Third-Party Risk Management: Ensuring Cybersecurity Compliance in Business Partnerships
Nowadays, almost all businesses outsource a portion of their operations. However, it's becoming challenging for companies to ensure outside suppliers remain an asset for their business.
With many businesses relying on external partners for services, the risk of cyber threats via your third parties looms big—with only 54% of companies having a comprehensive list of all the third parties that access their network. For this reason, third-party risk management (TPRM) is crucial to operational security.
In this article, we will explore what third-party management is, the common third-party threats, and some third-party cyber risk management best practices to ensure cybersecurity compliance in your business partnerships.
What Is Third-Party Risk Management?
Third-Party Risk Management, or TPRM for short, is a discipline that focuses on identifying and managing risks related to outsourcing third-party vendors or service providers. You can use third-party and vendor risk assessments to help your company assess how much risk it would assume if you contracted out a business process or gave a third-party access to your data.
What Are the Common Threats in Managing Third Parties?
The first step in mitigating the hazards posed by third-party partnerships to cyber security is to acknowledge their severity. Below are some common threats that come with managing third-party partners:
Data Breach via Third-Party Systems
The network or databases of an organization must be accessible to several third parties. The data these third parties had access to is likewise compromised if they are the target of a cyberattack. Thus, it is essential to evaluate their data protection policies.
Supply Chain Attacks
Frequently, third-party suppliers serve as a liaison between numerous customers and other suppliers. This linked chain has weak points that cyber attackers can exploit, jeopardizing the organization's security.
Exploitation of Software Vulnerability
Vulnerabilities in their codebase or architecture may serve as entry points for cyberattacks on your systems if third parties create software or administer systems on your behalf.
Non-Compliance with Cybersecurity Standards
There may be stringent cybersecurity requirements that apply to your organization. If a third party violates these rules, you can be subject to harsh fines and other legal repercussions.
5 Best Practices in Third-Party Risk Management
Given the increased demand for risk management related to cyber security, that's where many businesses focus their energies. Below, we listed some suggested measures to help lower the risk of cyberattacks and mitigate cyber security issues.
Ensure Your Vendor Has Cybersecurity Protections in Place
Meet with the IT department before agreeing to a contract with a third-party vendor. Learn about the security testing and auditing processes they follow and the access controls they have in place. Also, find out whether they have fraud alert systems in place.
Find out if and when staff members participate in social engineering tests, phishing simulations, and cyber security training.
Designate a Team Responsible for Vendor Risk Management
Having a team dedicated to vendor relationships, monitoring, and auditing reduces the risk of cyberattacks and other issues.
If an incident does arise, it can also assist in handling it much more quickly. By having top executives on the team, you can make sure they are investing in the group.
Provide Cyber Security Training
Verify that vendor staff members have received the same cyber security training as your employees. Ensure certain staff members are using multi-factor authentication, VPNs, and secure file transfers if they will have access to your data and systems.
Give instructions on how to protect credentials, create secure passwords, and spot phishing emails and dangerous links.
Monitor Your Vendors Regularly
Once the onboarding process is finished, some organizations believe the matter is resolved. However, risks related to cyber security might appear at any stage of the vendor lifecycle. For instance, a policy change can be necessary due to changing administration or staff.
Regularly review your vendors’ cybersecurity protocols with the use of security monitoring platforms. Not only do they help you comply with security standards such as SOC 2, but they also ensure your vendors’ cybersecurity measures remain robust.
Develop an Incident Response Plan
Organizations nevertheless require a solid action plan in case something goes wrong, regardless of the steps they take to reduce third-party risks. In a third-party breach, quick thinking and action can help reduce expenses and disruption while protecting reputation.
Assign distinct responsibilities to individual staff members and provide incident management training in advance.
What Is the Importance of Investing in Third-Party Risk Management?
When the primary goal of working with a third-party vendor is to save expenses by outsourcing or automating non-core tasks, investing in TPRM may seem counterintuitive. Business executives may believe that TPRM is not worth investing time, resources, and money when finances are limited.
However, the initial investment in TPRM pays dividends over time, especially considering the substantial risks associated with third-party partnerships. For example, the likelihood of cybersecurity incidents increases, and the expense of rectifying them can be significant.
Serious data breaches hobble businesses as they battle to win back consumers and repair their reputations while managing the legal fallout.
These disruptions come at a rapid financial cost. Organizations run the danger of losing ground and giving market share to rivals while they are recovering. In the end, the cost of prevention is a better deal.
Final Thoughts
Third-party risk management is necessary for maintaining robust cybersecurity. An organization can avoid damaging cyber incidents, financial consequences, and a decline in stakeholder trust by being aware of the potential cyber risks and putting strict third-party risk management procedures in place.