Vendor Due Diligence Checklist: What Every SMB Should Ask Before Signing

Third-party vendors play a critical role in how small and medium-sized businesses (SMBs) operate. But vendors can also introduce major risks—especially when they handle your data, support key services, or interact with customers.

A proper vendor due diligence process ensures you understand those risks before signing a contract. This checklist is designed to help SMBs ask the right questions and avoid costly surprises down the road.

Why Vendor Due Diligence Matters

• Security breaches often start with a third party.
• Compliance requirements like SOC 2, HIPAA, and GDPR expect vendor oversight.
• Business continuity depends on understanding vendor reliability.
• Legal and financial risk can arise from poor contracts or unclear responsibilities.

Due diligence isn’t just a checkbox—it’s risk management.

Vendor Due Diligence Checklist

Use this checklist before onboarding a new vendor, especially if they:

• Access sensitive data
• Host your infrastructure or apps
• Interact with your customers
• Affect compliance obligations

1. Basic Company Information

• What is the vendor’s full legal name, location, and ownership?
• How long have they been in business?
• Who are their primary customers or industries served?

2. Data Handling & Access

• What types of data will they access or store?
• Where is the data stored (geographic region)?
• Do they encrypt data at rest and in transit?
• Who within their organization can access your data?

3. Security Practices

• Do they have a documented security program or policy?
• Have they undergone recent security audits (SOC 2, ISO 27001)?
• Is multi-factor authentication (MFA) enforced?
• How are backups managed and tested?

4. Privacy & Compliance

• Are they compliant with relevant laws (e.g., GDPR, CCPA, HIPAA)?
• Can they provide a Data Processing Agreement (DPA)?
• How do they respond to data subject requests?
• Do they share your data with any third parties?

5. Incident Response

• Do they have a formal incident response plan?
• Will they notify you of a breach, and in what timeframe?
• Have they had any security incidents in the past 2 years?

6. Business Continuity

• Do they have a business continuity or disaster recovery plan?
• How quickly can they restore services after a disruption?
• Are they financially stable (optional: request a financial snapshot)?

7. Legal & Contractual

• Who owns the data you provide?
• What happens to your data when the contract ends?
• Are there clear service level agreements (SLAs)?
• Can you perform audits or request evidence?

8. Subprocessors & Dependencies

• Do they rely on other vendors (e.g., cloud providers)?
• Are those subprocessors documented and vetted?
• Do you have visibility into their supply chain?

When to Escalate Concerns

Any of the following should prompt a deeper review:

• Vague or incomplete answers to questionnaires
• Refusal to sign a DPA or provide a security policy
• No recent audits or unclear breach response plans
• Over-reliance on third parties with no visibility

How SMBs Can Track This Process

You don’t need an expensive GRC platform. Use simple tools like:

• Google Sheets: For tracking responses and risk ratings
• Airtable or Notion: For organizing documents, links, and timelines
• Shared folders: Store contracts, questionnaires, and security artifacts

Keep notes centralized and assign clear owners for each vendor.

Final Thoughts

Vendor due diligence helps you:

• Reduce legal and security risk
• Make informed decisions
• Meet compliance obligations
• Avoid vendor lock-in or contract regret

Anchor Cyber Security helps SMBs build scalable vendor risk programs without enterprise complexity. If you’re unsure how to assess a vendor or need help with a contract review, we’re here.

Need help performing due diligence?
Contact Anchor Cyber Security →