RiskXchange can help your business monitor and mitigate third-party risks to prevent unnecessary exposures.
Third-party technology and service providers can offer huge strategic advantages to businesses. But at the same time they can cause huge headaches for cybersecurity teams. Although third-party technology allows organisations to focus on their highest value activities, security risks often crop up with each new partnership. Third-party risk is now an integral part of business ecosystems worldwide, which has brought about the need to incorporate a robust third-party risk management framework to manage risk and to keep both your business and customers safe.
Establishing a risk assessment framework
The first step any business should take is to establish a risk assessment framework to decrease risk and increase security. The risk assessment should focus on the organisation’s internal processes but must also include the entire supply chain and third and fourth parties.
Third-party risk management is extremely important because it consists of an organisation’s suppliers, vendors, marketing partners, business channels, and so on. A third-party risk management framework should be bespoke to an organisation’s structures and risk profiles. And remember, your business is liable for any third-party failures.
Why you should establish a third-party risk management framework
In 2022, it has never been as important as it is now to take charge of third-party risk. As highlighted by EY in their global third-party risk management survey, 36% of businesses suffered a third-party breach in the year spanning 2019-2020. What’s more, 56% of companies are relying on agreements with third parties to govern parties with fourth parties. Other studies have found that most organisations rely on the reputation of third parties to determine their risk. This is, of course, not a reliable way to judge third-party risk.
In its guidance for banks and savings associations, the US Federal Office of the Comptroller of the Currency says: “[An organization] should adopt risk management processes commensurate with the level of risk and complexity of its third-party relationships.”
The FFIEC points out in its Supervision of Technology Service Providers guidance that using partners in your business processes “does not diminish the responsibility of […] management to ensure that the activities are conducted in a safe and sound manner […] just as if the institution were to perform the activities in-house.” In layman’s terms, it basically means that a third-party risk management framework is not something that should be viewed as a ‘nice thing to have’ but is a necessity to reduce liability. And during the pandemic, liability has become an issue on a grand scale.
more than half of businesses faced one or more third-party risks last year, and that was experienced even by those who felt their TPRM program was strong prior to the pandemic. And of those incidents, 13% severely compromised profitability and financial performance, affected customer service or seriously breached regulation.
Best practices for third-party risk management frameworks
The ISO and NIST frameworks are the most popular risk management frameworks. Both can be used in tandem and really encourage businesses to assess risks and implement controls based on their own unique needs.
Let’s take a closer look at the best practices for any risk management framework:
- Catalogue all third parties associated with the organisation.
- Record cybersecurity risks that third parties can expose the company to.
- Rate and segment third parties based on risk and focus on critical activities.
- Develop rule-based diligence testing to pinpoint third parties with the most critical cybersecurity risk.
- Create a decision-making group to own the governance and framework.
- Assess critical activities in order to set a benchmark for the third-party risk management framework.
- Define three lines of defence which includes third-party oversight, business owners, and an internal audit team.
A robust third-party risk management framework protects an organisation’s employees, clients, and the strength of their operations. Third-party risk management frameworks also provide standards company-wide, which help focus and streamline third parties that pose the greatest risks. Effectively managing cybersecurity risks can reduce costs, improve operations, and bolster the organisation’s reputation.
Get in touch with RiskXchange to find out more about third-party risk management frameworks.
How RiskXchange can help
RiskXchange is one of the firms leading the fight against cybercrime, coming up with novel solutions to everyday problems experienced at the hands of hackers.
With full visibility over your eco-systems’ entire attack surface in near real-time, you can regularly monitor and mitigate risks to prevent unnecessary exposures. Our passive data collection methods are effective and have no impact on your network performance. Using data-driven insights to prevent breaches is the best way to reduce an attack surface and prevent cyberattacks.
RiskXchange provides a powerful AI-assisted, yet simple automated and centralised 360-degree cybersecurity risk rating management approach. We generate objective and quantitative reporting on a company’s cyber security risk and performance, which enables organisations with evolving business requirements to conduct business securely in today’s open and collaborative digital world.
RiskXchange is an information security technology company, which helps companies of all sizes fight the threat of cyber threats by providing instant risk ratings for any company across the globe. RiskXchange was founded and is led by recognised experts within the security industry, who have held leading roles within companies such as IBM Security. Find out more here.