Third Party Risk Assessment - Introduction
An analysis of the risks that third parties in your supply chain partnerships present to your firm are known as a third-party risk assessment also called a third party assessment. These third parties may be suppliers, service providers, vendors, or makers of the software.
The majority of businesses today work in conjunction with a variety of third-party vendors. Their day-to-day operations often depend on these external relationships for needs like supply chain management and resource development. These partnerships are widely necessary to remain competitive in the marketplace — regardless of industry. Third-party vendors allow for greater convenience, faster production speeds, and lower costs.
However, these external relationships pose a significant cybersecurity threat to a business if unchecked. Every outside partnership risks opening the door to malicious actors invading their network and gaining access to sensitive information. A third-party assessment, also sometimes referred to as a third-party risk assessment is an in-depth examination of each vendor relationship a business has established. This assessment looks to identify possible security risks associated with the vendors and how these pitfalls can be mitigated.
It is no secret how devastating a successful cyber attack can be. On average, it costs businesses, regardless of the size, about $200,000 when a security breach occurs. While it may not be possible to prevent 100 percent of security threats, it pays to take mitigation seriously and invest in identification and monitoring practices to protect your business.
Why Invest in Third-Party Vendor Risk Assessments?
Third-party assessments aren’t meant to poke holes in a business’s security measures, but instead, help educate companies on possible risks that exist within their partnerships. Therefore, decisions can be made on how to fix the threat or terminate the relationship if necessary. As the business has grown to become more digital in nature, companies are starting to dedicate more time and resources to their cybersecurity efforts.
In fact, many businesses do have an incident response plan in place for when a breach does occur. Yet, many of these plans lack true detail or action steps to follow when the breach is the result of an external vendor relationship. Little knowledge is known about the timeline that follows and what must be done.
When should the third-party vendor be notified?
Who specifically should be contacted?
What should be said?
How will their role in breach be dealt with?
By conducting an annual third-party vendor risk assessment or whenever a new vendor is brought on, this investment helps ensure that your business may continue to operate under the safest possible conditions. As more businesses look to collaborate or outsource parts of their daily operations or production, the avoidance of third-party ties remains difficult. This causes businesses to conduct in-house or independent reviews of all partnerships in an act of self-preservation.
Third Party Risk Assessment Process
A proper third-party assessment can usually be completed in a couple of days, depending on the number of vendor relations. When an assessment is conducted, an individual cybersecurity specialist or team of cyber professionals will audit every single external partnership, looking at a variety of aspects, such as:
Licenses and certifications
Most auditors will employ a risk management framework from the International Organization for Standardization (ISO) or the National Institute for Standards and Technology (NIST) to analyze your third-party risk management program.
This breaks down by looking at:
Set up Vendor Risk Criteria
Several vendor risks are common across many industries.
Operational Risk: Determine the importance of the vendor’s service in your organization’s business activities and operations.
Data/ Privacy risk: Determine whether the vendor will handle or store critical information like customer, donor, or employee information.
Transactional risk: Establish if the vendor will handle financial transactions for your organization.
Replacement Risk: Determine whether you can replace the vendor service if they come to a halt.
Downstream Risk: Determine if the vendor will use sub-contractors who might deliver certain services for your organization.
Compliance Risk: Ensure that the vendor complies with your organization’s regulations.
Geographic Risk: Determine the physical location of the vendor and if it is secure to deliver services for such locations.
Perform Third-Party Onboarding and Screening
Experts advise creating a formal structure for your third-party risk management program to standardize all third-party onboarding and screening. Businesses should also take comprehensive real-time risk-checking and containment methods to ensure a thorough third-party risk assessment.
Easy and Manageable Assessment
Your third-party assessment should not be gruesome. A good assessment is thorough, informative, easy to understand, and comfortable to manage. Understand that undertaking assessment is one of many tasks your vendor does, but it also ensures that critical information is collected.
Ensure your assessment is an ongoing process and not a one-time job. Create a process that ensures continuous supervision for vendors who might be risky.
Use technology as a part of your Risk Assessment Process.
It is prudent to utilize technology to aid your third-party risk assessment. Technology and innovation assessment software helps a smooth and comprehensive vendor assessment process.
Utilizing technology for your assessment process has the following benefits:
- It offers you command over a system that allows you to frequently monitor any number of third parties and the hazards involved.
- It influences the scope of your evaluation while improving your capacity to anticipate and analyze internal and external third-party threats.
- It assists you in gathering and performing a macro-analysis of reliable data on third-party risks across several assessments, which will improve any future vendor selections made by your company.
- It allows you to examine the effectiveness of risk assessment metrics, which identifies the caliber and dependability of your data.
Managing third-party risks in cybersecurity can be done in a few ways. Firstly, organizations should assess potential third-party risks and create a plan to mitigate those risks. This plan should include measures such as requiring third-party vendors to use secure authentication protocols, encrypting data transfers, and performing regular security audits. Additionally, organizations should create a comprehensive cybersecurity policy that outlines specific requirements for third-party vendors, such as requiring the use of the latest security technologies. Finally, organizations should regularly monitor third-party vendors to ensure they are complying with the established security policies.
Need a Third-Party Vendor Risk Assessment?
If you’re looking for more guidance on how to complete a third-party assessment or need immediate security assistance, CDG can help. Founded in 2016 by cybersecurity expert Lou Rabon, Cyber Defense Group was designed to address the growing demand for experienced cybersecurity consulting for innovative cloud-native and cloud-reliant organizations. Get in touch, and see what results are possible for your organization.