By Jackson Godwin  |  Cybersecurity Analyst & Penetration Tester

Today’s businesses rely heavily on third parties to deliver products and services. Cloud providers, payment processors, software vendors, IT consultants, managed service providers (MSPs), and outsourced customer support teams all play important roles in modern business operations.

While these partnerships improve efficiency and reduce costs, they also introduce cybersecurity, operational, financial, legal, and compliance risks.

A single security incident involving a vendor can expose sensitive customer data, disrupt operations, and damage an organization’s reputation.

This is why Third-Party Risk Management (TPRM) has become a critical part of enterprise cybersecurity and governance programs, including for banks, fintechs, and oil and gas companies across Nigeria that depend heavily on cloud providers, payment processors, and outsourced IT services.

In this guide, you’ll learn what third-party risk is, why it matters, how to assess vendors, and the best practices for managing supplier risks in 2026, with reference to the regulatory expectations that apply to Nigerian organizations.

What Is Third-Party Risk Management (TPRM)?

Third-Party Risk Management (TPRM) is the process of identifying, assessing, monitoring, and reducing risks associated with external organizations that provide products or services to your business.

These third parties may include:

• Cloud service providers
• Software vendors
• Payment processors
• Managed Service Providers (MSPs)
• Internet Service Providers (ISPs)
• Payroll providers
• Marketing agencies
• Law firms
• IT support companies
• Outsourcing partners

An effective TPRM program helps organizations understand the risks introduced by these relationships and implement appropriate controls.

Why Third-Party Risk Matters

Organizations often focus on securing their own systems while overlooking the security of their vendors.

However, attackers frequently target suppliers because they can provide indirect access to larger organizations.

Poorly managed third-party relationships can result in:

• Data breaches
• Financial losses
• Business interruptions
• Regulatory penalties
• Reputational damage
• Intellectual property theft
• Compliance violations

As supply chains become more interconnected, third-party security becomes a key component of organizational resilience. For Nigerian organizations, a vendor-related data breach can also trigger breach-notification obligations to the Nigeria Data Protection Commission (NDPC) under the NDPA 2023, even when the underlying failure originated with the vendor rather than the organization itself.

Types of Third-Party Risks

1. Cybersecurity Risk

Cybersecurity risks include:

• Data breaches
• Malware infections
• Ransomware attacks
• Weak access controls
• Vulnerable software
• Insider threats

Organizations should evaluate vendors’ security practices before sharing sensitive information.

2. Operational Risk

Operational risks occur when vendors fail to deliver services as expected.

Examples include:

• System outages
• Poor service quality
• Delayed deliveries
• Business disruptions

Service Level Agreements (SLAs) can help define expectations and responsibilities.

3. Compliance Risk

Vendors must comply with applicable laws, regulations, and contractual obligations.

Examples include:

• Data protection laws
• Industry standards
• Customer requirements
• Financial regulations

Failure to comply may expose both the vendor and customer to legal consequences. In Nigeria, this includes compliance with the NDPA 2023, CBN guidelines for vendors serving financial institutions, and NITDA requirements for technology suppliers to public sector agencies.

4. Financial Risk

Financial instability may affect a vendor’s ability to provide services.

Organizations should review:

• Financial statements
• Credit ratings
• Business continuity plans

5. Reputational Risk

A vendor’s actions can impact your organization’s reputation.

Security incidents, unethical practices, or regulatory violations involving a supplier may reduce customer confidence.

Common Third Parties That Require Assessment

Organizations should evaluate vendors such as:

• Cloud providers
• Payment gateways
• HR software providers
• Managed security service providers (MSSPs)
• Software-as-a-Service (SaaS) vendors
• Data hosting companies
• Customer support providers
• Payroll companies
• Marketing platforms

The depth of the assessment should reflect the level of risk posed by the vendor.

Third-Party Risk Assessment Process

Step 1: Identify Vendors

Create a complete inventory of all third parties.

Include:

• Services provided
• Data accessed
• Systems connected
• Business owner
• Contract information

Step 2: Classify Vendor Risk

Not every vendor presents the same level of risk.

Examples:

Low Risk

• Office supplies

Medium Risk

• Marketing agencies

High Risk

• Cloud providers
• Banks
• Payroll providers
• Payment processors
• IT service providers

Risk classification helps determine the level of due diligence required.

Step 3: Perform Due Diligence

Evaluate the vendor’s security and governance practices.

Request documentation such as:

• Security policies
• Information security certifications
• Penetration testing reports
• Vulnerability management procedures
• Business continuity plans
• Incident response plans
• Data protection policies

Step 4: Review Contracts

Contracts should clearly define:

• Security responsibilities
• Confidentiality obligations
• Incident notification timelines
• Audit rights
• Data ownership
• Service Level Agreements (SLAs)
• Termination procedures

Clear contractual requirements reduce misunderstandings and improve accountability.

