How to Evaluate AI Vendors: Security, Privacy and Compliance Requirements

Artificial intelligence is becoming part of everyday business operations. Companies now use AI platforms for customer support, document processing, data analysis, software development, marketing, forecasting and workflow automation.

However, choosing an AI vendor involves more than comparing features, subscription prices or product demonstrations. An AI supplier may process confidential business information, customer records, employee data, intellectual property or other sensitive material.

Before approving an AI tool, organizations should understand what information it receives, how that information is used, which security controls are in place and what happens when the service is changed or discontinued.

This guide explains how to evaluate AI vendors through a practical due diligence process covering information security, privacy, compliance evidence, third-party risk and ongoing oversight.

What Is AI Vendor Evaluation?

AI vendor evaluation is the process of reviewing an external AI provider before allowing its product or service to be used by an organization.

The review considers whether the supplier's technology, contractual commitments, security arrangements, privacy practices and operational controls are suitable for the intended business use.

Depending on the AI application, the assessment may cover:

• Information security and access control

• Personal data handling and privacy

• Use of customer data for model training

• Data storage, retention and deletion

• Subprocessors and external service providers

• AI governance and accountability

• Reliability, monitoring and incident response

• Compliance evidence and independent assurance

• Contractual responsibilities and exit arrangements

The level of review should reflect the nature of the service and the risk involved. A low-risk internal productivity tool may require a different assessment from an AI platform processing financial, healthcare or customer-identifiable information.

Why AI Vendor Due Diligence Matters

Traditional software supplier reviews often focus on availability, support, cybersecurity and contractual obligations. AI services introduce additional questions because data may be processed by models, connected services or changing technical components.

For example, an organization should understand whether information entered into an AI assistant is retained, used to improve a model, shared with subprocessors or accessible to personnel outside the organization.

AI vendor due diligence helps businesses make informed procurement decisions before sensitive information is transferred.

It can also support:

• Supplier approval and procurement reviews

• Enterprise customer assurance

• Information security risk management

• Privacy and data protection assessments

• AI governance responsibilities

• Contract and regulatory reviews

• Business continuity planning

AI vendor evaluation is not a guarantee that a supplier is risk-free. It is a structured way to identify concerns, request evidence and decide whether risks are acceptable under the organization's own approval process.

Step 1: Identify the AI Vendor's Intended Use

Begin by documenting why the organization wants to use the AI service.

A vendor providing an AI writing assistant may present different risks from a platform used for recruitment screening, financial analysis, customer identity verification or healthcare-related workflows.

Record:

• The business process supported by the AI tool

• The departments and users who will access it

• The information that will be submitted

• Whether personal or confidential data is involved

• Whether AI outputs influence important business decisions

• Whether the tool connects to internal applications

• Whether human review is required before acting on outputs

This first step helps determine the appropriate depth of the AI supplier security assessment.

Step 2: Review Information Security Controls

Information security should be a central part of AI vendor assessment.

Ask the supplier to explain how it protects customer information during transmission, storage, access and processing.

Access Management

Review whether the vendor supports appropriate authentication, role-based access, administrator controls and user access management.

For business deployments, consider whether single sign-on, multi-factor authentication and access logs are available where relevant.

Data Encryption

Ask how data is protected in transit and at rest. The vendor should explain the controls applicable to the service and any relevant limitations.

Security Monitoring

Understand how the provider monitors its environment, detects suspicious activity and investigates potential security incidents.

Vulnerability and Change Management

Ask how the supplier identifies vulnerabilities, applies security updates and manages material changes to its service.

Incident Response

Review the vendor's process for notifying customers of security incidents, investigating events and supporting remediation.

A useful assessment should seek evidence rather than relying only on general statements such as “enterprise-grade security.”

Step 3: Understand AI Data Usage and Model Training

One of the most important questions in AI vendor evaluation is how submitted information is used.

Organizations should establish whether the vendor:

• Uses customer prompts or uploaded files to train or improve models

• Retains conversation history or input data

• Offers business or enterprise data-use settings

• Allows administrators to control retention

• Uses external model providers

• Shares data with subprocessors

• Provides deletion mechanisms

• Applies different terms to free, business and enterprise plans

Do not assume that a vendor's public privacy statement applies identically to every subscription or deployment.

Review the contractual terms and product-specific settings that govern the actual service being purchased.

Where sensitive information is involved, obtain clear written confirmation of relevant data-use commitments before approval.

Step 4: Assess Privacy and Data Protection

AI services may process personal information relating to customers, employees, suppliers or other individuals.

The organization should identify the data involved and determine which privacy obligations apply to the proposed use.

Review:

• Categories of personal data processed

• Purpose of processing

• Data retention periods

• Data deletion and access procedures

• International data transfers

• Subprocessor arrangements

• Privacy incident notification

• Contractual data protection commitments

• Responsibilities of the customer and vendor

For UAE operations, assess applicable UAE data protection requirements and any relevant free-zone or sector-specific obligations. Organizations operating internationally may also need to consider requirements in other jurisdictions.

A vendor's privacy policy is useful background information, but it should not replace a review of the actual contractual and operational arrangements.

Step 5: Review Compliance and Independent Assurance

AI vendors may provide certifications, audit reports, security documents or other assurance material.

Examples include:

• ISO/IEC 27001 certification

• ISO/IEC 42001 certification

• SOC 2 examination reports

• Independent penetration-test summaries

• Security policies and control descriptions

• Business continuity documentation

• Privacy and data processing documentation

These forms of evidence have different purposes and scopes.

