What Is Third Party Security Risk Management?

Third-party security risk management is important because failure to assess third-party risks exposes an organization to supply chain attacks, data breaches, and reputational damage.

Third-Party Security Risk Management (TPSRM) is the process of analyzing and minimizing risks associated with outsourcing to third-party vendors or service providers. There are many types of risks that could include financial, environmental, reputational, and security risks.

These risks exist because vendors have access to intellectual property, sensitive data, personally identifiable information (PII), and protected health information (PHI). Third-party breaches can result in severe financial losses, downtime, and loss of sensitive information, loss of reputation, breach of compliance, fines, and other legal liabilities.

A well-orchestrated Third Party Security Risk Management program can not only mitigate third-party cyber risks but also boost the ability to onboard, manage, and maintain third-party suppliers.

Is third-party security risk management really important?

Third-party risk management is important because directly or indirectly it impacts an organization’s cyber security. Third parties increase the complexity of an organization’s security for several reasons. There are many potential risks that organizations face when working with third parties.

Some of them are listed below.

  1. Loss of intellectual property
  2. Loss of data or information
  3. Operational risk
  4. Financial risk
  5. Compliance risk
  6. Reputational risk
  7. Legal, regulatory risk

Best practices for Third-party Security Risk Management

  1. Assess
  2. Prioritized list
  3. Vendor Importance
  4. Data sensitivity
  5. Acceptable risk
  6. Governance
  7. Compliance
  8. Physical Location
  • Monitor
  • Threat landscape and Trends
  • Patching and Detection
  • Improvement Reporting
  • Ongoing process
  • Remediate
  • Breach planning
  • Regulatory response
  • Contractual enforcement
  • Peer Benchmarking

Key considerations in choosing the right tool for Third-party Risk Assessment

  • Ease of use

In considering the ease of use, user experience and interface need to be taken into account.

  • Data quality and availability

False positives may occur if the data is inaccurate or incomplete.

  • Time frame

It is also important to consider the amount of time it takes to complete an assessment on a target.

  • Costs

The cost of a third-party risk assessment tool depends on what kind of services the organization requires.

Conclusion

Develop a security scorecard (risk rating) to assess the threat to the organization. Use the guidelines below to create a risk rating.

High Risk: Deploy corrective actions immediately

Medium Risk: Deploy corrective actions within a stipulated time frame

Low risk: Accept the risk or create the mitigation plan in a longer period

Every vendor consists of a different level of risk. A vendor risk questionnaire plays a prominent role in assessing the security posture. In some scenarios, organizations may need to comply with standards like SOC2 Type 2, ISO 27001, NIST CSF, PCI-DSS, etc. It is also important to have such a framework and compliance-related questionnaire.