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#cybersecurity | hacker | Best practices for reducing third-party risk


The simple truth is that the security measures
organizations put in place are not enough to protect them from threats. Third
parties can present the greatest area of risk exposure — both for data security
and for regulatory compliance. It is much easier for hackers to penetrate
smaller third-party vendors to get to larger business partners with more robust
controls.

Knowing the Risks

As organizations increasingly outsource
non-core business processes, customer and proprietary data — along with
access to critical systems — the security of these items moves beyond their
direct control. Once you are no longer directly responsible for controlling all
access to systems and those who touch your data, you lose visibility into all
of the places it can go. This has a spider web effect; companies who outsource
often discover that the vendor they’re outsourcing to plans to outsource as
well.

Not knowing where your data is doesn’t just
pose security problems, it has potential regulatory impact. Regulatory
pressure around data protection and data privacy is increasing, and the
ramifications of non-compliance broaden significantly when you think about all
of the third parties that are essential to your daily operations.

The advantages of the cloud — having data go
wherever it can effectively be managed and used at the time — also creates
problems. There may be substantive regulatory impacts when data moves
cross-border. Many organizations have to know if their data leaves the U.S.,
and if their European Union (EU) data leaves the EU. You can’t always assure
that with a cloud provider. Vendor termination also poses a problem. When you
sever a vendor relationship, it is important to ensure that your data is either
returned to you or destroyed. Including those requirements in your contract is
not enough; you need to validate that the required action has been completed.
Because of how cloud data is stored, that’s not always possible.

An effective third-party risk management
program is essential not only to compliance efforts, but to your overall
security posture.

Best Practices for Success

There are 10 best practices for successfully
managing third-party risk:

1. Invest Time in Foundational Elements
Too often, when companies set out to assess vendors, they rush into developing
a questionnaire and initiate assessments without having created the framework
for doing so. It is important that the foundational elements of a successful
program — policies, procedures, a comprehensive vendor inventory, and the
appropriate way of contracting — are well-established. In order to do this, the
right stakeholders need to be involved. Vendors are the partners of the
business unit and need to be treated accordingly by the group that conducts
risk assessments. Vendors have to be comfortable with the process, understand
what has to be done, and help to determine what happens when controls aren’t
found to be in place.

2. Look at It as a Lifecycle
Organizations sometimes develop inaccurate expectations about the scope of
third-party risk initiatives. Develop your program to make sure that you
address the entire lifecycle of your vendor relationships — from selection, to
onboarding, to management to termination — and carefully evaluate the cost and
effort involved in each step.

3. Engage in Vendor Prioritization
It is critical to have a current vendor list that includes the services they
provide, the data they access, and the criticality of their services (from an
availability standpoint). Which vendors you need to assess, and what you need
to ask them depends on who they are, and what they do for you. Vendor risk
framing starts by assigning a risk rating to the type of service being
provided. Start with the risk that is inherent with outsourcing that function.
Consider that risk and the security and data protection requirements that need
to be placed on any company that’s going to provide that service. That is the
inherent risk calculation that will help to place them in the right risk
categories.

4. Get the Contracting Right
A vendor contract is the playbook that details what you can do throughout the
relationship. Alignment and synergy need to exist between the contracting
process and the people who understand and can define what the risk requirements
need to be for that type of service. Whomever is responsible for the contract
(Legal, Procurement etc.) should be aware of the provisions required to address
the risks associated with a vendor. All contracts are not equal; vendors need
to be held to different accountability standards based on what they are
providing.

5. Assess Your Maturity
Evaluating the maturity of your program is essential. One area may be more
evolved than another. For example, if you’re in a regulated industry such as
financial services, the part of your program that is subject to regulatory
requirements needs to be more mature than it would be if you were in an
unregulated industry. Assess the maturity of the different pieces of your
program and decide which of them need attention.

6. Look at Reporting from the Top Down
Don’t start the reporting process by trying to figure out what data you need to
gather. Start by considering all of the reports you have to deliver and who you
need to deliver them to. Then you can easily work backward to determine what
data you need. There are two central areas to report on — risk and operational
effectiveness.

  • What risk is the company subjected to by outsourcing a
    type of service, by vendor, or by service type?
  • How effective is the program? Operational assumptions
    and program performance metrics can help demonstrate the effectiveness of
    your program and why you may need more resources to accomplish your goals.

7. Leverage Automation
Assessing your third parties can be a time-consuming, manual effort. In fact,
40 to 50 percent of the time spent involves the process of sending out
questionnaires, getting answers back, and validating vendor responses and
documentation. Automation can free risk assessors from tasks that
don’t involve their skill sets and speed the process up. With an automated
solution, an individual assessor can easily conduct three to six times as many
assessments in a year as they can manually.

8. Treat Them Like a Partner
Many vendors get assessed often, have good security in place, and don’t want to
go through the process hundreds of times a year. When the vendor you need to
assess is providing something that is critical to delivering your own products
and services, be sure to treat them like a partner, rather than simply
dictating what they’re going to need to do for you. Make sure they understand
from the beginning what you’re doing, why you need to do it, and what
information you need.

A lot of vendors put together a strong package
of information to share with partners that you can use. Those that don’t have
information prepared and object to being assessed may be doing so because they
can’t possibly meet requirements; therefore, they should not have been
on-boarded in the first place. And when it comes to post-assessment
remediation, try to put yourself in the place of the vendor. If they don’t have
the necessary controls in place, work with your stakeholder business unit to
get them implemented, but be fair and reasonable in the expectations you place
on the vendor.

9. Assess Consistently
Sometimes the desire to move quickly — so that a vendor’s product or service
can be delivered and start generating revenue — leads companies to initially
conduct one level of assessment and then shift to a more extensive version
afterward. The problem with this is that may lead you to take on levels of risk
you’re not aware of. Without a comprehensive assessment, you may later discover
that they don’t have certain controls in place and cannot meet your
requirements.

10. Monitor External Factors
Vendor assessments provide static, point-in-time perspectives; it is important
to also monitor outside the scope of the contract for additional factors that
are not part of a normal assessment. Consider the following questions:
Does the vendor face legal action that could impair their ability to deliver
services?

  • What is their financial condition?
  • Are they involved in breach incidents at locations
    other than the locations where my work is performed?
  • Are they subject to regulatory action (OFAC, FTC, or others)?
  • Are their executives subject to SEC investigation?

Don’t Leave Your Reputation in Someone Else’s
Hands

Outsourcing has clear benefits — from lower
costs to increased efficiency and productivity in non-core business processes.
But the value third parties bring can be eroded by associated risks.
Third-party weaknesses are your weaknesses. By developing and maintaining an
effective third-party risk management program, you can help ensure that your
vendors have strong controls in place and protect your organization from
fiscal, operational, regulatory and reputational risk.



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