Protecting Your Business From Cyber Threats: The Importance of Third-Party Risk Management
As businesses continue to digitise and rely on technology, cyber threats are becoming more sophisticated and prevalent. As a result, more is needed for organisations to focus solely on their cybersecurity measures. However, they must also address the risks their third-party vendors and partners pose. This is where third-party risk management comes into play. This article will discuss the importance of third-party risk management, the process involved, common risks and threats, best practices, tools and technologies, and outsourcing options.
About Third-Party Risk Management
Third-party risk management refers to the process of identifying, assessing, and mitigating risks associated with third-party vendors and partners. These risks can range from data breaches, cyberattacks, and system failures to regulatory compliance violations, reputational damage, and financial loss. Third-party risk management is essential for businesses of all sizes and industries as it helps to ensure the protection of sensitive data, maintain business continuity, and minimise legal and financial liabilities.
Understanding Third-Party Cyber Risk Management
Third-party cyber risk management focuses specifically on the risks associated with cyber threats and attacks. It involves identifying and assessing the potential impact of a third-party vendor or partner's cybersecurity posture on the organisation's overall security. This can include evaluating their security policies and procedures, data protection measures, incident response plans, and employee training programs.
Importance of Third-Party Risk Management for Businesses
The importance of third-party risk management cannot be overstated. According to a survey by the Ponemon Institute, 59% of organisations have experienced a data breach caused by a third-party vendor or partner. This highlights the need for businesses to prioritise third-party risk management to protect their assets and reputation. Failure to implement a robust third-party risk management program can result in significant financial and legal consequences, as well as damage to the organisation's brand and customer trust.
The Third-Party Risk Management Process
The third-party risk management process involves several steps, including:
Step 1: Identify Third-Party Vendors and Partners
The first step in the process is to identify all third-party vendors and partners that have access to the organisation's systems, data, or network.
Step 2: Assess Third-Party Cyber Risk
Once the third-party vendors and partners have been identified, the next step is to assess their cyber risk. This involves evaluating their security posture, including their policies and procedures, data protection measures, and employee training programs.
Step 3: Mitigate Third-Party Cyber Risk
After assessing the third-party cyber risk, the organisation must take steps to mitigate any identified risks. This can include requiring the third-party vendor or partner to implement additional security controls, performing regular security audits, and monitoring their security posture.
Step 4: Monitor Third-Party Cyber Risk
The final step in the process is to monitor the third-party cyber risk on an ongoing basis. This involves regularly reviewing their security posture, assessing any changes or new risks, and ensuring that the vendor or partner is maintaining compliance with the organisation's security policies and procedures.
Common Third-Party Cyber Risks and Threats
There are several common third-party cyber risks and threats that organisations should be aware of, including:
1. Data Breaches
One of the most significant risks associated with third-party vendors and partners is the risk of data breaches. This can occur when a third-party vendor or partner accesses sensitive data or systems and is not adequately protecting that data.
2. Malware Infections
Third-party vendors and partners can also introduce malware into the organisation's systems through infected files or emails. This can result in the compromise of sensitive data or the disruption of business operations.
3. Insider Threats
Third-party vendors and partners can also pose an insider threat to the organisation. This can occur when an employee of the third-party vendor or partner intentionally or unintentionally exposes sensitive data or systems.
Third-Party Security Risk Management Best Practices
To effectively manage third-party security risk, organisations should follow these best practices:
1. Develop a Comprehensive Third-Party Risk Management Policy
Organisations should develop a comprehensive third-party risk management policy that outlines the process for identifying, assessing, and mitigating third-party risks. This policy should also include guidelines for vendor selection and ongoing monitoring.
2. Require Third-Party Vendors and Partners to Provide Proof of Compliance
Organisations should require third-party vendors and partners to provide proof of compliance with industry standards and regulations, such as SOC2, PCI DSS, PDPA and GDPR.
3. Perform Regular Security Audits
Organisations should perform regular security audits of their third-party vendors and partners to ensure that they are maintaining compliance with the organisation's security policies and procedures.
Benefits of Implementing Third-Party Risk Management
Implementing a robust third-party risk management program can provide several benefits to organisations, including:
1. Improved Security Posture
A comprehensive third-party risk management program can help to improve the organisation's overall security posture by identifying and mitigating potential risks and vulnerabilities.
2. Reduced Legal and Financial Liabilities
Effective third-party risk management can help to minimise legal and financial liabilities associated with third-party cyber incidents.
3. Increased Customer Trust
Implementing a robust third-party risk management program can also help to increase customer trust by demonstrating the organisation's commitment to protecting sensitive data and maintaining business continuity.
Tools and Technologies for Third-Party Risk Management
Several tools and technologies can assist organisations in managing their third-party risk, including:
1. Third-Party Risk Management Software
Third-party risk management software can help organisations to automate the third-party risk management process, including vendor selection, risk assessment, and ongoing monitoring.
2. Security Information and Event Management (SIEM) Systems
SIEM systems can assist organisations in monitoring their third-party vendors and partners for potential security incidents and threats.
3. Data Loss Prevention (DLP) Solutions
DLP solutions can help to prevent the loss or theft of sensitive data by monitoring and controlling data access and usage.
Outsourcing Third-Party Risk Management Services
For organisations that lack the resources or expertise to implement a comprehensive third-party risk management program, outsourcing to a third-party provider may be a viable option. Outsourcing third-party risk management services can provide several benefits, including:
1. Access to Expertise and Resources
Outsourcing to a third-party provider can provide organisations with access to specialised expertise and resources that may not be available in-house.
2. Reduced Costs
Outsourcing third-party risk management services can be more cost-effective than hiring and training a dedicated team in-house.
3. Improved Efficiency
Outsourcing can also help organisations to improve efficiency by freeing up internal resources to focus on core business activities.
Conclusion: Taking Proactive Steps to Reduce Third-Party Cyber Risk Management
Hence third-party risk management is essential for protecting organisations from the growing threat of cyber-attacks and data breaches. By implementing a comprehensive third-party risk management program, organisations can identify, assess, and mitigate potential risks and vulnerabilities associated with their third-party vendors and partners. This can help to improve their overall security posture, minimise legal and financial liabilities, and increase customer trust. Whether through in-house resources or outsourcing to a third-party provider, taking proactive steps to reduce third-party cyber risk management should be a top priority for all businesses.
References
https://sharedassessments.org/about-tprm/
https://www.isaca.org/resources/news-and-trends/isaca-now-blog/2022/eight-steps-to-manage-the-third-party-lifecycle
https://www.osfi-bsif.gc.ca/Eng/fi-if/rg-ro/gdn-ort/gl-ld/Pages/b10_dft_2022.aspx
https://www.scmagazine.com/resource/cloud-security/third-party-risks-how-to-reduce-them
https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/Risk/Our%20Insights/Improving%20third%20party%20risk%20management/Improving-third-party-risk-management.ashx
https://www.techtarget.com/searchsecurity/feature/Your-third-party-risk-management-best-practices-need-updating