AI Vendor Risk Management: Treat AI Tools Like Vendors

AI Vendor Risk Management: Treat AI Tools Like Vendors

October 23, 2025
Last updated: October 23, 2025

Human-authored, AI-produced  ·  Fact-checked by AI for credibility, hallucination, and overstatement

The Trust Mismatch That Shapes How We Use AI Tools

Here’s a pattern I keep seeing—one minute, I’m clicking “Authorize” and giving a coding assistant access to our entire repo. A few hours later, I’m staring at a chat window and hesitating to paste a single function. Funny thing is, it’s essentially the same models, different platforms.

What really changes here is the lens of AI vendor risk management, not the AI at all. It’s how much I trust the platform’s security posture and their policies. I want clarity, not drama. Just straightforward answers about who’s protecting our data and how.

The funny part is, no matter how many years I spend working with this stuff, there’s still that nagging worry—the kind you get late at night—about models “learning” secrets they’re not meant to see. I imagine some assistant picking up our API keys, quietly stashing them away, maybe popping up somewhere ridiculous down the line. But in reality, the risks aren’t that mysterious. It comes down to retention and access.

Is our code or user data parked on a server I can’t check? Who on the provider’s team can see it? Model memorization always grabs the headlines, but the day-to-day risk is so much more mundane: data lingering somewhere you didn’t quite mean for it to go, waiting for the wrong person or process to stumble on it.

Most folks I talk to treat “AI risk” like it’s some brand new beast, but honestly, it’s familiar. Where is our data? Who can get at it, and for how long? The models aren’t the magic ingredient—the risk is in the handoff. It’s just another party in the chain.

So here’s where I’ve landed, after plenty of trial and error. If we treat AI tooling like any other third-party vendor—plain old build or buy for AI logic—most of the anxiety fades. The same frameworks and governance controls we use everywhere else actually work here too. The trick isn’t reinventing; it’s sticking to discipline.

Getting Real About the Risks: The True Threat Model

If you strip away all the hype, AI third-party risk boils down to four ways things go off the rails—legal discovery, insider access, old-fashioned breaches, and accidental sharing. These are the real risk vectors, not sci-fi scenarios. Most of the dramatic “AI risk” headlines just repackage problems we’ve tackled for decades. Legal discovery can flip a routine request into a requirement to produce databases you wish you’d already purged. Insider access means somebody bored or under-trained digs into the wrong set of files. Breaches are what you think: third-party storage gets cracked. And accidental sharing is just people being people, multiplied by every chat window we add.

Four icons representing legal, insider, breach, and accidental data risks in AI vendor risk management
Legal, insider, breach, and accidental sharing: the real risk categories to address with AI vendor management

This is why I’ve started relying on the “vendor email” test. If you wouldn’t paste sensitive config or production keys into a support ticket or attach them to a random vendor email, don’t drop them into an AI chat. Picture yourself asking a vendor for help—would you toss in user data just to get a faster answer? If not, a chatbot shouldn’t change your judgment.

The hazard is mostly sitting right in front of us: data uploaded to AI tools lives on someone else’s servers until you delete it—or forget about it long enough for it to become a problem. Persistence is sneaky. You upload a prompt or a document, and unless there are tight retention controls, your information sticks around, sometimes way past its usefulness. This opens doors to accidental indexing or support staff poking through logs.

A while back—maybe late last year—I spent a frantic afternoon hunting through old dev environments after realizing some logs included secrets that should’ve never been printed, let alone shipped to a SaaS provider. Ended up firing off support emails and sweating until confirmation came back that their team had purged everything. That sense of “did I just screw this up?” doesn’t really go away. What matters is remembering the problem is as basic as misplaced files—the fancy stuff can wait.

Here’s the real gap: headlines focus on models learning secrets, but retention mistakes are much more likely and much easier to prevent. Most providers offer pretty good controls for data usage and retention—if you bother to use them. The hard part, always, is routine discipline. Focus on data flows, and AI tools become just another platform with trade-offs.

AI Vendor Risk Management: How to Govern AI Tools with the Same Discipline You Use for Vendors

Before getting wound up about new frameworks tailor-made for AI, we’d be better served by grounding our approach in AI data governance by applying what already works. Leading a team means you don’t let the basics slip—just because somebody put “AI” in the tool name doesn’t mean the standard playbook evaporates. Stick with controls you already trust. The NIST AI Risk Management Framework goes into detail about unique generative AI risks, but the takeaway is familiar: root your process in the existing security controls.

Due diligence hasn’t gotten much more complicated; it’s just a little louder. You need concrete answers: when exactly does your data get wiped—not “eventually,” not “soon.” Is anything you send being used for training? (The opt-out mechanism isn’t always as solid as you hope.) Who, specifically, on the provider’s team can see what you upload? Auditability matters. Simple, transparent logs of who accessed what and when. Certifications are nice—SOC 2, ISO 27001, the usual suspects—but I’ve learned not to treat them as guarantees. I want to check them against the documentation, and I want to see where the process can fall down. That framework for AI tradeoffs is how I tease out the weak spots. The same controls, just recycled.

This next bit is where my own bias kicks in. Trust feels a lot like handing your passport to a hotel concierge. Most of the time, it’s mundane. But I wouldn’t toss sensitive designs or credentials into that pool. For real secrets, I want something closer to the locked safe behind the counter than the usual “we’ll take care of it!” Platform trust, in the real world, isn’t about algorithms—it’s about whether you can comfortably give up control, knowing you can get everything back in one piece.

