Strategic Security Risk Management When Engaging a Managed Service Provider

Introduction: Why MSP Security Matters for Organisations

Managed Service Providers (MSPs) are increasingly integral to modern ICT and cyber operations—outsourced to deliver technical expertise, operational support, and often privileged access to core systems. However, they also represent a significant risk vector when their access isn’t rigorously controlled and governed. High-impact compromises of MSPs have repeatedly demonstrated that attackers will exploit these trust relationships to penetrate customer systems and pivot deeper into networks.   

This risk is amplified when MSPs manage sensitive environments—whether critical national infrastructure, defence supply chains, or regulated commercial systems. MSP engagements therefore demand a risk-centric governance modelthat integrates contract design, network access controls, identity and access management, logging and monitoring, and coordinated incident response.

1. Build Security Into the Engagement from Day One

One of the most common failure points is treating MSP procurement as purely commercial rather than a security-governed outsource contract. Security must be a core evaluation criterion, not an afterthought.

Key Contractual Requirements: 

• Define clear security expectations and evidence requirements — require prospective MSPs to demonstrate their internal controls and how they will secure customer environments.   

• Mandate cybersecurity frameworks such as adoption of ASD’s Essential Eight and alignment to ISO/IEC 27001 (Information Security Management) as minimum requirements.   

• Include incident notification and reporting clauses — MSPs must be contractually obliged to notify you immediately of any cybersecurity incident or compromise affecting their systems or your managed infrastructure.   

• Define staff clearance and vetting standards — specify minimum personnel security requirements for MSP staff, including background checks consistent with your own organisational standards.   

This approach embeds security expectations early and supports due diligence prior to network access.

2. Control and Segment MSP Access

An MSP’s technical access is both a function enabler and a threat vector. Broad access without control is unacceptable.

Best Practices for Access Management: 

• Clearly define system boundaries and access scope. Maintain an up-to-date record of exactly which systems the MSP can administer and how. Treat any MSP connection point outside their defined scope as untrusted.   

• Network segmentation and trust zones. Segment your network to isolate MSP administered assets from core infrastructure. Consider implementing separate trust zones and jump hosts for MSP administrative activities.   

• Secure remote access controls. Require secure jump boxes within your network for MSP activities and enforce techniques such as multi-factor authentication (MFA), just-in-time privileges, and least privilege administration.   

Such segmentation and access governance minimises lateral movement opportunities for adversaries if an MSP is compromised.

3. Identity and Credential Risk Management

Credential compromise remains one of the most effective pathways for threat actors targeting MSPs and their customers.

Credential Hardening Measures: 

• Least Privilege and Just-in-Time provisioning. Only grant the minimum privileges necessary, and revoke or suspend elevated access when not in active use.   

• Attributable and Auditable Accounts. Enforce unique accounts for MSP staff rather than shared credentials, enabling audit trails and forensics.   

• Mandatory MFA on all remote access. Even if credentials are compromised, secondary factors significantly reduce the ability of attackers to authenticate.   

These controls should be non-negotiable in high-risk engagements—especially in critical infrastructure or defence supply chains where SOCI and DISP frameworks apply.

4. Visibility Through Logging and Monitoring

Without proper visibility, malicious activity can go undetected for extended periods.

Logging and Monitoring Expectations: 

• Centralised event logging. Collect host, network, firewall, proxy, and remote access logs in a centralised security platform.   

• Contractual logging responsibilities for MSPs. Require your MSP to perform logging for their access and activities and make logs available for independent review.   

• Retention aligned to regulatory or operational requirements. Retain logs for at least 18 months (or longer where compliance frameworks dictate).   

This enables both operational detection and forensic readiness.

5. Incident Response Planning and Communication

Even with robust prevention, incidents will occur. Effective planning ensures rapid containment.

Incident Preparedness Measures: 

• Integrated incident response plans that anticipate MSP involvement. Plans should clearly outline roles, responsibilities, and escalation pathways.   

• Secure communication channels separate from compromised infrastructure.   

• Regulatory reporting alignment, including obligations under SOCI or Australian Privacy obligations if personal information is impacted.   

A combined response posture that includes your MSP as part of your playbooks will reduce recovery time and limit impact.

Conclusion: Position MSP Security as a Strategic Risk Discipline

Engaging an MSP is not merely a technical or commercial transaction—it is a strategic risk management engagement. Organisations must adopt a governance approach that:

• Embeds security from the start,

• Controls access proactively,

• Strengthens identity and credential management,

• Enables full visibility,

• And aligns comprehensive incident response.

Integrating these practices with existing Australian standards (ISM, Essential Eight, SOCI compliance) and broader ISO risk frameworks will position your organisation to better withstand the evolving threat landscape targeting MSP ecosystems.

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