Without proper insight into cybersecurity, executives may make business decisions that may have negative consequences for employees, customers, stockholders, and other stakeholders. One crucial decision-making area that executives must engage in is the company’s cybersecurity efforts. Their input is required in making critical decisions on cybersecurity protection, including budgets, staffing requirements, security toolsets, and other areas.
Where cybersecurity is concerned, the decision-making process often requires weighing in potential risk versus investment. Without an effective assessment of potential risk, executives are inclined to make poor cybersecurity decisions. Cybersecurity concerns extend beyond the organization to third-party businesses that provide business functions for or on behalf of the company. That is why ensuring the strong cybersecurity posture of business partners is important – this can be done through third-party risk management.
Third-party compliance risks associated with partners and vendors
There is a significant risk associated with engaging with third-party partners and vendors. In fact, a recent survey from eSentire revealed that nearly half of all firms experienced a significant data breach at the hands of a third-party vendor in 2019. This alarming reality coupled with the fact that just 60 percent of organizations report having some form of formalized third-party policies, highlights the need for businesses to get serious about their cybersecurity and vendor compliance risk management strategies.
Policy regulators are increasingly enforcing the implementation of effective risk management programs. Without one, enterprise companies are at risk of receiving significant fines and penalties. Considering the evolving and expanding nature of the threat landscape, organizations must implement continuous monitoring of partner security postures to ensure compliance with constantly shifting regulations.
Some third-party risks to consider include:
- Regulatory and legal violations – are your third-party vendors complying with regulations?
- Systems and data breaches – how are your third-party vendors managing security risks?
- Reputation damage – do your third-party vendors have business policies that align with your own?
- Financial issues – do your third-party partners have a sound financial situation?
- Internal and external events – does your third-party vendor have a sound business disaster recovery plan?
Benefits of implementing a third-party compliance risk management program
A major challenge for businesses is to source relevant information about the cybersecurity posture of their vendors. In the absence of insightful data, it’s impossible to make informed decisions on who to trust with sensitive corporate data.
Businesses with third-party cybersecurity risk concerns need to restate their engagement to help key vendors minimize the risk of embarrassing and potentially expensive breaches. If third-party partners fail to protect critical business data, engage in unethical practices, or expose the business to cyber risks, your company will be exposed to those same risks and may be held responsible for third party compliance-related fines and other consequences.
An important requirement is to set up effective vendor risk management programs and continuously monitor the compliance practices of your business partners. With programs like these in place, your organization will be able to confidently demonstrate compliance for both the enterprise and enterprise partners, improve visibility into your partner ecosystem, and improve the overall cyberhealth of your business.
SecurityScorecard helps mitigate third-party cybersecurity and compliance risk
SecurityScorecard provides executives with a wealth of highly relevant data on the cybersecurity posture of a large ecosystem of third-party companies and vendors. This publicly and ethically sourced security information helps businesses make data-driven decisions about the cyberhealth of third parties. Used either as an overall cybersecurity planning tool or as a collaborative partner compliance risk management tool, SecurityScorecard helps support smart business decisions on how to decrease cybersecurity risk within one’s own company or across a universe of third-party partners and vendors.