management (SIEM) or Extended Detection and Response (XDR) systems are invaluable. They provide real-time visibility into third-party activities, logging detailed records and correlating events across systems to detect suspicious behaviour early [14].

Automation plays a key role here. With API attacks surging by 681% in 2023 [13], automated monitoring tools can detect and respond to threats far quicker than manual processes.

Given the unique challenges of cloud environments, having a cloud-specific incident response plan is essential. These plans should address the distributed nature of cloud systems and the shared responsibility model [14]. A well-structured response plan includes preparation, detection, containment, eradication, recovery, and post-incident analysis, with clear roles and tasks for handling incidents involving third parties.

Regular testing, such as tabletop exercises and drills, ensures your incident response plan is up to date and effective. These activities help identify gaps in procedures and prepare teams to act swiftly when needed [14].

For UK businesses looking to strengthen their strategies, Hokstad Consulting offers expert support. Their expertise in DevOps transformation and cloud security audits can help you build a resilient third-party risk management framework without compromising efficiency.

Third-Party Risk Management Tools

Managing third-party risks effectively demands tools that simplify and automate the process. Over the years, these tools have come a long way, with AI-driven solutions now making risk management faster, smarter, and more efficient [15]. They offer real-time insights into potential risks and handle tasks that previously required extensive manual effort.

By combining risk assessments with access controls, these tools help organisations turn their strategies into actionable security measures. At the heart of these solutions lies a strong Identity and Access Management (IAM) framework.

Identity and Access Management Tools

IAM tools are essential for controlling third-party access in private cloud environments. They provide features like centralised directories, single sign-on (SSO), multi-factor authentication (MFA), and automated lifecycle management. But modern IAM solutions go even further. They enforce role-based access control (RBAC), ensuring third parties only get the permissions they need to perform their tasks. This is especially crucial for organisations managing the over 1,000 third parties that 60% of businesses typically work with [11].

Cloud providers like AWS, Microsoft, and Google also offer built-in IAM services tailored for their platforms. For example, AWS IAM, Azure Active Directory (now Entra ID), and Google Cloud IAM provide robust tools to manage third-party access at scale [17]. These services align with Zero Trust security principles, offering precise access controls through RBAC [19].

IAM will give Snapchat the ability to grant fine-grained access control to resources within a project. This allows us to compartmentalise access based on workgroups and to manage sensitive resources around individual access needs. - Subhash Sankuratripati, Security Engineer, Snapchat [18]

Considering that data breaches cost organisations an average of £3.6 million [20], these automated safeguards deliver both security and financial benefits. For more complex third-party arrangements, Privileged Access Management (PAM) solutions provide secure interfaces that limit what third parties can do, all while maintaining operational efficiency [12].

Monitoring and Threat Detection Systems

Continuous monitoring is a cornerstone of third-party risk management. Tools like Security Information and Event Management (SIEM) platforms and Extended Detection and Response (XDR) systems offer the real-time visibility needed to identify threats before they escalate.

Modern SIEM solutions track events across distributed systems, logging third-party activities and flagging anything suspicious. With 82% of breaches involving data stored in the cloud [20], having a comprehensive monitoring system for all third-party interactions is critical.

Advanced threat detection systems use machine learning to spot unusual behaviours, such as unexpected access patterns or data transfers. These systems can trigger immediate responses, like isolating affected systems or revoking third-party access, reducing the time attackers have to exploit vulnerabilities.

Integration is a must when choosing monitoring tools. The best systems work seamlessly with existing IAM solutions, security infrastructure, and incident response platforms, providing a unified view of third-party risks across private cloud environments.

Compliance and Automation Solutions

Compliance automation tools are another key part of third-party risk management. These platforms simplify tasks like cloud risk assessments, remediation, and compliance reporting. They also generate the necessary documentation for information assurance [21].

Third-Party Risk Management (TPRM) software centralises vendor data and automates assessments [15]. These platforms handle everything from identifying and analysing risks to monitoring and automating processes [16], reducing the manual workload traditionally involved in vendor management.

Automated patch management is another critical feature. These tools ensure third-party systems stay updated with the latest security patches by automating deployments, verifying installations, and alerting administrators to any delays [22]. This helps maintain security standards across even the most complex vendor networks.

Continuous compliance monitoring further streamlines operations. These tools verify configurations against established frameworks, generate audit reports, and flag any deviations [22]. This means organisations can stay compliant without constant manual intervention.

Speed cloud security compliance with controls inheritance and automated continuous compliance. - Telos [21]

Some advanced platforms also use AI to predict vendor risks, suggest mitigation strategies, and update risk scores dynamically as threats evolve [15]. This allows organisations to anticipate risks and address them proactively rather than reacting after the fact.

For UK businesses looking to implement these tools, Hokstad Consulting offers expert guidance. Their experience in cloud security audits and DevOps transformations ensures businesses can select and deploy the best tools for their unique risk management needs while maintaining operational efficiency.

Long-Term Vendor Management and Compliance

Managing third-party risks in private cloud environments isn’t a one-and-done task - it’s an ongoing process. To ensure your organisation remains secure and compliant, you need to focus on continuous evaluation and effective vendor lifecycle management. This means not only choosing the right vendors initially but also maintaining strong relationships while keeping an eye on compliance and performance over time. A systematic approach, backed by regular reviews and thorough documentation, is essential to safeguard against emerging risks.

Vendor Performance Tracking

Keeping tabs on vendor performance is crucial. This involves monitoring service-level agreements (SLAs), security standards, and performance metrics to identify issues before they become major problems. The goal is to spot risks early and address them proactively.

