How other companies' weak security can put your business at risk

The Australian Cyber Security Centre recently warned that supply chain and third-party compromises are becoming a growing cybersecurity risk. While the warning was issued for Australian businesses, the reality is the same for small and medium-sized businesses everywhere.

Your business relies on other companies every day, from payment processors and accountants to cloud software and IT providers. If one of them has weak security or is compromised in a cyberattack, your business could be affected too. Here's what third-party risk means, how it can impact your business, and the steps you can take to reduce it.

Key takeaways

• Third-party risk means your business can be affected by a cyberattack on a vendor, supplier, or service provider you rely on.
• According to IDCARE, almost 60% of Australian small businesses still don't use multi-factor authentication (MFA) on their email accounts, even though email remains one of the most common entry points for cyberattacks.
• IDCARE estimates the average financial loss from a cyber incident for a small business is around AU$47,000, an amount many businesses would struggle to absorb.
• Retail, trades and contractors, health services, construction, and tourism and hospitality are among the industries most affected by cyber incidents, according to IDCARE.
• Reviewing the companies and services that have access to your business, limiting their access, and enabling MFA can significantly reduce your cybersecurity risk.

What is third-party risk?

Third-party risk is the risk that your business could be affected by a cybersecurity incident involving another company you work with or a service you use. Even the smallest businesses rely on online banking, cloud storage, payment platforms, accounting software, CRMs, and dozens of other online services to keep operations running.

Think about all the companies that have access to your business data or systems. Your accountant may handle financial records, your payment provider processes customer transactions, your website host stores your website, and your cloud storage provider keeps important business files. Marketing platforms, CRM systems, payroll software, IT consultants, and even AI tools may also handle sensitive business information.

If one of these providers is compromised, attackers may gain access to your data, steal customer information, disrupt your operations, or use the trusted connection to target your business.

Related: 7 AI customer service mistakes that can put your business at risk

How can another company's weak security affect your business?

If a cybercriminal gains access to an account belonging to one of your service providers that has permission to access your systems, they may be able to steal sensitive information, install malware, or send convincing phishing emails while pretending to be a trusted partner.

The impact can include:

• Business downtime while systems or services are restored.
• Lost sales if customers can't place orders or access your services.
• Exposure of customer or employee information.
• Financial losses from fraud, recovery costs, or legal obligations.
• Damage to your reputation if customers lose confidence in your business.

While you can't control how every supplier protects its systems, you can reduce your own risk by choosing trusted providers, limiting the access they have to your business, and regularly reviewing the tools you use.

Related: How to Work Safely with Polyworkers, Contractors and Freelancers

The third parties most small businesses forget about

Here are some of the third parties small businesses often overlook:

• Your accountant or bookkeeper. They may have access to financial records, tax information, payroll data, and banking details.
• IT consultants or managed service providers. If someone manages your computers or network remotely, they may have administrator-level access to your systems.
• Website developers and hosting providers. They often have access to your website, customer data, and business email accounts.
• Marketing agencies and social media managers. They may have access to your website, advertising accounts, customer mailing lists, or social media profiles.
• Payroll, HR, and CRM software. These platforms store employee records, customer information, contracts, and other sensitive business data.
• Cloud storage and file-sharing services. Documents stored online may include invoices, contracts, customer lists, and confidential business plans.
• AI tools, browser extensions, and integrations. Employees may upload company documents or grant permissions without realizing how much information they're sharing with third-party services.

It's also worth reviewing old software and services you no longer use. Former employees, contractors, or unused apps may still have access to business accounts months or even years later, creating unnecessary security risks.

Related: How to Vet Suppliers and Avoid Fake Vendor Scams

How to reduce third-party risk

You can't run a modern business without relying on third-party providers, so the best thing you can do is reduce your risk.

Here are a few simple ways to do it:

Enable multi-factor authentication (MFA). Turn on MFA for every business account that supports it, especially email, banking, cloud storage, and business software.

Review who has access. Regularly check which employees, contractors, and third-party providers have access to your accounts and remove anyone who no longer needs it.

Only grant the permissions a service needs. Before connecting a new app, review the permissions it requests and avoid giving it access to more data than necessary.

Keep a list of the tools your business uses. It's easy to forget about software you signed up for years ago. Periodically review your apps and remove services you no longer use.

Choose providers that take security seriously. Before trusting a provider with sensitive business information, spend a few minutes researching its security practices, support for MFA, and history of responding to security incidents.

Keep software up to date. Install updates for your operating systems, browsers, and business applications as soon as they're available. Many updates fix security vulnerabilities that attackers actively exploit.

Have a backup plan. If one of your providers experiences an outage or cyberattack, make sure you can still access your critical business data or continue operating until the service is restored.

Related: Small Business Security Starter Kit: The Tools You Need and Why

How Bitdefender Ultimate Small Business Security can help

Third-party risk doesn't necessarily mean you've done something wrong or that your own systems have been hacked. Sometimes, cybercriminals simply look for the weakest link in a network of suppliers, software providers, and business partners. If one of them is compromised, the attack can quickly spread to the businesses that rely on them.

While you can't control how other companies protect their systems, you can strengthen your own defenses. Bitdefender Ultimate Small Business Security helps protect your business against many of the attacks that can follow a third-party security incident, including phishing, malware, and credential theft. It also helps secure business devices, detect suspicious activity, and reduce the risk of attackers using compromised accounts to access your systems.

Try Bitdefender Ultimate Small Business Security free for 30 days and see how easy it can be to strengthen your business's cybersecurity.

FAQs

Do small businesses really need to worry about third-party risk?

Yes. Small businesses often rely on dozens of cloud services and external providers but rarely have dedicated cybersecurity staff. A single compromised account or vulnerable provider can expose customer information, disrupt operations, or lead to financial losses.

What should I do if one of my service providers has a data breach?

If a company you rely on reports a data breach, don't ignore it. Read the provider's notification carefully to understand what information may have been affected. Change your password for that account immediately, especially if you reused it elsewhere, and enable multi-factor authentication (MFA) if you haven't already. Monitor your accounts for suspicious activity, review the permissions you've granted the provider, and follow any additional security recommendations they provide.

Can my business be affected if one of my software providers is hacked?

Yes. If a software provider is compromised, attackers may gain access to customer information, business data, or connected accounts. Depending on the service, it could also interrupt your operations, prevent employees from working, or expose sensitive information.

Which third-party services should I review first?

Start with the services that have access to your most sensitive information, such as your business email, cloud storage, accounting software, payment platform, CRM, payroll system, and any apps connected to your Microsoft 365 or Google Workspace account.

Can cybersecurity software protect me from third-party risk?

Cybersecurity software can't prevent another company from being hacked, but it can help protect your business if attackers try to use a compromised third party to target you. Features such as phishing protection, malware detection, and account security add an extra layer of defense alongside good vendor management.