Step 5: Monitor Vendors Continuously

Risk management does not end after onboarding.

Organizations should periodically review:

• Security incidents
• Compliance status
• Performance metrics
• Audit reports
• Regulatory changes

Continuous monitoring helps identify emerging risks.

Third-Party Risk Assessment Checklist

Use this checklist when evaluating vendors:

Governance

• Information Security Policy
• Risk Management Policy
• Vendor Management Policy
• Data Protection Policy

Security Controls

• Multi-Factor Authentication (MFA)
• Role-Based Access Control (RBAC)
• Encryption
• Firewall protection
• Endpoint security
• Patch management
• Vulnerability scanning

Compliance

• ISO/IEC 27001 Certification
• SOC 2 Report
• PCI DSS (if applicable)
• Privacy compliance documentation

Operations

• Disaster Recovery Plan
• Business Continuity Plan
• Backup procedures
• Incident Response Plan

Documentation

• Security awareness training
• Penetration testing reports
• Audit reports
• Asset inventory
• Change management records

Best Practices for Third-Party Risk Management

Organizations should:

• Maintain a vendor inventory
• Conduct regular risk assessments
• Review contracts periodically
• Monitor vendor performance
• Perform security assessments before onboarding
• Restrict third-party access using the principle of least privilege
• Enable Multi-Factor Authentication
• Monitor vendor activities
• Review audit reports annually
• Conduct periodic vendor security reviews

Frameworks Supporting Third-Party Risk Management

Several cybersecurity and governance frameworks include third-party risk requirements, including:

• ISO/IEC 27001
• NIST Cybersecurity Framework (CSF)
• NIST SP 800-161 (Supply Chain Risk Management)
• SOC 2
• PCI DSS
• CIS Controls

Organizations often align their TPRM program with one or more of these frameworks depending on their industry and regulatory obligations. Nigerian organizations frequently combine these international frameworks with local requirements, including NDPA 2023 accountability obligations and CBN outsourcing guidelines for regulated financial institutions.

Common Third-Party Risk Management Mistakes

Avoid these common mistakes:

• Failing to assess vendors before onboarding
• Granting excessive access privileges
• Not reviewing contracts
• Ignoring security certifications
• Conducting one-time assessments without ongoing monitoring
• Maintaining incomplete vendor inventories
• Not testing incident response procedures involving vendors

Benefits of an Effective TPRM Program

A mature Third-Party Risk Management program can help organizations:

• Reduce cybersecurity risks
• Improve regulatory compliance
• Strengthen customer trust
• Protect sensitive data
• Enhance operational resilience
• Improve vendor accountability
• Support informed business decisions

Future Trends in Third-Party Risk Management

As organizations become more dependent on digital supply chains, TPRM continues to evolve.

Key trends include:

• Continuous vendor monitoring
• AI-assisted risk analysis
• Automated security questionnaires
• Supply chain cybersecurity assessments
• Zero Trust access for third parties
• Greater focus on software supply chain security

Organizations that invest in these capabilities will be better prepared to manage emerging risks.

Final Thoughts

Third-Party Risk Management is no longer optional. Every organization that relies on vendors, cloud providers, or outsourced services should understand the risks these relationships introduce.

By identifying vendors, assessing their security posture, implementing appropriate contractual safeguards, and continuously monitoring their performance, organizations can reduce cyber risks and strengthen their overall security posture.

A well-designed TPRM program not only protects your business but also demonstrates to customers, partners, and regulators, including the NDPC in Nigeria, that security is a strategic priority.

Frequently Asked Questions (FAQ)

What is Third-Party Risk Management (TPRM)?

Third-Party Risk Management is the process of identifying, assessing, managing, and monitoring risks associated with vendors, suppliers, and other external organizations that provide products or services.

Why is TPRM important?

Third parties often have access to sensitive systems or data. Weak security practices at a vendor can lead to data breaches, operational disruptions, or regulatory issues.

What documents should you request from high-risk vendors?

Common examples include security policies, ISO/IEC 27001 certificates (if applicable), SOC 2 reports, penetration testing summaries, incident response plans, business continuity plans, and evidence of security awareness training.

ABOUT THE AUTHOR

Jackson Godwin is a Cybersecurity Analyst and Penetration Tester at Jackson Technology, a cybersecurity and data protection consulting firm based in Abuja, Nigeria, serving enterprise clients across banking, fintech, oil and gas, and the public sector. His expertise spans vulnerability assessment and penetration testing (VAPT), cloud security, and compliance advisory covering ISO 27001, the NDPA 2023, and GDPR. He is also affiliated with TechTrain Academy, where he supports cybersecurity education for African professionals.

info@jacksontechnology.com.ng  |  jacksontechnology.com.ng