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Guide: Third Party Risk Management

Third-Party Security: 6 Steps to Securing Your Ecosystem



Contents

What Is Third-Party Security?

A third-party vendor is an entity with which an organization has a business relationship — and that has access to the organization’s protected data assets. 

Third-party vendors and suppliers represent a severe security risk, and were the cause for several global-scale attacks, such as the SolarWinds and Kaseya attacks. Third-party security is a set of practices, services, and technologies that can identify these risks and protect your organization from security threats associated with third-party vendors. 

Third-party risk management is becoming a critical part of any organization’s information security strategy.

Why Is Third-Party Security Important?

In most organizations, the board of directors and senior management are responsible for managing third-party relationships within an organization. This responsibility should include identifying and acting on risks that arise from these relationships. 

Senior executives need to understand the high risk of cybersecurity attacks and data breaches within their organizations and external service providers. Technologies such as cloud-based applications have accelerated the outsourcing trend and increased the associated risks. Regardless of your organization’s risk profile, third-party risk management is essential for internal auditing and risk mitigation.

Unfortunately, in many cases organizations fail to properly evaluate security aspects of their third-party relationships. Failure to manage these risks can expose organizations to regulatory, financial, litigation, and reputational damage. This can undermine an organization’s ability to acquire new customers or serve existing customers.

Especially after the recent wave of supply chain attacks, third-party security is now widely recognized as a critical pillar of any organization’s information security efforts.

6 Steps for Implementing Third-Party Security

When your organization is considering a business relationship with a third-party vendor, certain measures can be taken to ensure third-party security throughout the process.

1. Perform Due Diligence Before Signing

Ensure that third parties have the same level of security as your organization before signing a contract. Remember that if the provider’s system is compromised, hackers can gain access to your data next. Ask questions like the following:

  • Does the supplier have a response and notification plan? 
  • Does the supplier document resolution processes? 
  • Does the supplier perform penetration testing? 

2. Build Third-Party Security into Vendor Contracts

Once you have confidence in your vendor’s internal security, you can write an agreement to protect both parties.

Standard tests for phishing, hacking, and social engineering are required. Vendors and their employees need to be aware of these vulnerabilities, as cybercriminals use vendors to target large organizations.

Your supplier should conduct testing at least once a year, document a plan for finding and fixing issues. They should also sign a complete nondisclosure agreement that documents access controls.

3. Set Expectations

Prioritize by setting high standards for third-party security expectations. Do not contract with vendors who do not agree to your team reviewing and evaluating their security on a regular basis. If vendors expect to be audited, they are more likely to create a more secure network environment for everyone involved.

4. Perform an Independent Risk Assessment

Don’t rely solely on contracts to prevent third-party data breaches. Vulnerabilities should be assessed independently by your team, who should have full access to scan the supplier’s IT environment.

Related content: Read our guide to third-party risk assessment

5. Implement Third-party Monitoring

Integrate continuous monitoring solutions to ensure real-time risk detection and response and prevent the consequences of breaches and cyberattacks.

Third-party monitoring involves the continuous monitoring of a partner’s security systems. This allows you to comply with changing regulatory and security best practices. In the evolving threat landscape, third-party monitoring maintains a secure vendor ecosystem and protects data integrity.

To ensure the protection of internal systems and data, combine deep security data intelligence with third-party risk management solutions to monitor your vendor’s security posture.

6. Have Proper Exit Management

Suppliers may retain access to sensitive data and systems or buildings if exit management processes are not in place. So, even if the contract has expired, data can be compromised. Organizations must do the following upon termination of a partnership:

  • Require vendors to destroy or delete all data related to your organization and provide formal data erasure documentation. This includes situations in which a vendor subcontracts data to another vendor.
  • Revoke privileges, ensuring that all vendor privileges on systems and physical locations are terminated.

How Third-Party Risk Management Frameworks Can Help

A strong third-party risk management program should address all aspects of risk throughout the lifecycle of a third-party relationship. Third-party risk is on C-level and board-level agendas, especially for organizations operating in regulated environments. The rise of decentralized businesses has increased the need for a coherent third-party governance framework. 

Focusing on operational risk factors such as performance, quality standards, lead times, KPIs, and SLA measurements is not enough. Reputational, financial, legal, and regulatory factors are becoming increasingly important. These factors include the following:

  • Labor practices
  • Information risk management
  • Financial health
  • Compliance with regulations and industry standards
  • Health and safety compliance 

The risk assessment process is part of internal controls and should include supply chain and other third-party risk assessments. Third parties include suppliers, business channels, marketing partners, payroll vendors, and others who, if breached, could harm your finances, reputation, or compliance.

A third-party risk management framework should be aligned with the following aspects of your organization:

  • Regulatory and compliance requirements
  • Acceptable level of risk
  • Use of third parties in business processes
  • Joint ventures, mergers and acquisitions
  • Overall enterprise risk management strategy