While outsourcing can drive efficiency and innovation, it also introduces significant risks, particularly concerning data security and compliance. Many security frameworks have taken up the responsibility of helping organizations manage threats in this context, and SOC 2 is no different.
This article explores the intersection of SOC 2 compliance and third-party vendor risk management, providing advanced insights for business and technical decision-makers.
The Importance of SOC 2 Compliance
SOC 2 is a set of criteria developed by the American Institute of Certified Public Accountants (AICPA) to evaluate service providers’ controls related to security, availability, processing integrity, confidentiality, and privacy. Unlike other compliance frameworks focusing primarily on financial reporting, SOC 2 is particularly relevant for organizations that handle sensitive data, including SaaS providers, data centers, and cloud service providers.
For business and technical decision-makers, SOC 2 compliance is a critical indicator of a vendor’s commitment to maintaining robust security practices. A SOC 2 report comprehensively overviews how a vendor manages its systems and processes to protect client data. This assurance is precious in the finance, healthcare, and technology sectors, where data breaches can have severe legal and reputational consequences.
Third-Party Vendor Risk Management
Third-party vendor risk management involves assessing and mitigating the risks of outsourcing services or functions to external entities. These risks include operational failures, data breaches, regulatory non-compliance, and reputational damage. Given the complexity and interdependence of modern supply chains, managing these risks has become a strategic priority for organizations.
Effective vendor risk management requires a systematic approach encompassing the entire vendor lifecycle—from initial selection and due diligence to ongoing monitoring and, eventually, contract termination. Critical components of a robust vendor risk management program include:
- Vendor Risk Assessment: Identify and evaluate the risks posed by each vendor based on factors such as the nature of the service provided, the sensitivity of the data handling, and the vendor’s security posture.
- Due Diligence: Conduct thorough background checks and assessments of a vendor’s compliance with relevant regulatory standards, including SOC 2, ISO 27001, and GDPR.
- Contract Management: Establish clear terms and conditions in vendor contracts that define security expectations, compliance requirements, and responsibilities in the event of a breach.
- Ongoing Monitoring: Regularly review and audit vendors to ensure they meet the organization’s security and compliance standards throughout the contract.
- Incident Response Planning: Preparing for potential security incidents involving third-party vendors, including establishing communication protocols and remediation steps.
SOC 2 and Vendor Risk Management: The Intersection
SOC 2 compliance is crucial in the third-party vendor risk management process, serving as a vendor selection benchmark and a tool for ongoing risk assessment. Here’s how SOC 2 can be integrated into each stage of the vendor risk management lifecycle:
Vendor Selection and Due Diligence
When selecting a new vendor, decision-makers should prioritize those who have achieved compliance. A SOC 2 report provides detailed insights into a vendor’s controls and processes, helping organizations assess whether the vendor can meet their security and compliance needs. Key elements to review in a SOC 2 report include:
- Trust Service Criteria: The specific areas (security, confidentiality, availability) covered by the vendor’s SOC 2 audit, including the systems, processes, and locations included in the audit.
- Audit Findings: Any control deficiencies or areas where the vendor failed to meet SOC 2 standards. By using SOC 2 as a filter during the vendor selection process, organizations can significantly reduce the risk of partnering with vendors without adequate security measures.
- Contract Negotiation and Management: Compliance should also be a key consideration during contract negotiations with third-party vendors. Contracts should include specific clauses that require vendors to maintain SOC 2 compliance throughout the contract period. Additionally, contracts should stipulate that the vendor must regularly provide the organization with updated reports. Decision-makers should also consider incorporating penalty clauses for non-compliance or breaches of controls. These clauses help ensure that vendors remain vigilant about their security practices and provide a mechanism for recourse in the event of a security incident.
Ongoing Monitoring and Compliance
SOC 2 reports represent a snapshot of a vendor’s security posture at a specific time. Therefore, organizations must regularly monitor their vendors’ SOC 2 compliance status. This can be done by periodically requesting updated SOC 2 reports and reviewing them for any changes or new deficiencies.
Organizations should assess critical vendors’ security practices and review reports. This may involve on-site audits, penetration testing, and incident reports. Organizations can better understand their vendors’ risk profiles by combining SOC 2 reports with these additional assessments.
Incident Response and Remediation
Despite best efforts, security incidents involving third-party vendors can still occur. When they do, a SOC 2 report can be invaluable for understanding the incident’s root cause and determining the appropriate remediation steps.
For example, if a breach occurs, the organization can review the vendor’s report to identify any control deficiencies that may have contributed to the incident. This information can then be used to work with the vendor to address the deficiencies and prevent future breaches.