The first step? Set clear performance baselines. These benchmarks help you measure whether vendors are meeting expectations. Key metrics might include response times, system availability, security incidents, and compliance scores. Once these baselines are established, use modern tools to track metrics like usage fees, response times, and error rates. Gathering insights across teams and consolidating this data makes oversight more effective.

How often you assess vendors depends on their risk levels. Vendors with moderate to high risks should undergo detailed annual reviews, while lower-risk vendors might only need periodic evaluations. For ongoing monitoring, regular audits - whether monthly or quarterly - can uncover vulnerabilities, misconfigured assets, or inefficiencies before they escalate.

A reliable vendor assessment approach is not about volume or checklists. It is about asking the right questions, scoring consistently, and knowing when a follow-up actually matters. - The Atlas Team, Atlas Systems [23]

Targeted alert systems can streamline issue resolution by focusing on metrics that genuinely impact your organisation. Beyond tracking performance, regular access reviews ensure permissions stay aligned with current roles, reducing the risk of unauthorised access.

Access Reviews and Permission Management

Access reviews are a cornerstone of vendor management. They help ensure that only authorised personnel have the permissions they need - no more, no less. This reduces the risk of security breaches and ensures compliance with access control policies.

According to Forrester Research, 80% of security breaches involve the misuse of privileged credentials [24]. Similarly, the 2023 Verizon Data Breach Investigations Report found that nearly 40% of unauthorised access incidents were due to outdated permissions or poor controls [24]. These numbers highlight the importance of structured, regular reviews.

Access reviews should be scheduled periodically, triggered by role changes, or conducted during incidents. Role-Based Access Control (RBAC) models are particularly effective here, assigning permissions based on job functions and enforcing the principle of least privilege.

It’s also important to involve the right stakeholders - department heads, HR, compliance officers, and system owners - to ensure permissions align with responsibilities. Don’t forget to include cloud accounts in these evaluations alongside traditional systems.

Access reviews are essential for ensuring that users only have the permissions necessary to perform their job functions... By regularly reviewing user access, organisations can prevent these risks and ensure that access rights are correctly aligned with each employee's responsibilities. - SecurEnds [25]

Automated access review processes can significantly improve efficiency. Organisations using automation have reduced errors by 40%, cut the number of employees involved by 30%, and saved 40% of the time typically spent on reviews [26]. Once access is properly managed, a structured offboarding process ensures no loose ends remain when vendor relationships end.

Vendor Offboarding and Record Keeping

Properly offboarding vendors is just as important as onboarding them. When mishandled, it can lead to financial losses or security breaches. A recent example? In January 2023, AT&T suffered a data breach involving a former cloud vendor. Years after the contract had ended, residual access led to the exposure of 8.9 million customer records, costing AT&T approximately £10.4 million in fines [27].

To avoid such risks, start by reviewing contracts to confirm data destruction protocols and termination rights. Resolve outstanding invoices and ensure any credits or returns are handled.

Revoke access systematically. This includes disabling access to digital portals, databases, applications, and even physical locations. Don’t overlook integrated systems or shared resources that might offer indirect access.

Data handling is another critical area. Retrieve all company property and ensure vendors securely delete any residual data. If data retention policies prevent deletion, ensure strict controls are in place to prevent unauthorised access.

The process of vendor offboarding is as crucial as onboarding them. If you don't offboard properly, you may risk potential data loss, compliance, equipment, and more. Following a proper checklist will make the offboarding process effortless. - Chaithanya Yambari, Co-Founder, Zluri [28]

Finally, update your vendor management database with detailed records of the vendor’s history and reasons for termination. Backup and archive critical data, and adjust your incident response plan as needed. Even after a vendor relationship has ended, ongoing monitoring can help identify any lingering risks.

For UK businesses navigating the complexities of vendor management, Hokstad Consulting provides tailored strategies. Their expertise in cloud infrastructure and security audits can help you implement effective offboarding procedures that minimise risks while keeping operations smooth.

Conclusion

Managing third-party risks in private clouds requires a well-organised and ongoing approach. Recent figures reveal that 98% of organisations faced a third-party breach over the past year, with 74% of these incidents linked to excessive privileged access granted to external parties. The financial impact of such breaches can surpass £70,000 [11]. These statistics highlight the urgent need for strong governance.

A solid governance framework is the cornerstone of effective third-party risk management. This includes adopting RACI models to establish clear roles and responsibilities, conducting comprehensive risk assessments, and embedding specific resilience and security standards into contracts [29].

To stay ahead of potential risks, organisations must prioritise continuous monitoring and performance evaluation. Relying solely on annual reviews is no longer sufficient. Real-time oversight of vendor performance, access controls, and compliance metrics is essential. Regular access reviews play a crucial role in preventing credential misuse and mitigating risks.

The intricate nature of modern private cloud environments adds to the challenge. In fact, 40% of compliance leaders report that between 11% and 40% of their third parties are classified as high-risk [29]. Addressing this complexity demands not only well-defined policies and procedures but also the expertise to implement them effectively. When combined, these strategies ensure seamless oversight across all vendor-related activities.

For UK businesses looking to strengthen their third-party risk management, expert guidance can make a significant difference. Hokstad Consulting offers tailored solutions in cloud optimisation and security audits. Their expertise spans DevOps transformation and strategic cloud migration, helping organisations establish robust governance frameworks and monitoring systems to manage risks effectively while maintaining operational efficiency.

Third-party risk management isn’t a one-time task - it’s an ongoing commitment. Success depends on allocating the right resources, maintaining clear processes, and leveraging expert support to uphold security and compliance in an ever-evolving landscape.

FAQs