Optimizing Third Party Due Diligence for Business Impact
Last week, we covered how to assess vendor impact and identify inherent risk factors. Now: how to turn that insight into proportionate due diligence.
Too often, a payment processor gets the same enterprise grade security deep dive as the digital signage for your cafeteria.
That’s proportionality for you, I guess.
Your impact assessment should drive both the depth and focus of your due diligence. Different impact levels need different approaches:
- Low business impact: Ask “Are you doing something?” Verify basic risk governance and security hygiene exist.
- Medium business impact: Ask “What are you doing?” Focus on control objectives for topics such as data protection, incident response, and business continuity.
- High business impact: Ask “How are you doing it?” Request specific implementations, procedures, and evidence of effectiveness.
This progression ensures you get the detail that matches your exposure while avoiding both over-assessment of trivial services and under-assessment of critical dependencies.
Instead of sending the same questionnaire to every vendor, tailor your assessment to your specific risk scenario:
- High-dependency vendors: Focus on operational resilience and incident response capabilities.
- Sensitive data processors: Examine data handling practices, access controls, and breach response procedures.
- Integration-heavy vendors: Review technical architecture, API security, and change management processes.
- Commodity services: Verify basic security hygiene and operational competence.
Preparing standardized questionnaires which address both the business impact of the service as well as the type of service your vendor provides reduces effort - for both the vendor when answering the questionnaire as well as your organization when analyzing it.
Effective due diligence connects vendor controls to your existing risk management framework and thus provide transparency if the vendor is successful in addressing your risks. When preparing your questionnaire, design it to answer these questions:
- How do their controls align with your security framework and data protection standards?
- Where are the gaps and what additional measures are needed to manage residual risk?
- How will their monitoring and incident response integrate with your operations?
This mapping helps you understand not just whether their controls are adequate, but how they’ll fit within your broader risk management ecosystem.
The goal isn’t perfect assessment. It’s proportionate assurance that matches what you actually stand to lose.
Next week: We’ll take a short detour to cover vendor red flags that should pause procurement - and how to structure due diligence documentation for ongoing vendor management. Then we’ll tackle contracting: how to embed risk controls into vendor agreements from day one.