Additionally, organizations should have a clear incident response plan that outlines the steps to take in the event of a vendor-related security incident. This plan should include communication protocols, roles and responsibilities, and timelines for remediation.
Stay On Top Of Vendor Risk with Lazarus Alliance
In a world where data breaches and cyber threats are becoming increasingly sophisticated, leveraging SOC 2 as part of a comprehensive vendor risk management strategy is not just a best practice—it’s a business necessity.
To learn more, contact us.
- FedRAMP
- StateRAMP
- NIST 800-53
- FARS NIST 800-171
- CMMC
- SOC 1 & SOC 2
- HIPAA, HITECH, & Meaningful Use
- PCI DSS RoC & SAQ
- IRS 1075 & 4812
- ISO 27001, ISO 27002, ISO 27005, ISO 27017, ISO 27018, ISO 27701, ISO 22301, ISO 17020, ISO 17021, ISO 17025, ISO 17065, ISO 9001, & ISO 90003
- NIAP Common Criteria – Lazarus Alliance Laboratories
- And dozens more!
What Is Autonomous Malware?
We’re reaching the end of 2025, and looking ahead to 2026, most experts are discussing the latest threats that will shape the year ahead. This year, we’re seeing a new, but not unexpected, shift to autonomous threats driven by state-sponsored actors and AI. With that in mind, a new generation of threats, broadly known as...Continue reading→
What CISA’s Emergency Directive 26-01 Means for Everyone
In mid-October 2025, the CISA issued one of its most urgent orders yet: Emergency Directive 26-01. The directive calls on all Federal Civilian Executive Branch (FCEB) agencies to immediately mitigate vulnerabilities in devices from F5 Networks following a state-sponsored breach of F5’s systems and access to portions of BIG-IP source code and vulnerability data. The event...Continue reading→
Cybersecurity and Vetting AI-Powered Tools
A recent exploit involving a new AI-focused browser shone a light on a critical problem–namely, that browser security is a constant issue, and AI is just making that threat more pronounced. Attackers discovered a way to use that browser’s memory features to implant hidden instructions inside an AI assistant. Once stored, those instructions triggered unwanted...Continue reading→
Shutdown Security And Cyber Vulnerability
When the federal government shuts down, the public sees closed monuments, unpaid workers, and halted programs. What they do not see is the silent surge of cyberattacks targeting agencies already operating on fumes. During the most recent shutdown, attacks against U.S. government systems spiked by nearly 85%. Cybersecurity failures during government disruptions rarely start with...Continue reading→
Identity and the Shift from Malware
The world of cyber threats is rapidly evolving, and while we can see these changes more generally, it’s always crucial to understand them concretely. As the 2025 CrowdStrike Global Threat Report shows us, the landscape of our industry is changing. We’re digging into this report to discuss a challenging trend: the move of hackers foregoing...Continue reading→
Maintaining Compliance Against Prompt Injection Attacks
The increasing adoption of AI by businesses introduces security risks that current cybersecurity frameworks are not prepared to address. A particularly complex emerging threat is prompt injection attacks. These attacks manipulate the integrity of large language models and other AI systems, potentially compromising security protocols and legal compliance. Organizations adopting AI must have a plan...Continue reading→
Are We Already Talking About CMMC 3.0?
The ink has barely dried on the CMMC final rule, and already the defense contracting community is buzzing with speculation about what comes next. Just when contractors thought they had a moment to catch their breath after years of regulatory limbo, whispers of CMMC 3.0 have begun circulating through the industry. But is this just...Continue reading→
Centralizing Identity-Based Risk
As the traditional network boundary dissolves and remote work becomes standard practice, identities are the major frontier for security. Whether we’re talking about human users, service accounts, or machine identities, these have emerged as both the primary access mechanism and the most targeted attack vector. It has become imperative for providers to centralize identity management...Continue reading→
Deviation and Significant Change Requests in FedRAMP: A Comprehensive Guide
FedRAMP provides a standardized approach to security assessment, authorization, and continuous monitoring for cloud products and services used by federal agencies. While the program’s rigorous baseline requirements ensure consistent security, the reality is that this consistency calls for a little flexibility. This is where deviation requests and significant change requests come into play. These two...Continue reading→
The Costs of Compliance and Data Breaches
Data is possibly one of the most valuable assets any organization holds. Customer information, employee records, and proprietary business intelligence present challenges because the data flowing through modern enterprises represents both significant opportunities and serious risks. Businesses face a challenging balance: investing in compliance measures to protect sensitive information while also preparing for the real...Continue reading→
Related Posts