Managed service providers' access to login credentials across dozens or even hundreds of client environments can transform a single compromised account into a multi-client security incident, according to an interview published by Channel Insider with Chris Skipworth, CEO of MSP-focused password management provider Passpack. The discussion highlights how credential sprawl, informal access practices, and poor offboarding create systemic risks as cyber insurers and customers demand greater accountability from service providers. MSPs manage large volumes of login credentials distributed across teams of technicians who all require access to perform their work, creating numerous entry points for attackers.
The operational model of MSPs naturally generates credential sprawl as they serve multiple clients, onboard new accounts regularly, and scale their workforce, the report notes. Smaller MSPs in particular tend to handle credentials in ad hoc ways through spreadsheets, shared documents, and credentials held by a single senior technician, creating a single point of failure. Common failure modes include shared master passwords that give too many people access to too much, no consistent policy around password strength, and credentials stored in email threads or documents not designed for secure storage. When technicians leave or when MSPs end client relationships, credentials frequently remain active because nobody has systematically revoked them. Without a formal process and clear audit trail, MSPs can't always be certain what access has been left open.
According to Skipworth, the gap between assumed control and actual control can be significant, and it often only becomes visible when something goes wrong. "Nothing has gone wrong" isn't the same as "this is secure," he notes. The report emphasizes that if an MSP uses the same credential across multiple client environments, a single breach in one area gives an attacker a foothold across the entire client base. Unsecured sharing, whether by email or through an unmanaged team channel, increases the attack surface at every point. Skipworth identifies poor offboarding as the risk that tends to be most underestimated because the exposure isn't immediately visible, which is exactly what makes it dangerous.
Cyber insurers are tightening underwriting requirements beyond multi-factor authentication, which is now a baseline expectation rather than a differentiator. Insurance carriers increasingly focus on privileged access controls, zero trust principles, and phishing-resistant MFA specifically, because standard app-based tokens can be compromised through social engineering. The critical issue for MSPs is coverage denial: if a claim is made and an MSP cannot provide evidence that the controls they said they had were actually in place and enforced, the insurer can deny the claim. MSP clients are also asking harder questions about how service providers handle credential access, changing the nature of sales conversations. Prospects want to understand who has access to their environments, how that access is managed, and what happens when the relationship ends.
The clearest indicator of mature credential management is when it's embedded in standard operating procedures rather than treated as a separate concern, requiring consistent password policies enforced across all client environments and least-privilege access so people can only reach what they actually need. Mature organizations don't just have these controls; they can demonstrate them through audit trails and evidence. The report concludes that the cost of a breach in downtime, client impact, reputational damage, and potential insurance complications far outweighs the cost of getting credential management right upfront. The organizations that understand this tend to be those who've either experienced a security incident or watched what happened to someone who has. For providers caught between operational convenience and security overhead, the choice is increasingly being made for them by insurers and clients who won't accept informal credential practices. The shift from credential security as an internal technical matter to a sales differentiator and contractual requirement marks a fundamental change in how MSPs must demonstrate trustworthiness to survive in a market where access itself has become the product.