In the rapidly evolving landscape of digital threats, organizations are investing heavily in sophisticated cybersecurity tools and training. Yet one of the most overlooked vulnerabilities often hides in plain sight: your business contracts. As the CEO of a company that manages contracts for over 1,500 businesses worldwide, I’ve seen firsthand how poor contract management can create significant security risks that no firewall can prevent.
The Contract Security Paradox
Here’s the paradox that keeps me up at night: while businesses tirelessly secure their systems against external threats, they willingly share their most sensitive data with third-party vendors through contracts—often without adequate security controls or oversight.
The statistics are alarming. According to a 2024 report, 98% of companies have experienced a breach through one of their vendors in the last two years alone. Even more concerning, 60% of companies don’t maintain a complete inventory of all third parties they share sensitive information with.
These numbers reflect a troubling reality: most organizations have a significant blind spot when it comes to the security implications of their contracts.
Where Contract Management and Cybersecurity Converge
When I began my career, contracts were primarily seen as legal documents. Today, I consider them as operational risk management tools with profound security implications. Here’s why:
- Data Access Permissions: Every vendor contract essentially creates a legitimate pathway into your organization’s data. Without proper controls, these pathways can become security liabilities.
- Fourth-Party Risk: Your vendors have their own vendors (fourth parties), creating an extended supply chain that multiplies potential vulnerabilities. Multiple vendors sharing the same fourth-party provider can significantly elevate your risk exposure.
- Compliance Cascades: Regulatory requirements like GDPR, HIPAA, and other data protection laws impose obligations that must flow through your entire vendor ecosystem. Without proper contract management, compliance gaps emerge.
Three Critical Contract Security Vulnerabilities
In my experience working with organizations across industries, three contract management vulnerabilities consistently create cybersecurity risks:
1. Inadequate Security Requirements
Many contracts lack specific, measurable security requirements. Vague language like “reasonable security measures” provides little protection. Instead, contracts should reference specific standards (ISO 27001, NIST, etc.) and include detailed security requirements tailored to the data being shared.
Your contracts should clearly allocate responsibility for security breaches, including costs related to notifications, investigations, and potential fines.
2. Missing Monitoring Mechanisms
The contract signing is just the beginning of your security relationship. Without continuous monitoring provisions, you have no visibility into whether vendors maintain their security posture over time.
This disconnect is significant—37% of companies believe their vendors wouldn’t even notify them of a data breach involving their information.
3. Inadequate Termination and Data Return Provisions
Many contracts lack clear provisions for data return or destruction when the relationship ends. This creates persistent risk long after the business relationship terminates. Every contract should include specific procedures for data handling at termination.
Building a Security-First Contract Management Strategy
Based on my experience helping organizations transform their contract management, here are four actionable steps to enhance contract security:
1. Implement Contract Management Technology with Security Features
Manual contract management creates security vulnerabilities. A modern contract management software system should include:
- Centralized contract repository with strong access controls
- Automated monitoring of security-related obligations
- Integration with vendor risk management processes
- AI-powered analysis to identify security gaps across your contract portfolio
2. Develop Standard Security Clauses for Different Risk Levels
Create a tiered approach to security requirements based on data sensitivity and access. For high-risk relationships, include requirements for:
- Regular third-party security assessments
- Breach notification timelines (typically 24-72 hours)
- Rights to audit security measures
- Specific encryption and access control standards
3. Institute Regular Security Reviews Throughout the Contract Lifecycle
Security isn’t a one-time assessment. Implement:
- Annual security reassessments for critical vendors
- Quarterly security check-ins for high-risk relationships
- Automated alerts for security incidents related to vendors
- Periodic review of security provisions against evolving threats
4. Build Cross-Functional Collaboration
Contract security cannot be siloed in either legal or IT. Create collaboration between:
- Procurement teams evaluating vendors
- Legal teams drafting contracts
- IT security teams assessing technical controls
- Business units managing vendor relationships
- Compliance teams ensuring regulatory requirements
The Future of Secure Contract Management
As AI continues to transform contract management, we’re seeing promising developments in security capabilities. AI-powered contract analytics software can now scan thousands of existing contracts to identify security gaps, while automated monitoring can detect when vendor security postures change.
Over the next five years, I believe we’ll move toward real-time contract security management, where AI not only flags issues but recommends specific remediation actions based on evolving threat intelligence.
Contract Management as a Security Discipline
For too long, organizations have treated contract management and cybersecurity as separate functions. This artificial division creates significant vulnerabilities that sophisticated attackers are increasingly exploiting.
By recognizing contract management as a critical component of your security strategy, you can close a major gap in your defenses. As cybersecurity professionals, this shift in perspective is essential—your security perimeter is only as strong as your contract management practices.
Matt Lhoumeau is the co-founder and CEO of Concord, a leading contract management platform helping over 1,500 businesses streamline their contract processes. Prior to founding Concord, Matt worked at France’s second-largest telecom company, where his experience renegotiating thousands of vendor contracts highlighted the need for better contract management solutions.
