Third-party and business partner cybersecurity

“Third-party and business partner cybersecurity” is a control expectation focused on one hard truth: your security posture is only as strong as the outside parties that touch your data, network, and clinical operations. HICP frames the requirement plainly: manage cyber risk introduced by service providers and partners. ¹

For a Compliance Officer, CCO, or GRC lead, the fastest path to defensible implementation is to treat this as an operational lifecycle, not a questionnaire exercise. You need a system that (1) finds relevant third parties, (2) classifies them by risk, (3) enforces pre-contract due diligence and minimum security terms, (4) documents exceptions, and (5) monitors the relationship until offboarding.

This page is written to help you implement the third-party and business partner cybersecurity requirement without overbuilding. It focuses on the few artifacts auditors and customers consistently ask for: a third-party inventory, risk ratings, completed due diligence, contract security obligations, and proof that you follow your own process. Where helpful, it also points to common patterns from widely used frameworks (NIST CSF, NIST SP 800-53, ISO 27001), while anchoring the requirement to HICP. ¹

Regulatory text

HICP requirement (excerpt): “Manage cyber risk introduced by service providers and partners.” ¹

Operator interpretation (what you must do):

• Know who your third parties are (not just “vendors”): any external entity that can access systems, networks, facilities, or sensitive data; or whose outage would disrupt patient care.
• Understand and document the risk they introduce before you sign, integrate, or share data.
• Put security requirements in contracts (and track them), then verify performance over time, not just at onboarding.
• Manage exceptions explicitly: business justification, compensating controls, time limits, and approvals.

HICP is guidance, but it is commonly used as a baseline in healthcare assurance. If you claim alignment to HICP, you need evidence that the process exists and runs. ¹

Plain-English requirement (what “good” looks like)

You can explain your third-party risk program in one minute:

1. “Here is our third-party list and who owns each relationship.”
2. “Here is how we tier them by cybersecurity impact.”
3. “Here is what we require at each tier (due diligence + contract terms).”
4. “Here is how we monitor, handle findings, and offboard.”
5. “Here is the evidence for a sample of third parties.”

That narrative, backed by artifacts, is how you operationalize the third-party and business partner cybersecurity requirement.

Who it applies to

Entity scope: Healthcare organizations using HICP as a cybersecurity practices baseline. ¹

Operational scope (third parties to include):

• Cloud/SaaS handling regulated or sensitive data (EHR add-ons, billing, scheduling, patient engagement).
• Managed service providers (IT, security, SOC, backup, helpdesk).
• Business partners with network connectivity (HL7/FHIR interfaces, SFTP, VPN, VDI).
• Contractors or consultants with privileged access.
• Medical device vendors with remote support access (or firmware/software update paths).
• Collection agencies, legal firms, shredding, facilities vendors if they handle records or have facility access to restricted areas.

A practical scoping rule: include any third party that meets at least one condition—data access, system access, or operational criticality.

What you actually need to do (step-by-step)

Step 1: Build a complete third-party inventory (system of record)

• Pull from AP/ERP, contract repositories, IAM directories, SSO app catalogs, CMDB, EHR integration lists, and departmental “shadow IT” attestations.
• Normalize entries: legal name, service description, business owner, IT owner, data types, access method, subcontractor dependency (if known), renewal date.

Tip: If you can’t name the business owner, you don’t control the relationship. Make owner assignment mandatory.

Step 2: Tier third parties by cyber impact (simple is defensible)

Create a tiering model that drives required actions. Example tier triggers:

• High impact: stores/processes sensitive data; privileged or persistent access; critical to clinical operations; direct network connectivity.
• Moderate impact: limited data; no privileged access; important but with workable alternatives.
• Low impact: no sensitive data; no system access; commoditized service.

Document the decision logic so two reviewers would reach the same tier.

