Why Vendor Risk Management Is More Important than Ever for MSPs

Here's what every business owner needs to understand: their cybersecurity is only as strong as their weakest vendor. A single compromised supplier can trigger a data breach that destroys years of trust and compliance efforts in minutes.

For MSPs, this vendor vulnerability is both a critical threat to your clients and a major business opportunity. This post shows you how to turn third-party risk management into a competitive advantage that wins you more clients.

The growing third-party threat

According to the 2025 Verizon Data Breach Investigations Report (DBIR), third-party vendors are increasingly vulnerable in the data security chain. Two findings are particularly concerning:

30% of all data breaches involve a third party, twice as high as last year.
20% of data breaches originated from the exploitation of known vulnerabilities, especially those in the very systems that make up the core of MSP services, such as firewalls, VPNs, and remote access points.

These trends highlight that the traditional security perimeter is not enough. Attackers are now targeting the supply chain, leveraging vulnerabilities in third-party software, services, and partners to gain access to primary targets.

How third-party risk impacts MSPs: Security, compliance, and growth

The growing threat of third-party exploitation has a three-fold impact on MSPs:

1. MSPs need to harden their security as third-party vendors

Your MSP is a prime target for attackers because you hold the keys to multiple client networks. If hackers breach your systems or compromise one of your sub-vendors, the damage spreads to every client you serve.

This means you need bulletproof security for your operations. Vet every tool in your stack, secure your supply chain, and remember that your security posture directly impacts your client’s risk profile.

2. Increasing regulatory scrutiny means MSPs may be required to comply

Regulators and cybersecurity experts worldwide have recognized the escalating danger posed by third-party risk. Their answer? A strong emphasis on the management of third-party relationships.

Key frameworks that integrate controls for third-party risk management include:

NIST Cybersecurity Framework (CSF): NIST CSF emphasizes the importance of managing supply chain risks as part of an overall cybersecurity program. NIST SP 800-161, for example, specifically addresses cybersecurity supply chain risk management practices.
ISO 27001 and ISO 27002: These international standards for information security management systems (ISMS) include controls related to supplier relationships.
Cybersecurity Maturity Model Certification (CMMC): CMMC mandates specific cybersecurity practices and processes, including those related to third-party risk.
General Data Protection Regulation (GDPR) and HIPAA: These data privacy regulations hold organizations accountable for the protection of personal data, even when processed by third parties.
Digital Operational Resilience Act (DORA): DORA extends regulatory scrutiny to third-party ICT service providers, including MSPs.

Depending on the industries you work with, you may find yourself directly subject to cybersecurity or regulatory frameworks. If your MSP isn’t (yet) required to comply, adherence to these frameworks serves to demonstrate your commitment to security, which is quickly becoming a prerequisite for doing business in many sectors.

3. Vendor risk management for MSPs creates compliance-as-service opportunities

The heightened awareness and regulatory focus on third-party risk create a compelling opportunity for MSPs. By offering vendor risk management as a dedicated service, you can help your clients navigate compliance requirements, identify and mitigate risks posed by their vendors, and strengthen their overall security posture. This transforms a potential challenge into a valuable, in-demand service that can differentiate an MSP in the market.

From challenge to revenue: Monetizing third-party risk

Vendor risk management for MSPs offers a multitude of benefits, not just for your clients, but for your growth and reputation:

Enhanced security posture

By systematically assessing and managing vendor risks, you help your clients proactively identify and address vulnerabilities in their supply chain. This extends their security perimeter, making them more resilient against cyberattacks and data breaches.

Improved regulatory compliance

Many compliance frameworks mandate third-party risk management. By offering this service, you help clients meet these requirements, avoid costly fines, and build a stronger foundation for audits and certifications. This is especially valuable in highly regulated industries.

Protection of reputation and trust

A data breach involving a third party can severely damage a company’s reputation and erode customer trust. By proactively managing vendor risks, you help your clients avoid such incidents, safeguarding their brand and reinforcing their reliability.

Cost savings

Effective vendor risk management can lead to significant cost savings. By identifying and mitigating potential risks early, organizations can prevent expensive data breaches, legal fees, and operational disruptions. It can also optimize procurement processes by ensuring vendors meet security and compliance standards, leading to stronger partnerships.

Streamlined operations

A well-defined vendor risk management program brings structure and efficiency to managing external relationships. This reduces administrative overhead, ensures consistent due diligence, and allows for better resource allocation.

Competitive differentiation

In a crowded market, offering specialized compliance services like vendor risk management positions your MSP as a strategic security partner rather than just an IT provider. This expertise attracts clients who are increasingly concerned about their supply chain security.

Compliance Scorecard: Your partner in vendor risk management for MSPs

Turning the third-party challenge into a thriving Compliance as a Service (CaaS) opportunity requires the right tools. With Compliance Scorecard, your MSP can provide tailored strategies that align with industry regulations, expand your expertise beyond traditional IT management, and position your firm as a compliance specialist.

Here are just some of the tools that support your vendor risk management offering:

Due Diligence and Onboarding: Implement a structured process for vetting new clients and vendors before they’re engaged, including policy reviews and security posture assessments.
Assessment Scorecard: Map comprehensive compliance assessments against a wide range of industry standards, including those relevant to third-party risk.
Policy & Procedure Management: Centralize and manage client policies and procedures, ensuring they’re aligned with compliance requirements and can be easily shared with vendors for due diligence.
Risk Register & Risk Matrix: Identify, track, and mitigate risks associated with third-party vendors using a comprehensive risk management system.
Leverage Integrations: Shut down exploitation of known vulnerabilities with integrations for vulnerability scanning, patch management, asset tracking, and more.
Reminders & Notifications: Stay on top of compliance tasks and deadlines for vendor assessments, reviews, and remediation with automated alerts.
Centralized Document Storage: Securely store all compliance-related documentation, including vendor contracts and audit trails, in one easily accessible place.

Be the third party your clients can rely on

A single compromised third-party vendor can unravel an entire digital defense program. But this flaw in the data security chain is a strategic pivot point for MSPs. By proactively integrating vendor risk management into your compliance-as-a-service offering, you transform vulnerabilities into market leadership.

Compliance Scorecard gives you the tools to strengthen client security across their entire vendor ecosystem. Position yourself as the MSP that truly understands modern risk. Get started by contacting us today or scheduling a Live Demo.