Outsourced but Not Off the Hook: The Hidden Risks of Third-Party Data Security

In today’s digital-first economy, outsourcing to third-party providers has become the backbone of efficiency for small and medium-sized businesses. From cloud storage to payment processing, many organizations rely on trusted third-party service providers to store, process, and transmit their data. Unfortunately, this reliance often comes with the dangerous misconception that once data is handed off to a third-party provider, the responsibility for securing it is handed off as well.

The truth is responsibility for security is, at most, shared and not transferred.

The Shared Responsibility Model

When you use a third-party provider such as a cloud service provider, payment processor, or SaaS vendor, there is often a shared responsibility model at play. The provider may manage the infrastructure such as servers, hardware, and physical security, but the business remains responsible for how the data is used, accessed, and protected within that environment.

For example, a cloud storage provider may ensure the data centers where your data is stored are secure, but if your employees use weak passwords, fail to enable encryption, or share credentials, your data is still at risk and your business remains accountable for a breach caused by any such action of an employee.

Why This Misconception Is Dangerous

Believing that outsourcing services also transfers security responsibility can create blind spots in your cybersecurity posture. Cybercriminals frequently exploit these assumptions, targeting misconfigured cloud environments or insecure integrations between systems.

Even major regulatory frameworks like PCI DSS, NIST, and HITRUST make it clear that an organization cannot outsource accountability for data protection. While vendors may share the workload, your business is still responsible for ensuring compliance and protecting sensitive information.

Due Care and Due Diligence Requirements

Major cybersecurity frameworks such as NIST, PCI DSS, ISO 27001, and HITRUST all emphasize the importance of performing due diligence and due care when working with third-party service providers. 

Due Diligence involves thoroughly evaluating the security posture of your vendors to ensure they meet your organization’s standards and requirements prior to onboarding. Due Care, on the other hand, refers to continually reviewing the steps the third party provider is taking to protect sensitive information in order to avoid a negative security outcome during the relationship. Many of the ongoing security expectations and requirements should be clearly embedded in signed contractual obligations with your vendors. 

These frameworks make it clear that outsourcing a service doesn’t eliminate your responsibility but instead extends it. To stay compliant, businesses must not only choose reputable providers but also verify, document, and monitor those providers’ ongoing adherence to cybersecurity best practices.

Tips for Securing Data with Third-Party Providers

Building a secure, compliant environment when working with external partners requires a proactive approach. Here are some essential steps to take:

1. Understand the Scope of Responsibility: Review your vendor’s documentation and contracts to clarify who is responsible for each part of the security process. For example, in a cloud service model (IaaS, PaaS, or SaaS), the boundaries of responsibility can differ significantly.

   
   

2. Vet Your Providers Carefully: Before signing on, evaluate your third-party provider’s security certifications and compliance standing. Look for independent attestations like SOC 2, ISO 27001, or PCI DSS Level 1 Service Provider certifications. These demonstrate that the provider has undergone rigorous external audits.

   
   

3. Encrypt Data Everywhere: Use encryption both at rest and in transit — even if your provider already does. Layering encryption ensures your sensitive information remains unreadable even if it’s intercepted or accessed by an unauthorized party.

   
   

4. Implement Strong Access Controls: Maintain strict access policies for employees and contractors. Use multi-factor authentication (MFA), role-based access control (RBAC), and regular reviews to limit who can view or modify sensitive data.

   
   

5. Regularly Audit and Monitor Activity: Don’t assume your provider’s security controls are sufficient forever. Schedule regular audits of access logs, configuration settings, and compliance status. Monitor for anomalies that could indicate suspicious activity.

   
   

6. Include Security in Vendor Contracts: Build cybersecurity expectations directly into your contracts and service-level agreements (SLAs). Define clear terms around breach notification, data handling, encryption standards, and termination procedures for data deletion.

   
   

7. Develop an Incident Response Plan: Coordinate your incident response procedures with your provider’s processes. If a data breach occurs, both parties should understand their roles in identifying, containing, and reporting the issue.

Compliance Starts with Understanding Responsibility

Frameworks like PCI DSS and NIST require that businesses maintain oversight of their data regardless of where it resides. Outsourcing services can simplify your operations, but you cannot outsource accountability. Staying compliant means maintaining visibility, verifying controls, and actively managing the relationship with every provider that handles your data.

How InfoSec Specialists Can Help

At InfoSec Specialists, we understand that compliance and cybersecurity can be complex, especially when managing data across multiple platforms and providers. As experienced cybersecurity consultants, we help small businesses assess their current practices, identify gaps, and build stronger, framework-aligned programs to secure sensitive information.

Whether you’re aiming to comply with PCI DSS, NIST, HITRUST, or another security standard, our team can evaluate your vendor relationships, review your configurations, and design policies that keep your data protected no matter where it lives.

Protecting your business starts with understanding your responsibilities and InfoSec Specialists can help you get there.