What to consider when selecting a third party risk management framework

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In March 2021, the Volkswagen Group of America learnt that one of its vendors left unsecured data online, exposing contact information and social security numbers of over 3.3 million customers. The attack severely damaged the brand’s reputation because over 97% of the victims were Audi customers and interested buyers.

The cyberattack encapsulates the problem most companies face today—discerning which vendors are not following security best practices and putting your data at risk.  

Moreover, the pandemic and subsequent lockdowns have stretched supply networks to their capacity, making it more complicated to secure these networks. These challenges have resulted in a disturbing increase in cyberattacks, with ransomware being the leading cause.

Preventing cyber breaches and ensuring that data remains secure, however, necessitates a systematic due diligence framework that examines third-party vendor security—also known as a third party risk management framework (TPRM).  

It allows you to convert vendor security into quantitative metrics that make it easy to determine which vendors are following security best practices and those that aren’t, preventing several issues that span destructive cyber breaches, costly operational failures, vendor bankruptcy, and non-compliance risks. 

What can organisations achieve with a third party risk management framework?

With supply chain attacks expected to increase in the next few years, it’s critical for your business to implement a mature third-party risk management programme; one that encompasses all aspects of risk and all stages of a third-party relationship, turning vendor security into a more manageable, quantifiable, and systematic process. 

Having a framework helps you address a variety of operational risk factors that go beyond standard performance metrics, including labour practices, financial health, and information risk management. 

These insights help security teams identify and prioritise the remediation of technical risks, which in turn, help you reduce reputational and financial risks. 

Moreover, it helps businesses vet vendors and the risks they pose with greater clarity. This is in contrast to one of the biggest challenges organisations face, which is the divide between business and technical teams that can get in the way of appropriate threat mitigation strategies.  

It’s also incredibly useful in helping you keep tabs on your vendor network’s compliance regulations in key areas like bribery, the environment, and health and safety compliance. 

How can you choose the right framework?

To begin with, identify what your current duties and potential liabilities are, as per legal regulations and industry standards. This will help you set the scope for your framework and direct your TPRM efforts in the right direction. 

Once you understand the breadth of your duties towards vendor risk management, assess potential risk management frameworks. To manage your third parties effectively and mitigate your attack surface, consider the following features when you’re choosing a TPRM model. 

– An inventory of third parties accessing critical business data

– The ability to identify and categorise cyber risks 

– An assessment of critical activities within your organisation

– A review of critical activities to set benchmarks for your third-party risk management framework 

– A category of third parties in terms of risk 

– A list of key defences, including third-party oversights, business owners, and an audit team

– Governance procedures and key decision-making workflows

Depending on your organisation’s requirements, you may need to integrate multiple frameworks into your business processes. 

A robust third-party risk management framework can secure your success 

Research indicates that cyberattacks could rise, particularly in areas like ransomware and cryptocurrency in the next few years. 

Given this trend, improving third-party security is critical for ensuring system stability, preventing data breaches, and abiding by compliance regulations. 

While upgrading your security technology, training your teams and following other security best practices can take you far, it’s simply not enough to stem the tide of attacks originating from third-party networks. 

Given the interconnected nature of the business environment, you have a role to play in the security standards your vendors adhere to, and a data breach on their end puts you at risk from a technical, legal, and financial perspective.

A third-party risk management framework ensures you’re monitoring third-party and fourth-party vendors and how they manage and mitigate their cyber exposure. This gives you greater capabilities to keep your proprietary data safe and meet compliance standards. 

More importantly, it allows you to categorise and tier vendors effectively to improve vendor security, which is critical for preventing sophisticated cyberattacks now and in the future!