For numerous companies, the effective management of third party risk starts to become an easy proposition since the company deals with numerous third-party relationships. While the firms start to mature, the entire endeavor becomes cumbersome.
You can start by using spreadsheets to identify and undertake the right third party risk management services with a couple of parties in your supply chain. However, when your company starts to grow, the needs turn challenging, and the spreadsheets become chaotic and disorganized.
In our post today, we will discuss effective strategies for managing these third-party risks for your business.
Understanding Third/Fourth Party Vendor Risks
A company encounters third party vendor and fourth party risk through external third or fourth party parties present in the supply chain ecosystem. These third or fourth party parties might include vendors, suppliers, partners, contractors, or service providers with access to internal company systems or customer data, networks, processes, and other important details.
Third or fourth parties have become major issues for businesses worldwide. They expose a firm to financial and regulatory issues, affect its reputation, and draw attention to malicious threats from around the globe, as well as acting as a gateway for intrusions.
Strategies for Third Party Risk Management
The following are a few of the robust strategies to help you manage your third-party risks:
Develop a Third Party Risk Management Program
The vital step in effective third party risk management is creating a programmatic approach to the work. This includes a governance structure establishing duplicate standards and processes, which are often applied to integrations with numerous third parties. An effective Third-Party Risk Management Program should match a company’s regulatory and data protection requirements along with its risk tolerance.
The most beneficial strategy is to use a rubric for the knowledge and the categorization of the third parties relying on the threat imposed by them. For instance, a rubric is often used for grading third parties as high, medium, and low. A rubric allows the companies to identify the number of assessments and mitigating controls as required for every third party, with the ones that get labeled as the high-rating ones with better scrutiny and mitigations.
Experts mention that the entire framework of third-party risk management and the software can assist the technological leaders in creating programmatic approaches to this approach. However, it is effective as the moves appear, with the studies revealing that several companies have yet to implement the necessary changes.
Identify the Risk That Matters
The most notable risks that are surfacing are data privacy and cyber security. These two have the greatest impact on the company. The costs related to the outcomes and liabilities linked with the breaches increase, with ransomware attacks turning out to be extremely frequent. Third-party associations are often bare at the inlet for the top security risks.
The primary challenge here is that the company’s security leaders are never responsible for all risk domains. They have to rely on and start engaging with the security leadership of the stakeholders. The risk will even impact the entire business team. It even indicates that the business risk owners should be identified across every risk domain with responsibility that does not fall just onto the security teams.
As noted by the Gartner survey of 2023, companies would often enhance their potential by 18% through close collaboration with the rest of the third or fourth-party risk functions. It is in this manner they are redirecting the responsibility for the concerns related to the non-cybersecurity or third-party.
Create an Up-To-Date Inventory of Third Parties
The CISOs can potentially manage third-party security threats unless they are garnering the entire picture of the third parties across the company.
It is the main complex task since the business units are deploying the growing technology. Today, each business functionality is allowed through IT, and in the majority of firms, each of the functions becomes a security shield for their solutions. It has majorly replacement the core IT functionalities dedicated to the inventorying of different technical assets.
As an outcome, the CISOs should implement strategies to identify and maintain an accurate, extensive, and current inventory of third or fourth-party security risks. Effective software solutions can assist in this situation; however, there is a growing need for more steps that can help to identify the issues with third parties. Several of these go beyond the tools and work across teams, risk awareness, and security policies at the end of the vendors.
Determine Risk Controls
Proper risk management should mainly aim towards better controls that can minimize risks across supply chain ecosystems. Numerous third-party CISOs have to manage varied forms of controls along with their distinctive risks.
For instance, SaaS or software as a service vendor accesses the corporate data that requires varied controls than an onsite service provider or the hardware vendor. Companies should implement these controls with the others staying as the responsibility of the third parties.
Ensure The Executive Team Knows the Third Party Risks
The third-party risks will include more than the cybersecurity threats as they would cripple the business completely. They would impact the different aspects of the company, including their operational abilities.
However, numerous companies need to manage the risks more extensively. A few companies have a dedicated executive for this kind of job, like a Chief Risk Officer. It is a real strategy that ensures that third-party risks are handled seriously like the other cybersecurity risks.
Conclusion
Companies should build a robust risk intelligence team that constantly monitors the third-party vendors as they should ensure better leadership support while investing in proper analysis and regulatory compliance. They should continue conducting regular audits to evaluate the vendor’s compliance with health, security, and governance standards. There is a growing need for investing wisely across IT security and infrastructure to strengthen defenses against third and fourth party threats.