Step 3: Define minimum due diligence per tier (and make it repeatable)

Map tiers to required checks. Keep it tight:

High impact due diligence (typical set):

• Security questionnaire aligned to your control set (NIST CSF or ISO-style domains).
• Independent assurance evidence where available (SOC 2 report, ISO 27001 certificate) and a review memo documenting scope fit and gaps.
• Architecture and access review: data flows, auth method, encryption expectations, admin access model, logging, and incident notification.
• Breach/incident history disclosure and remediation status.
• Subprocessor list (or at least a contractual right to know material subprocessors).

Moderate impact:

• Short-form questionnaire + contractual controls.
• Evidence sampling for key controls (encryption, MFA/SSO support, vulnerability management approach).

Low impact:

• Sanctions/legitimacy checks, basic security attestations, and standard contract language as appropriate.

Your goal is consistent risk decisions, not perfection.

Step 4: Put security requirements into the contract, then track them

For higher-risk relationships, use a security addendum (or embedded clauses) that covers:

• Access control (MFA for admin access; least privilege; SSO where feasible).
• Encryption requirements for data in transit and at rest (state your expectation).
• Logging and incident notification timeframes (state your required notification obligation).
• Vulnerability management and patching responsibilities.
• Audit/assessment rights and cooperation expectations.
• Data return/destruction at termination.
• Subcontractor controls (flow-down obligations).

Then do the part most programs miss: track each security requirement to an owner and evidence, the same way you track any other compliance obligation. HICP explicitly points to managing cyber risk introduced by providers and partners; contract requirement tracking is how you prove you managed it. ¹

Where Daydream fits: Daydream is useful when you need one place to track third-party assurance artifacts (questionnaires, SOC reports, exceptions) and map contract security requirements to renewal dates and evidence requests, so the process doesn’t collapse into spreadsheets.

Step 5: Handle findings and exceptions with discipline

Create three lanes:

• Remediate before go-live: missing MFA, missing encryption, no incident response commitment, unclear data ownership.
• Accept with compensating controls: restrict scope, tokenize data, limit access paths, add monitoring, shorten contract term.
• Reject: high impact + unfixable gaps + no alternatives.

For exceptions, require: documented risk, approver, compensating control, expiration date tied to renewal, and a re-review trigger (material change, incident, scope expansion).

Step 6: Ongoing monitoring (lightweight but real)

Ongoing monitoring should match tier:

• Renewal-based re-assessments for all non-low relationships.
• “Material change” triggers: new integration, new data type, new geography, new subprocessor, major outage, security incident.
• Evidence refresh cadence tied to contract dates (SOC report updates, pen test summaries, policy attestations).

Step 7: Offboarding controls

• Confirm account deprovisioning and access revocation.
• Ensure data return/destruction certificates where applicable.
• Remove integrations (API keys, VPN tunnels, SFTP accounts).
• Document final security closure.

Required evidence and artifacts to retain (audit-ready checklist)

Maintain these artifacts in a controlled repository:

• Third-party inventory with owners, tiers, and last review date.
• Tiering methodology and approval record.
• Completed due diligence packages (questionnaires, review notes, SOC/ISO evidence, security calls).
• Risk acceptance/exceptions register with approvals and expirations.
• Executed contracts and security addenda, plus a clause-to-control mapping (even a simple table).
• Proof of ongoing monitoring: renewal reassessments, evidence refresh requests, meeting notes, remediation tracking.
• Offboarding checklists and data destruction confirmations (where applicable).

Auditors typically sample. Your process must work end-to-end for any sampled third party.

Common exam/audit questions and hangups

Use these as your internal readiness prompts:

• “Show me your complete list of third parties and how you know it’s complete.”
• “Which third parties have access to sensitive data or production systems?”
• “How do you decide risk tiers, and who approves exceptions?”
• “Provide evidence for three high-impact third parties: due diligence, contract terms, and monitoring.”
• “How do you ensure contract security terms are met after signature?”
• “What happens when a third party has a security incident?”

