Mind the Gap: Bridging the Disconnect Between Third-Party Risk Management and Cybersecurity
Imagine this - you are running a Fortune 100 company, and of course, you have made significant investments to protect your network from cyberattacks. You've put top-of-the-line monitoring tools, firewalls, and encryption in place. As a result, you are confident that your organization is safe from harm.
But are you? What about your third-party vendors?
In today's business environment, third-party vendors are more and more common. They provide various services and solutions that businesses need to run efficiently. They do, nonetheless, present a severe security threat. A single incident at a third-party vendor may jeopardize the security of your network, and your company's confidential information and intellectual property may also be at risk.
Recent occurrences have made third-party risk management (TPRM) more crucial than ever in today’s connected and digitalized world.
The LastPass breach, which affected millions of users globally, is one example of such an occurrence. Popular password manager LastPass experienced a security breach that made user email addresses and encrypted master passwords public.
According to Securityweek, “The attackers exploited a remote code execution vulnerability in a third-party media software package and planted keylogger malware on the employee’s personal computer". This incident underscores the critical importance of TPRM.
For organizations to protect themselves, they must create and maintain adequate controls and policies to ensure that third-party vendors adhere to security standards and have sufficient controls to prevent data breaches. Without acceptable TPRM policies, businesses risk becoming vulnerable to cyberattacks and data breaches, posing an incalculable risk to their operations.
In this article, we'll look at the disconnect between TPRM and cybersecurity, the dangers of using insufficient TPRM, and how businesses can close this gap to protect their networks and data.
Third-Party Risk Management
Third-party risk management is finding and reducing risks from your organization’s work with third parties like partners, contractors, and vendors. When you work with third parties, you give them access to your resources, data, and systems, which can be a security risk if mishandled.
As part of TPRM, the security of your vendors and other third parties are evaluated to ensure proper security controls to keep your data and systems secure. This includes looking at how well they follow regulations and best practices in the industry and how many data breaches or security incidents they have experienced.
By implementing a complete TPRM program, you can reduce the chance that your relationships with third parties will result in cyber-attacks, data breaches, and other security issues.
The Dangers of Third-Parties
Organizations can gain a lot from working with third parties but should also know the risks involved. Some of the dangers that should be considered with third-party relationships are:
The defenses of your fortress could be broken by just one breach, putting your private information and intellectual property at risk. It's like leaving the backdoor unlocked and letting cybercriminals storm in and take whatever they want. Third-party relationships can be hazardous for your company and have disastrous effects. According to Globalnewswire,
"Findings revealed that organizations are not taking the necessary steps to reduce third-party remote access risk and are exposing their networks to security and non-compliance risks. As a result, 44% of organizations have experienced a breach within the last 12 months, with 74% saying it resulted from giving too much-privileged access to third parties".
Damage to Reputation
Information about a data breach can spread like wildfire and ruin an organization's reputation in hours. Reputational damage is not limited to the immediate aftermath of a breach. The effects can last years and impact a company's capacity to draw in new clients and retain existing ones. Negative press coverage and online backlash can leave a company's reputation with a stain that is difficult to remove and lasts for a long time. Some businesses have shut down due to the harm a data breach has done to their reputation. CyberGRX shared these staggering statistics,
“Considering the impact on brand reputation, loss in business and possible decreases in share value, the overall cost of failing to vet and evaluate third parties effectively is about $13 million".
Third-party relationships can also lead to regulatory violations, resulting in fines and legal action. In industries like healthcare and finance, where data privacy and security rules are stringent, not following them can have serious consequences. For example, a 2019 breach cost Capital One 80 million dollars due to a third-party breach. Cipher’s analysis documented that the breach affected over 100 million customers and was caused by a misconfigured firewall on a third-party cloud provider's system.
To highlight the urgency that organizations need to address a solid TPRM system, the following visual was taken from a report by Prevalent:
Best Practices in TPRM
Organizations need to handle third-party partnerships well to avoid leaving themselves open to a wide range of legal risks, damage to their reputation, and cyber threats. Hence, to reduce these risks, firms must prioritize best practices in third-party risk management. The three methods listed below can assist businesses in reducing risks from third parties and protecting their operations from unplanned interruptions.
Establish a Risk Management Framework
Building a solid foundation is the first step in overcoming third-party risk, just like building a house; everything starts with the foundation. The framework for risk management is the base, while the walls are the rules, procedures, and standards. This helpful tool makes identifying, assessing, and managing hazards from third-party relationships simpler.
A thorough strategy for managing third-party risks is essential to protect firms from cyber-attacks, damage to their reputations, and regulatory issues. This is where creating a framework for risk management becomes essential. The framework should encompass the entire partnership lifecycle, from the initial contract discussions to the conclusion of a relationship with a third party. It provides businesses with a methodical strategy to manage and lower third-party risks, shielding them from potential security breaches, harm to their reputations, and legal violations.
