Why Is Third Party Risk Management Important?
Third-party risk management (TPRM) is essential to a company’s security, as it helps to protect the company from the risks that come with its involvement with an outside vendor. By relying on a third party for necessary business products or services, a company may be subject to reputational risks, financial risks, and information risks, should a mishap with the third party occur.
It is important to vet third parties to determine their trustworthiness. Often third-party involvement requires the sharing of confidential information between both parties to perform business. Cybersecurity risks can be especially common with third parties, as they can have access to sensitive information. By not having control over the vendor’s cybersecurity, your company must trust the third-party organization to keep the shared data secure.
Third parties and supply chain partners can provide organizations with necessary services like shipping, website/Cloud hosting, supplies, and more. However, if that third party suddenly cannot provide the services required, this can be a problem for the main organization.
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TPRM Best Practices
Keep a Third-Party Inventory
Keeping an inventory of your third parties and vendors is a great way to keep track of your outside involvement. Furthermore, these inventories can be organized based on classification factors. Tier levels can be used to measure the importance of your organization’s partnership based on the risk that a third-party mishap would pose for your organization.
Inherent risk can be determined based on the amount of confidential information shared between the organizations.
Inherent risk can be determined based on the amount of confidential information shared between the organizations, or how critical third-party functioning is to your organization’s functioning. The level of impact from a third-party issue should be considered, such as the misuse of important information or the inability to access a vendor’s services.
Know the TPRM Lifecycle
The third-party risk management lifecycle is a process to promote your organization’s security based on third-party involvement. According to ISG, this lifecycle includes four phases:
- Setup and Tiering: Developing business requirements, assigning stakeholders, and performing an initial risk assessment and tiering
- Due Diligence and Selection: Conducting third-party risk assessment, SME evaluation and reporting, putting controls in place, and third-party selection
- Negotiation and Onboarding: Contract negotiation, residual risk review and approval, and contract onboarding
- Ongoing Monitoring and Management: Risk monitoring and remediation, contract and relationship management, and termination management
By performing these tasks in order, your organization can make wiser decisions regarding increasing security with third-party organizations.
Use Automation When Possible
Companies and organizations should utilize automation, when possible, to stay on top of third-party risk factors. Automation can save companies the time and effort of ensuring the security of third-party risks. In addition, they can improve safety Investing in third-party risk management software can help you streamline your third-party management and reduce risk factors. Many TPRM frameworks use automation to monitor and assess the presence of third-party risks. TPRM frameworks use artificial intelligence (AI) to automate the risk management process. They can offer organizations many benefits, such as better data visibility, easier third-party security assessments, and swifter vendor onboarding.
TPRM frameworks provide advanced reporting capabilities on potential risk factors through third-party risk assessment and other tools. For example, OneTrust Vendorpedia is third-party risk software that uses risk assessments to gather useful information on third-party organizational risk factors. Their system allows companies to request assessments from third parties easily and validates the legitimacy of the assessments through control testing.
TPRM frameworks use artificial intelligence to automate the risk management process.
Similarly, SecurityScorecard Atlas is a framework that manages third-party relationships Third-party risk frameworks can save organizations time and costs For example, the UpGuard framework constantly monitors both third-party and internal attack surfaces for risks. They also provide their clients with automated penetration testing. Processes like these make third-party risk tools extremely valuable in analyzing the security risks that could occur through a business partnership.
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Managing Third-Party Risk
Third parties can cause security breaches, but third-party relationships are necessary for many organization functions. Fortunately, there are practices that companies and organizations can follow to improve their third-party security. By taking security measures like monitoring risk factors and third-party inventory, your organization can avoid the possible issues that can arise from these partnerships.
And when looking for ways to bring third-party security to the next level, using automation through third-party risk management frameworks and tools is a practical option. Relying on third parties can be dangerous, so practicing third-party risk management is vital to ensure the safety and success of an organization.
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