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Posted on Feb 20, 2018

Selecting The Right Third-Party Risk Management Framework

Third-party security and risk management are beginning to play an integral part of digital business today as the ecosystems and risks associated with them are becoming more and more complex. Given that more than a quarter of business and technology executives do not know how many cyber attacks they have suffered in total and a third do not know how they occurred, establishing a risk assessment framework is a critical first step an organization can take in order to decrease risk and increase security. The risk assessment should not only be a part of an organization’s internal process, but should also be inclusive of supply chain and third parties.

Third parties can consist of an organization’s vendors, suppliers, business channels, marketing partners,  and so on. The choice of a third-party risk management framework should be based on the companies structure and risk profile, because no two companies are the same. The most popular frameworks are the NIST and the ISO frameworks, both of which can be used in tandem and encourage organizations to assess risks and implement controls based on its needs.

There are several best practices organization’s can refer to to help them select a risk management framework:

  • Take inventory of all third parties the organization has a relationship with.
  • Catalog risks that third parties can expose the organization to.
  • Segment third parties by risk and focus on all activities defined as critical activities.
  • Develop rule-based diligence testing to stay focused on third parties with the most critical risk.
  • Establish a decision-making group to own the governance and framework.
  • Review critical activities  to set a benchmark for the third-party risk management framework.
  • Define three lines of defense including business owners, third party oversight, and an internal audit team.

The benefits of establishing a solid third-party risk management framework protects an organization's clients, employees, and the strength of their operations. Understanding and managing risks can reduce costs allowing an organization to operate at a greater efficiency and with quality third-party relationships. It provides standardization across the organization, streamlining workflows and focusing on third parties posing greater risks, eventually leading to a reduction or elimination of fines and other costs..

At an administrative level, managing third party relationships in accordance with a framework can become a cumbersome task, which is why many organizations have opted for the route of selecting intelligent tools that can leverage existing data on cybersecurity risk in order to streamline their third-party risk management processes.

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