Managing Internet of Things (IoT) Devices with Third-Party Risk Management
Feb 27, 2026
As organizations continue integrating Internet of Things (IoT) devices into their networks—from smart sensors and medical equipment to industrial machinery—the attack surface for cyber threats has dramatically expanded. While IoT offers transformative benefits such as automation, real-time monitoring, and operational efficiency, it simultaneously introduces significant security and compliance challenges. One critical component in safeguarding IoT ecosystems is Third-Party Risk Management (TPRM). When IoT devices are sourced, supported, or managed by external vendors, organizations must ensure they are not unknowingly opening pathways to cyberattacks, data breaches, or regulatory violations.
In this article, we explore how to effectively manage IoT devices using a robust third-party risk management framework, ensuring security, trust, and operational resilience.
Understanding IoT Risks in the Supply Chain
IoT devices often come embedded with proprietary software, connectivity features, and cloud integrations—all maintained by third-party vendors. This dependency introduces multiple risk factors:
Unpatched Vulnerabilities: Many IoT manufacturers fail to provide timely firmware updates, leaving devices exposed to known exploits.
Weak Authentication Protocols: Default passwords or hardcoded credentials allow cybercriminals easy access.
Shadow IoT Devices: Unauthorized or undocumented devices on the network increase blind spots within security programs.
Data Leakage: Sensitive data transmitted through IoT endpoints may be intercepted or mishandled by third-party service providers.
These risks are amplified when vendors lack mature security practices. This is why Third-Party Risk Management must evolve to include continuous IoT oversight.
Why Third-Party Risk Management is Essential for IoT Security
Traditional IT risk management is not sufficient for IoT ecosystems. IoT devices interact with both digital and physical environments, making breaches potentially catastrophic. TPRM adds a structured approach to assess security controls, monitor ongoing compliance, and hold vendors accountable.
Key Ways TPRM Supports IoT Governance:
Due Diligence on IoT manufacturers and suppliers
Contractual Security Requirements regarding patching, encryption, and incident response
Ongoing Monitoring of vendor cyber posture and vulnerabilities
Incident Handling Protocols to ensure rapid response and transparency
By incorporating IoT-specific questions and controls into vendor assessments, companies can significantly reduce exposure to third-party risks.
Step-by-Step Approach: Managing IoT Devices with TPRM
1. Identify and Classify IoT Vendors
Begin by cataloging all IoT devices and their associated vendors, including hardware manufacturers, firmware developers, cloud service providers, and maintenance partners. Classify vendors by criticality—those with access to networks or handling sensitive data should be prioritized for deeper assessment.
Tip: Maintain an IoT vendor inventory with device type, network access level, and dependency level.
2. Conduct Security Assessments and Due Diligence
Before onboarding any IoT vendor, conduct thorough due diligence. Request documentation such as:
Secure Development Lifecycle (SDLC) practices
Patch and firmware update policies
Data encryption standards
Vulnerability disclosure process
Apply standardized cybersecurity frameworks such as NIST SP 800-82 (Industrial Control Systems) or ISO 27001 for benchmarking.
3. Incorporate IoT Security into Contracts
Contracts must clearly define security expectations, including:
Mandatory encryption and strong authentication
Regular vulnerability and penetration testing
Incident notification timelines (e.g., within 72 hours)
End-of-life (EOL) support commitments
This ensures accountability and protects your organization in the event of a breach.
4. Continuous Monitoring and Risk Scoring
Third-party risk management doesn't end after onboarding. IoT vendors must be continuously monitored using tools and processes that track:
Public vulnerability disclosures (CVEs)
Security posture changes
Compliance certification expiry (e.g., SOC 2, ISO)
Firmware update delays
Risk scoring tools and vendor risk platforms can help flag anomalies or downgrades in vendor security performance.
5. Incident Response Integration
Include IoT vendors in your Incident Response Plan (IRP). Ensure they provide logs, support coordinated investigations, and follow defined escalation procedures. Time is critical in IoT-related incidents due to the risk of operational downtime or physical harm.
Best Practices for Strengthening IoT Third-Party Risk Controls
To build a resilient IoT security strategy, organizations must adopt proactive and layered protections. Below are proven best practices:
🔒 Enforce Network Segmentation
Separate IoT devices from core enterprise networks using VLANs or zero-trust segmentation. This limits lateral movement if a device is compromised.
🔁 Regular Firmware Updates
Demand automated or scheduled updates from vendors to patch vulnerabilities promptly. Devices without ongoing support should be flagged as high-risk.
🕵️ Monitor Data Flows
Use device behavior analytics and intrusion detection systems to monitor outbound traffic from IoT devices. Unexpected data flows may indicate compromise.
🗂 Implement Secure Device Lifecycle Management
From procurement to decommissioning, ensure devices are wiped, deregistered, and securely disposed of to prevent residual data leaks.
The Role of Automation in IoT TPRM
The growing scale of IoT deployments makes manual tracking unsustainable. Modern TPRM platforms can automate:
Vendor questionnaires and risk scoring
Real-time cyber monitoring
Compliance tracking and documentation
Alerts on vendor breaches or certifications
Automating vendor assessments helps security teams stay ahead of emerging exploits and enforce consistency across the IoT supply chain.
Regulatory Compliance: IoT and Third-Party Accountability
Regulators worldwide are emphasizing IoT security accountability. Examples include:
GDPR – data protection obligations for IoT vendors in the EU
U.S. IoT Cybersecurity Improvement Act – mandates minimum standards for IoT devices in federal systems
NIST IR 8259 – IoT device cybersecurity capabilities
Organizations must ensure third-party IoT vendors meet relevant legal and regulatory requirements to avoid penalties and reputational damage.
TPRM is the Future of IoT Security
As IoT adoption accelerates, unmanaged devices and poorly secured vendors can become silent entry points for cyber threats. Integrating Third-Party Risk Management into IoT strategy enables organizations to protect not only data but also physical operations and human safety. By vetting vendors, enforcing contractual controls, and continuously monitoring risk, companies can confidently scale IoT innovation without compromising security.