Streamline Due Diligence
Before working with a third-party vendor, you must perform due diligence to protect your business from possible regulatory violations, damage to your reputation, and cyber threats. This means carefully evaluating potential vendors' security controls, policies, and practices to ensure they meet your company's security standards.
However, the complex and time-consuming due diligence procedure can frequently result in delayed decision-making and increased risk exposure. So, it is essential to streamline the procedure. By putting in place a standard practice, organizations can analyze possible risks quickly and correctly, figure out the level of risk, and take the steps needed to reduce these risks. By doing this, they can stay ahead of the curve and guarantee their third-party connections' safety and risk-free operation.
Address Risks Holistically
Organizations must adopt a holistic approach to manage third-party risks effectively. That means integrating third-party risk management into the overall risk management program. By doing this, businesses can better find and deal with threats across their different business units and functions.
A holistic approach empowers organizations to understand the big picture and see how third-party risks fit into the broader risk landscape. It allows them to be proactive in their way of managing them. In addition, a holistic approach ensures that risks are handled in a coordinated way instead of one at a time. This makes it less likely that there will be security breaches, damage to the company's reputation, or regulatory violations.
There's no doubt that outsourcing to outside vendors is appealing, but there are also risks and problems that come with it. To alleviate these risks, you need a thorough plan and a clear understanding of the possible risks. In this section, we look at the problems that businesses face when managing third-party risk and offer some practical solutions.
Lack of Visibility
When organizations must clearly understand their third-party vendors' operations, security protocols, and risk management practices, assessing and mitigating the associated risks can be challenging. This lack of visibility can have disastrous consequences, such as security breaches and reputational damage.
Organizations must prioritize transparency in their third-party vendor relationships to overcome this challenge. To ensure security standards are followed, clear communication channels must be set up, and vendor operations must be evaluated regularly. To improve vendor visibility, organizations can use advanced software tools to monitor vendor activities and proactively identify potential risks. As a result, they can effectively manage their third-party risks and keep them from becoming a liability.
The high cost of implementing effective risk management practices is one of the biggest problems businesses must deal with. Not only is it expensive to do due diligence, set up security controls, and keep an eye on third-party vendors, but costs could also go through the roof if there is a security breach or legal violation.
However, there are ways to overcome this challenge without breaking the bank. One practical solution is for organizations to prioritize their investments in risk management practices most critical to their operations. By doing so, they can focus their resources where they will have the most significant impact and avoid wasting money on less critical areas.
Another way to speed up due diligence is to use past vendor evaluations or work with trade groups to do assessments. These can help shorten the process and lower the price of researching each vendor while ensuring that significant risk factors are considered.
With the help of automation tools, the requirement for manual intervention can be reduced, freeing up resources that could be employed in other ways. In addition, by automating monitoring procedures, organizations may more rapidly identify possible dangers and take the required precautions to reduce them.
Ineffective Risk Assessment
Managing third-party risks requires a suitable risk assessment, but many organizations still need help. With a standardized approach to risk assessment, organizations may experience consistency and inefficiencies in the process, increasing their risks.
To overcome this challenge, organizations must create a standardized risk assessment framework adapted to their unique operational requirements. It is recommended that this framework considers the vendor's security measures, data protection procedures, and regulatory compliance. Prioritizing continuous monitoring and re-evaluation of risks is important to ensure that risks are managed well over time. By taking a thorough and standardized approach to risk assessment, organizations can reduce the risks from third parties and protect themselves from possible security breaches and other harmful effects.
The Role of Technology
Thanks to the latest technological advancements, TPRM has become more manageable. Organizations can now easily find potential risks and make their risk management process more efficient using data analytics and automated risk assessment tools.
Organizations can gather and analyze many data from their third-party relationships using data analytics tools, which helps them spot patterns and trends that could be signs of potential risks. For example, with these tools, companies can watch for strange behavior from third-party vendors, such as a sudden rise in data transfers or access to private data.
Automated risk assessment tools are another technology that can help businesses figure out how dangerous their relationships with third parties are. These tools consider several factors, including the type of shared data and the level of access third-party vendors have to sensitive information. By using automated risk assessment, organizations can save time and money while reducing the chance of human mistakes.
Third-party risk management is essential to any organization's cybersecurity strategy. The LastPass data breach illustrates the importance of managing third-party relationships and what can happen when due diligence has not been performed.
To bolster security and to lessen the chance of becoming victims of a major cyber-attack, or a data breach, organizations must proactively create frameworks to reduce risks, streamline due diligence, and deal with risks comprehensively. Regular review and updates to third-party risk management programs are essential to organizational security and success. Cybersecurity breaches erode public trust and confidence in businesses' ability to protect the interests of their customers and shareholders.
We urge all organizations to look closely at their third-party risk management programs; update and improve them as needed considering recent security breaches and new threats. The consequences of ignoring these risks can be severe, and no business should take that chance.