Hangup to anticipate: teams can produce contracts and questionnaires, but cannot show control operation (tracking, follow-up, exceptions, and monitoring). HICP’s requirement is management of risk, so operational evidence matters. ¹

Frequent implementation mistakes (and how to avoid them)

1. Inventory built from AP only. Fix: reconcile AP with SSO/app catalogs and integration lists; require department attestations.
2. Tiering based on spend. Fix: tier on access, data sensitivity, and operational criticality.
3. Due diligence with no decision record. Fix: write a one-page “risk decision memo” for high-impact third parties.
4. Contract language exists but isn’t tracked. Fix: create a requirement tracker tied to renewal dates and evidence requests.
5. Exceptions never expire. Fix: require expiration dates and renewal gating.
6. No offboarding evidence. Fix: make offboarding a ticketed workflow with security sign-off.

Enforcement context and risk implications

No public enforcement cases were provided in the source catalog for this requirement. The practical risk remains straightforward: third parties are a common pathway for unauthorized access, ransomware propagation, outages, and data exposure. If you cannot show that you identify high-impact third parties, assess them, and enforce contractual safeguards, you will struggle to defend your security governance under customer audits and healthcare assurance expectations aligned to HICP. ¹

Practical 30/60/90-day execution plan

Days 0–30: Establish the minimum viable program

• Name an executive owner and define RACI (Security, Legal, Procurement, Privacy, IT).
• Build the third-party inventory baseline from AP + SSO/app catalog + integration list.
• Create a tiering rubric and apply it to the top set of highest-impact relationships.
• Standardize templates: questionnaire, risk decision memo, exception form, security addendum clause library.
• Set gating: no new high-impact third party goes live without due diligence + security terms.

Days 31–60: Make it operational

• Run due diligence for all high-impact third parties not yet reviewed.
• Stand up contract requirement tracking: clause obligations, owners, evidence needed, renewal dates.
• Create an exceptions register and migrate informal acceptances into it.
• Pilot ongoing monitoring triggers with Procurement and IT change management.

Days 61–90: Prove it works and prepare for audits

• Complete a sample-based internal audit: pick several high-impact third parties and verify end-to-end evidence.
• Close gaps: missing addenda, missing evidence refresh, unresolved findings.
• Implement offboarding workflow and test it on at least one terminated relationship.
• Produce a board/committee-ready dashboard: inventory coverage, high-impact reviews complete, exceptions open, renewals due.

Frequently Asked Questions

Do we need to assess every third party?

You need a complete inventory, then risk-based due diligence. Low-impact third parties can follow a lighter process, but you still need an owner, a tier, and a documented rationale. ¹

What counts as a “business partner” versus a “vendor”?

Treat both as third parties for this requirement. If an external entity can affect your systems, data, or operations, include it in your inventory and tiering model. ¹

Is a SOC 2 report enough to approve a high-impact third party?

A SOC 2 can be strong evidence, but you still need a documented review of scope, carve-outs, and gaps against your requirements. Keep a short memo showing how you made the risk decision.

How do we handle third parties that refuse our security addendum?

Use a formal exception workflow: document the gap, evaluate compensating controls, get risk acceptance at the right level, and time-limit the exception to a renewal or renegotiation event.

What should we do for subcontractors (fourth parties)?

For higher-impact relationships, require contractual flow-down obligations and a right to know material subprocessors. Track subcontractor disclosures as part of ongoing monitoring.

Who should “own” third-party risk: Security, Procurement, or Compliance?

Make business owners accountable for the relationship, Security accountable for technical risk review, and Procurement/Legal accountable for contracting and renewals. Compliance/GRC should run the program mechanics, evidence, and reporting.

Related compliance topics

• 2025 SEC Marketing Rule Examination Focus Areas
• Access and identity controls
• Access Control (AC)
• Access control and identity discipline
• Access control lifecycle management

Footnotes

1. HHS 405(d) HICP