Platform enforcement around AI vendor security is catching up, finally. Enterprise options are leading the way with SSO and RBAC—you can scope who sees what, and keep boundaries firm. Segregated architectures, where exploration is kept separate from safeguards, help too. Customer-managed encryption brings leverage; rotate secrets or revoke access if there’s trouble. Prompt and response logging isn’t just for troubleshooting—it’s a real audit trail. Providers like AWS have a system for this (AWS Bedrock), storing prompts and logs in your own infrastructure. Gateway-level DLP is a must; block sensitive stuff before it even leaves your shop. Microsoft’s approach, bringing zero-trust access through Entra ID, takes aim at privilege abuse from the identity side. The old tools, polished for a new job.

That’s why treating AI providers like any other vendor through disciplined AI vendor risk management has personally helped me get past that weird tension between “Copilot vs Chat.” The discipline evens out the decisions. It’s the same governance, just pointed at a new surface.

Concrete Guardrails: Making Sure Prompts and Integrations Don’t Leak

Let’s get specific. Look at the jump from letting Copilot read your repositories to pulling up ChatGPT. Copilot can be scoped—maybe it gets your open source, not your private client code. ChatGPT is different; the constraints are manual. You have to be the boundary yourself: only the snippet, not the file. If it’s sensitive, use private instances and set prompts to delete right after use. Data classification isn’t new; it just matters more now. Your team has to know how to spot code with secrets or PII, and set guardrails for AI adoption so you’re not guessing. API keys are nuclear. Even a stray screenshot feels hazardous, and logs should be swept routinely for accidental drops.

A habit that’s become second nature for me is running the vendor-email test during code reviews. If I wouldn’t say something in a PR comment—about sensitive prod configs or customer info—I won’t let it slip into an AI prompt. It’s the same boundary, just testing new ground.

For LLM integrations, treat them like any third-party API. Issue purpose-specific tokens that can be revoked. Always proxy AI requests through your own servers—this keeps you in the loop for authentication and logging. Centralize audit trails alongside system logs, never hiding in some side admin panel. Sometimes that means retrofitting old workflows, but it pays off later. I once found out that a so-called “secure” workflow left logs in three different storage buckets, none of which our SIEM actually monitored—I haven’t quite solved that mess yet. In fact, it’s still an open thread I’m picking at between releases.

If you’re not allowed to persist sensitive user data elsewhere, don’t make exceptions for big-model assistants. AI tools are infrastructure with APIs. It’s just someone else’s code running behind the curtain.

An AI data retention policy is one of those controls that’s easiest to set up early. Stick to short log retention out of the gate—clean out prompts and responses quickly, especially from dev environments. Disable model training by default. Get legal and compliance involved now, not after something goes wrong. Written policies save you from scrambling, and cover you when the next surprise pops up.

Making Governance Routine: Answering the Pushbacks

I get the same pushback every cycle: “Good ideas, but all those reviews and templates will slow us down.” Reality is, once you’ve got good checklists like an AI vendor risk checklist and shared standards, teams actually move faster. There’s less fog, fewer cycles spent second-guessing the new widget in Slack. The entire process accelerates because framing cuts down back-and-forth, approvals get smoother, and what felt like bureaucracy begins to feel like muscle memory.

As for the memorization thing—sure, it matters, but not nearly as much as retention, access controls, and the provider’s stance. Tighten those and the edge cases shrink. I admit I still keep half an eye on the weird scenarios, but most exposure evaporates when you discipline the basics.

Regulatory ambiguity makes everyone tense, but we’ve been through this with cloud, SaaS, you name it. The workflow is familiar: map AI providers onto existing frameworks, document what data crosses the boundary, and use the same legal standards as you already do. When compliance is visible—think GDPR, or sector retention—loop in the legal teams early. Track where prompts, logs, and spin-off data actually live. Is it EU-based, who’s got admin, can you audit, do you have deletion playbooks? Model technology changes, but auditable flows are a constant. Call it routine, not politics.

If you want teams to go fast, don’t skip governance. Tighter loops now mean less drama next rollout—a lesson I keep relearning, sometimes the hard way.

(And for what it’s worth, that odd trust split—the special access we hand Copilot compared to the single-function paste into ChatGPT—still bugs me. There’s a logic there I haven’t fully unraveled. Maybe next time.)

Enjoyed this post? For more insights on engineering leadership, mindful productivity, and navigating the modern workday, follow me on LinkedIn to stay inspired and join the conversation.

  • Frankie

    AI Content Engineer | ex-Senior Director of Engineering

    I’m building the future of scalable, high-trust content: human-authored, AI-produced. After years leading engineering teams, I now help founders, creators, and technical leaders scale their ideas through smart, story-driven content.
    Start your content system — get in touch.
    Follow me on LinkedIn for insights and updates.
    Subscribe for new articles and strategy drops.

  • AI Content Producer | ex-LinkedIn Insights Bot

    I collaborate behind the scenes to help structure ideas, enhance clarity, and make sure each piece earns reader trust. I'm committed to the mission of scalable content that respects your time and rewards curiosity. In my downtime, I remix blog intros into haiku. Don’t ask why.

    Learn how we collaborate →