ISO 27001

ISO/IEC 27001 concerns an organization's Information Security Management System (ISMS). When reviewing a supplier's certificate, check the certified legal entity, scope, locations, validity and applicable accreditation details.

ISO 42001

ISO/IEC 42001 specifies requirements for an Artificial Intelligence Management System (AIMS). It can provide evidence of an organization's structured approach to AI governance, risk management and continual improvement.

It does not certify an individual AI model as error-free or guarantee that every AI output is safe.

For more information, see SCS's ISO 42001 certification in UAE guide.

SOC 2

SOC 2 is an examination and reporting framework associated with the AICPA, rather than an ISO-style management-system certification. When a vendor supplies a SOC 2 report, check the report type, period covered, system description, scope, exceptions and any complementary user-entity controls.

A report should be reviewed for relevance to the service being purchased rather than accepted solely because the supplier says it is “SOC 2 compliant.”

SCS's SOC 2 guide for UAE and regional businesses provides additional background.

Step 6: Evaluate AI Governance and Accountability

Security controls alone do not answer every question about AI use.

Organizations should understand how the vendor manages AI-related responsibilities and changes.

Consider asking:

• Who is accountable for AI governance?

• How are AI-related risks identified and reviewed?

• How are material model or service changes communicated?

• How are complaints or reported issues handled?

• What human oversight is available?

• How does the vendor address inappropriate or unexpected outputs?

• What information is available about the system's intended use and limitations?

Where the AI service supports consequential decisions, the organization should establish its own approval, oversight and escalation arrangements.

Step 7: Review Third-Party and Subprocessor Risks

An AI vendor may rely on cloud infrastructure providers, external model developers, analytics services or other subprocessors.

The customer should understand which external parties may process its information and what responsibilities the primary supplier retains.

Ask for details about:

• Relevant subprocessors

• Data processing locations

• Security responsibilities

• Contractual flow-down requirements

• Notification of material supplier changes

• Incident coordination

• Business continuity arrangements

Supplier risk does not end with the direct contract. Organizations should consider material dependencies that could affect confidentiality, availability, privacy or service continuity.

Step 8: Examine Contract Terms and Exit Arrangements

Before approving an AI vendor, review the commercial and contractual conditions alongside the technical assessment.

Important areas include:

• Permitted data use

• Confidentiality

• Data ownership and intellectual property

• Retention and deletion

• Security incident notification

• Service availability and support

• Audit or assurance rights

• Subprocessor changes

• Liability and responsibilities

• Termination and data export

A practical exit plan should explain how the organization can retrieve required information, revoke access, remove integrations and confirm deletion where applicable.

AI Vendor Evaluation Checklist

Use the following checklist as a starting point for procurement and security reviews.

The checklist should be adapted to the organization's risk classification, industry and contractual requirements.

How ISO 27001, ISO 42001 and SOC 2 Fit into AI Vendor Assessment

These frameworks can support different parts of a supplier assurance process.

No single certificate or report replaces the buyer's own due diligence. The organization should confirm that the evidence relates to the relevant supplier, service, scope and period.

For a separate overview of certification-provider selection, see Top 10 ISO 27001 certification bodies in UAE and Top 10 ISO 42001 certification bodies in UAE.

Common Mistakes When Evaluating AI Vendors

Treating a Certificate as Complete Due Diligence

A certificate or report is evidence within a defined scope. It does not answer every question about the particular AI service, data flow or intended use.

Ignoring Model Training Terms

Organizations may overlook whether prompts, files or feedback can be used for model improvement. Confirm the applicable service terms and settings.

Reviewing Only the Main Vendor

External model providers, cloud platforms and subprocessors may be material to the risk assessment.

Approving Tools Without Business Ownership

IT, security, privacy, procurement and the relevant business owner may all need defined responsibilities.

Failing to Reassess

AI services, model capabilities, contractual terms and suppliers can change. Reviews should be repeated when material changes occur and at an appropriate risk-based interval.

Building a Repeatable AI Supplier Review Process

A repeatable process can make AI procurement more consistent without turning every purchase into a lengthy audit.

A practical workflow is:

1. Register the proposed AI tool and business owner.

2. Identify the intended use and data classification.

3. Assign an initial risk category.

4. Request security, privacy and assurance evidence.

5. Review AI-specific data-use and governance questions.

6. Obtain relevant internal approvals.

7. Record conditions, exceptions and accepted risks.

8. Set a review date or change-triggered reassessment.

9. Reassess when the service, scope or supplier arrangements materially change.

This approach allows organizations to apply deeper scrutiny to higher-impact AI uses while maintaining a documented process for routine tools.

Conclusion

Evaluating an AI vendor requires a combined view of information security, privacy, data usage, AI governance, supplier dependencies and contractual responsibilities.

Organizations should not rely solely on product demonstrations, marketing claims or the presence of a certification logo. They should review evidence that relates to the actual service and establish whether the remaining risks are acceptable for the intended business use.

ISO 27001, ISO 42001 and SOC 2 evidence can support this process, but each serves a different purpose and must be interpreted within its scope.

For organizations seeking to strengthen their own information security or AI governance management systems, SCS Certification provides information on relevant certification services through its standards directory and contact page.

This article provides general information for business and supplier-assurance purposes. It is not legal, privacy or cybersecurity advice.