With growing global risks threatening cybersecurity, third-party risk management (TPRM) is critical. Businesses outsource to vendors to improve data security, but due to an increasingly digitized world, third parties may also pose a significant risk to security. To ensure safe TPRM practices, it is essential to understand the red flags and implement proactive measures to mitigate potential damage.
The Importance of TPRM
Using a third-party security vendor is a popular approach because these vendors specialize in their field and enable flexible scalability for a company. However, outsourcing any aspect can pose new challenges. TPRM is a process that companies use to assess and mitigate risks from third parties. These processes are essential in maintaining safe practices.
TPRMs are essential for mitigating cybersecurity risks and threats. In 2023, 25% of responding organizations experienced over six insider attacks. These types of attacks can originate from someone with access to company data, whether internal or an outsourced third-party vendor. 2024 data indicated that only 21% of organizations implemented operation-wide programs to deal with these threats. Proper management systems can significantly mitigate the risks posed by third-party vendors.
Common Risks of Security Vendors
Companies using a third-party security vendor must be aware of the following risks:
- Data breaches: Sensitive information is a prime target for cyberattacks, and if the vendor’s security systems fail to stop the attack, critical data becomes exposed.
- Intertwined financial relationships: Using a third party can mean feeling the effects of their financial burdens and debt, increasing the risk of financial jeopardy.
- Negative reputations: Should a vendor become poorly regarded, companies affiliated with it also feel the impact of its negative reputation.
- Failed legal compliance: Failure to comply with laws and regulations can put both companies in serious legal danger.
- Difficulty aligning strategic goals: Companies and their vendors may not completely agree on their goals and processes, which can strain relationships and impact productivity.
Red Flags to Look Out For
Because the impacts of these threats are so damaging, companies should be wary of what vendors they use. Red flags in a vendor can manifest in various ways, including:
- Lack of transparency in security practices: Failure to disclose methodologies or programs used to prevent security risks may indicate a lack of attention or preventive measures.
- Outdated or missing security certifications: Cybersecurity is constantly evolving, and vendors must stay updated. Though certifications are not always a requirement for every business, ensuring quality is essential for organizations to determine the highest security levels.
- Poor incident response history: If a vendor has a history of poor reviews, they may not be a trustworthy source for handling sensitive data.
- Infrequent or incomplete security assessments: Failure to comply with assessments or poor results may indicate mishandling of data.
- Unclear data handling and privacy policies: Policies and agreements should be clear for both parties. Without structure and clear rules, sensitive data may be mismanaged and communication may break down, leading to more risks.
Key Elements of a Successful TPRM Program
Understanding the risks and red flags is a crucial aspect of building a successful TPRM that mitigates these threats and fosters a strong relationship between the company and its vendor. Here is how to successfully implement TPRM.
- Vendor Assessment
Before agreeing to a contract relationship, companies must consider any red flags. They should also establish standards for the vendor to meet in advance. For example, requiring certifications can maximize efficiency and minimize threats, as 92% of cybersecurity professionals expressed increased confidence in their work performance after earning a certification.
- Due Diligence
Confirming all compliance and legal matters have been handled is critical to ensuring a company’s cybersecurity, especially when working with smaller vendors. Legal contracts, such as an operating agreement, can help clearly outline business practices and maintain personal liability protection. Reducing legal tangles increases clarity for both parties and avoids surprises down the line that can be costly and damaging to a company’s reputation.
- Ongoing Monitoring
Maintaining TPRM processes requires upkeep. As new data comes and goes and new threats arise, the TPRM must adapt, and communication between the company and vendor must remain strong. Using management systems that are controlled and closely monitored internally is important for ensuring consistent safe measures.
AI and machine learning tools are entering the cybersecurity sphere and can help mitigate risks by automating processes and monitoring areas where humans tend to make mistakes. This is especially important since human error is responsible for 68% of successful cyber attacks.
Take a Proactive Approach
Though third-party security vendors introduce massive risks, operating companies should proactively approach their TPRM procedures. Frequent assessments of potential external cybersecurity threats and internal vendor mismanagement can help a company avoid massive security breaches. In an evolving digital environment, cybersecurity should remain top of mind.
Devin Partida is an industrial tech writer and the Editor-in-Chief of ReHack.com, a digital magazine for all things technology, big data, cryptocurrency, and more. To read more from Devin, please check out the site.
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