The best way to manage third-party cyber risks is through effective third-party risk management (TPRM). TPRM focuses on identifying and reducing third-party risks from vendors, partners, suppliers, contractors, or service providers.
Third-party risk management gives organisations of any size a thorough understanding of how third parties are used and what safeguards they have in place. TPRM programs are dependent on the industry, sector, regulatory guidance, and other factors. However, there are many TPRM best practices that are global in nature which can be applied to many organisations or businesses.
The term ‘third-party risk management’ itself is often used interchangeably with other industry terms, such as vendor management, vendor risk management (VRM), supply chain risk management or supplier risk management. However, TPRM is the overarching discipline that encompasses all types of risks and all types of third parties.
With that in mind, read on to find out how to effectively manage third-party cyber risks with a robust third-party risk management framework to protect your organisation’s sensitive data.
Understanding Third Party Vendor Risks
Third-party vendor risks are any risk facing an organisation via external third parties in its supply chain or ecosystem. As mentioned above, these third parties may include suppliers, vendors, contractors, partners, or service providers, with access to customer data or internal company systems, processes, networks, or other sensitive information.
Third parties can become a huge problem for businesses everywhere. Not only can they act as a gateway for intrusions but can also expose a company to regulatory and financial issues, harm reputations, and even draw the attention of malicious actors from anywhere around the world.
How to Protect Your Data From Third Party Vulnerability
There are a variety of methods used to protect data from third-party vulnerability. Following a number of steps not only provides a process to work from with third-party vendors, but also how breach response services will be able to work with an organisation to protect its data. Let’s take a closer look at some helpful steps to take:
Assess and evaluate potential vendors prior to onboarding
A vendor’s cybersecurity measures can make or break their opportunity to work with organisations that take cybersecurity seriously. Using a pre-established data breach intelligence plan or TPRM framework can help quickly identify the level of risk your organisation is accepting when onboarding new third-party vendors.
Integrate risk mitigation strategies into contractual agreements
Ensure that responsibility for any breach intelligence is included within business contracts with all vendors. Not only does it offer assurances if anything were to go wrong but also ensures that protection measures are respected by all parties concerned.
Maintain a list of vendors utilised by your organisation
Create a master list of all third-party vendors which includes their level of access and security rating. This can aid IT security teams when it comes to finding the source of a breach if one should occur. Once the source of a breach has been identified, corrective measures can be implemented quickly to minimize the damage.
Monitor vendors for potential security vulnerabilities
Monitoring third-party vendors allows an overview of their network and highlights any changes they make to their systems. Also ensure that there is dialogue between parties to alert of any software or security changes that may affect the supply chain. It’s also important to use assessment standards that consider the vendor’s access to data and previous breach protocols. Communicate any cybersecurity expectations to your vendors, so they can make the necessary changes as soon as possible.
Discuss risks posed by third-party vendors
Work and communicate with third parties about the security threats facing the organisation. Work together to overcome any challenges faced. If a third-party vendor is aware of how important cybersecurity measures are to your business, they will be encouraged to work harder to protect sensitive data from a breach.
Limit access privileges to system users
If a third-party doesn’t need access to certain sensitive information, do not grant them access. However, if a third-party vendor does need higher security access, evaluate exactly how much information they need and limit access privileges as and where applicable. It’s also important to protect company data with a constant monitoring approach.
What is a third party risk management framework?
A third-party risk management framework helps an organisation analyse and control risks associated with outsourcing to third-party vendors or service providers.
Implementing Third Party Risk Management Frameworks
Implementing third-party risk management frameworks are key to ensuring that your organisation and its extended supply chain abides by a certain set of rules and guidelines. A third-party risk management framework is a process to classify, minimize and remove risks from partners, vendors, contractors, and suppliers. The framework helps identify third-party risk and potential threats, and enables organisations to allocate the correct resources for risk mitigation.
NIST developed the first risk management framework to help protect U.S. government information systems from vulnerabilities and threats. The latest version of the NIST Cybersecurity Framework consists of guidelines, standards and best practices specifically tailored to manage an organisation’s cybersecurity risk. ISO also has a third-party risk management framework that can be helpful for the third-party risk assessment process and can be applied to businesses all over the globe.
Third Party Risk Management Strategy Tips
According to Gartner, more than 80% of legal and compliance leaders report that third-party risks were identified after initial onboarding and due diligence, suggesting traditional due diligence methods in risk management policy fail to capture new and evolving risks. It’s also important to bear in mind that a third-party risk management strategy defines how an organisation identifies and addresses risks posed by third-party vendors within a specific risk tolerance. With that in mind, here are some top third-party risk management strategy tips to keep in mind:
- Streamline upfront due diligence to focus on critical risks
- Create relationship controls to compel compliance
- Establish business-driven methods for ongoing risk management analysis
- Keep in mind the four elements of a successful risk management strategy:
1) Risk identification and assessment;
2) Risk mitigation;
3) Risk management or response;
4) Risk monitoring.
Assessing Your Third Party Risk Management Program
A third party risk management program oversees the assessment process and due diligence review of a vendor to provide an understanding of their practices. It assesses potential third party risk and identifies vulnerabilities. You can build and test your third-party assessment program internally using questionnaires that reflect an organisation’s risk appetite. There are other steps to take to ensure that you have a thorough and robust system in place:
- Risk identification
- Risk measurement and assessment
- Risk mitigation
- Risk reporting and monitoring
- Risk governance
Streamlining Your Program With Automation
Organisations are turning to automated risk assessments to gain a more efficient, comprehensive, and consistent view of their risks. This approach uses a tried, tested, and proven risk management framework, which allows IT security teams to assess risks in an organised and systematic manner.
Automated risk assessment uses automation risk assessment tools to prioritize potential vulnerabilities and risks within an organisation. Automated assessments analyse data to identify potential risks and patterns that manual processes might miss. The automation tools generate alerts and reports to help risk management teams prioritize risks and make informed decisions.
Third Party Risk Management Software
What to look for in a third-party risk management platform?
A third-party risk management platform should cover an organisation’s regulatory requirements, use of third-parties, acceptable level of risk, business processes, compliance requirements, overall enterprise risk management strategy, and more.
RiskXchange is the best platform to protect your organisation from third-party cybersecurity and compliance risks. Our managed, third-party risk management program is a unique service that is fully integrated within the RiskXchange platform. RiskXchange can monitor your attack surface continuously to prevent data breaches, information leakage, as well as discover and report on a wide range of cybersecurity issues.
How can third party risk management software improve assessment accuracy?
Third party risk management software gathers and manages vendor risk data to protect organisations from issues such as vendor noncompliance or data breaches. The software monitors, assesses, and mitigates risks that may have a negative impact on the relationship between a company and its third-party vendors.
Get in touch with RiskXchange to find out more about how to manage third party cyber risks.