Your third-party risk management program identifies risks at a current, or potentially new, vendor to your organization. Next the TPRM program calls for managing that risk exposure. What can you do?
Did you know that 59% of organizations experience a third-party data breach every year, with the average cost of a data breach reaching $4.88 million. These statistics show the importance of efficiently managing third-party risks to safeguard your operations, reputation, and bottom line.
But how exactly do you manage these risks? It starts with identifying the roster of vendors that provide services to your organization, ranking them by operational criticality (‘if they go down, you go down’ exercise is a good start in our experience), then identify third-party risks, more commonly understood through the use of third-party risk management tools to assess, monitor, and mitigate cyber risks. Let’s explore the key steps to managing third-party risks to make sure that your business reduces any impact from a risky vendor while maintaining strong vendor relationships. Let’s dive in!
How Do You Manage Third-Party Risks?
Managing third-party risks involves identifying potential threats, evaluating their impact, and implementing controls to reduce exposure. Here’s how you can start:
- Identify Risks: Understand the types of risks associated with your third parties, such as cybersecurity vulnerabilities, evaluate access rights to your data or network, operational failures, financial stability, or regulatory non-compliance.
- Third-party Risk Example: A vendor with outdated security measures may expose your systems to cyberattacks, especially if they have access to your network where the attack on the third-party allows access to your organization for the threat actor.
- Real-life scenario: Third-party cyberattacks have been responsible for some of the largest data breaches in recent years. Read up on the major data breaches originating from third parties in 2024.
- Assess Risks: Perform a risk assessment to evaluate the likelihood and impact of each identified risk. This can include evaluating recent assessments, penetration tests, SOC 2 reports. Also, you should conduct your own external vulnerability assessment and send them your questionnaire or a standard questionnaire. This can give you an understanding of their cybersecurity processes and posture. This should also include reviewing financial stability, compliance history, and security protocols of your vendors.
- Mitigate Risks: Develop mitigation strategies, such as implementing stricter contractual agreements or requiring vendors to meet specific security standards. There is always something that can be done. We often hear that many organizations feel they have no option, but in our experience, there is always something that can be done. With some of the capabilities in the next section, Monitor Risks Continuously, you can add some SLA terms related to mitigating certain types of risks as you now have a mechanism to monitor that. This legal-cybersecurity partnership really helps with enforcement and renewal discussions.
- Monitor Risks Continuously: Risks evolve, so regular monitoring is essential. Use automated tools to track vendor compliance and identify new threats. The FortifyData platform offers embedded questionnaires and regular external attack surface assessments to meet continuous monitoring of third-party requirements. The questionnaires are embedded and digital; you see the progress (and gaps) as vendors complete the questionnaire. The external assessments provide you visiblity to their external posture which they may appreciate if they are a less mature from a cybersecurity perspective. What’s great, is FortifyData takes the technical assessment findings and automatically validates the technical control response in the questionnaire. We call this auto-validation and flag any discrepancies in a questionnaire which you can communicate with the vendor about, all from within the platform.
Third-Party Risk Management Framework
A structured framework provides a roadmap for managing third-party risks. Many NIST publications have NIST third-party risk management requirements as found in NIST SP 800-53, NIST CSF and others like ISO 27001 help organizations establish best practices. Many industries have compliance requirements that also address oversight and risk management of third-party suppliers that your organization needs to meet, and many third-party risk management tools have those included in their offering. Some of those are:
- CCPA
- DORA
- FedRAMP
- GLBA
- HIPAA
- ISO 27001
- NIS 2
- NIST CSF
- NY DFS
- PCI DSS
Key Elements of a Risk Management Framework:
- Identify: Understand the risks associated with each vendor.
- Protect: Implement measures to safeguard your data and systems.
- Detect: Monitor for potential threats or vulnerabilities.
- Respond: Develop a plan to address incidents when they occur.
- Recover: Ensure business continuity after a disruption.
Role of Third-Party Risk Management Tools
Organizations are relying more-and-more on third-party risk management tools to streamline processes, mature their programs and get out of spreadsheet management. In fact, these tools provide:
Key Features of a Third-Party Risk Management Tool:
- Inventory: Maintain an inventory of third-party vendors, current and past that have been off-boarded.
- Risk Assessments: These tools help identify risks associated with third-party relationships, such as cybersecurity threats and compliance gaps.
- Monitoring: Continuous monitoring ensures that vendors adhere to contractual obligations and regulatory requirements.
- Benchmarking: Evaluate a vendor’s risk against an industry or set of other providers to see how they compare and identify which is least risky.
- Automation/Workflows: Automated risk assessments (technical and questionnaire based) and workflows reduce the time and effort needed to manage compliance processes.
- API: a robust API to take the data and port into any other business processes and systems of record.
Using these tools ensures that your organization stays compliant and minimizes risks efficiently.
Third-Party Risk Management Lifecycle Management
The third-party risk management lifecycle encompasses all stages of vendor engagement, from onboarding to offboarding.
Key Stages include:
Onboarding
During onboarding, assess the vendor’s risk profile, including their cybersecurity posture and compliance history. Ensure contracts include clauses for data protection and compliance requirements.
Ongoing Monitoring
Continuously monitor the vendor’s performance and compliance status. Automating these processes can save time and improve accuracy.
Offboarding
When terminating a vendor relationship, ensure proper data handling and revoke system access to prevent unauthorized activities.
Automating Third-Party Risk Assessments
Automation plays a vital role in lifecycle management by:
- Streamlining the assessment process.
- Providing real-time alerts for non-compliance.
- Reducing manual errors and delays.
Beyond Third-Party Compliance Questionnaires
Compliance questionnaires are a common way to assess vendor risks, but they have limitations. Relying solely on questionnaires can leave gaps in your risk management strategy.
Trust AND Verify
While vendors may claim compliance, it’s essential to verify their claims by:
- Conducting attack surface assessments to identify potential vulnerabilities.
- Using tools to validate questionnaire responses with supporting evidence.
Automating Questionnaires
Automation enhances the efficiency of compliance questionnaires. For example:
- Platforms like FortifyData offer validation assistants that cross-check vendor responses with external data sources.
- This reduces manual workload while ensuring accuracy.
Protect Your Business with FortifyData: Your Trusted Partner in Third-Party Risk Management!
Managing third-party risk management process is important for interconnected businesses. Companies face increasing threats from vendors and partners. Automation is where FortifyData comes into play.
FortifyData offers a reliable Cyber Risk Management and Cyber GRC platform designed to help companies identify, assess, and mitigate risks associated with third-party vendors in an automated fashion. Here are some of the key features that set FortifyData apart:
Attack Surface Assessments: FortifyData continuously monitors the external assets of your vendors, providing real-time insights into their security posture. This proactive approach helps you identify vulnerabilities before they can be exploited.
Auto-Validated Questionnaires: The platform simplifies compliance using technology assessment data to automatically validate vendor responses for applicable technology control questions. This reduces the manual effort required for vendor assessments and ensures accuracy.
360-Degree Risk View: With detailed dashboards and reporting capabilities, FortifyData gives you a comprehensive view of all risks associated with your third-party relationships. This visibility allows you to make informed decisions and prioritize actions based on risk severity.
Cyber Risk Security Rating Scoring: FortifyData uses patented technology to provide a clear scoring system for cyber risks and is the only Security Ratings provider to offer customizable security rating risk models. This helps organizations understand their exposure and appropriately mitigate potential threats.
Schedule a demo to take control of your vendor risk management and set your business up for success!