Top 3 Third Party Risk Management Challenges – and How To Conquer Them

Posted on May 11, 2018

Since the massive Target data security breach in December 2013, third party cyber security stopped being an afterthought and started becoming one of the top security priorities for CISOs and Risk Departments. As a response, Third Party Risk Management (TPRM) underwent a transformation in early 2014, and continues to reverberate today.

With attackers finding new ways to break into third parties in hopes of infecting a larger organization, the third party ecosystem is more susceptible than ever before. Meanwhile third party usage is growing fast in large organizations and enterprises. Many critical business services such as HR functions, data storage, and modes of communication are the responsibility of cloud-based third parties. 

Without a modern TPRM program, many of these third parties are left behind in security risk management, putting organizations in a vulnerable position.

Over 60% of data breaches can be linked either directly or indirectly to a third party

Over 60% of data breaches can be linked either directly or indirectly to a third party (per Soha Systems, 2016) but TPRM programs don’t often take a risk-first perspective when it comes to risk management. Security and Vendor Risk departments are often solely focused on compliance. That’s important, but doesn’t get at the heart of the risk posed by your third parties. To shift the approach of your TPRM program to measure true risk, you’ll need to make some adjustments in how you manage third parties.

Here are the three top TPRM challenges and the actions you and your organization can take in order to bolster your TPRM program. 


1. Automate Your TPRM Process to Reduce Unmanaged Risk

With the rise in SaaS, businesses are now using cloud-based third parties more than ever. Gartner predicted that SaaS sales will nearly double by 2019, and that SaaS applications will make up 20% of the growth rate in all public cloud services, a $204B market. Last year, Forrester had already predicted that enterprise spend on software would reach $620B by the end of 2015.

As businesses engage in IT and infrastructure digital transformation, the need to manage vendors is more pronounced. Over 60% of respondents from a Ponemon Institute’s survey on Third Party Risk Management believe that the Internet of Things increases third party risk significantly. 68% believe the same is true for cloud migration.

However, as more third parties are brought in, they’re often not managed to match the level of cyber security risk they carry. Worse, they may not be managed at all due to a lack of resources. This creates unmanaged security risk. If these third parties have access to your network, your employees’ PII, or your customers’ sensitive data, shouldn’t they be subject to rigorous risk management assessments?

Unfortunately, as the number of third parties swell to the hundreds, it’s often not feasible for every vendor to be assessed in the same critical fashion. That’s why having an automated risk assessment tool for assessing vendors is a way to ensure you’re minimizing unmanaged risk from both new and existing vendors.

Automating your TPRM process is one of the major steps towards having a mature TPRM department capable. Its benefits include:

  • Improved third party management flexibility
  • Standardized processes and thirdparty management
  • Metrics and reporting consistency
  • Improved data-driven decision making
  • Further structuring the TPRM organization
  • Increased third party responsibility
  • Increased overall risk assessment and mitigation

By automating the TPRM process, you’re creating a standardized structure that can be applied to all third parties, whether existing or onboarded.

You can automate your TPRM process by finding new technologies or tools that will automate the assessment and information gathering process for your third party vendors. This helps to ensure that you’re optimizing your resources and spending company time on what is most impactful.

2. Augment and Validate Self-Reported Questionnaires Through Independent Risk-Based Assessments

Third parties are often assessed through questionnaires, onsite assessments, or via penetration tests. Each has its own advantages and disadvantages. Onsite risk assessments and penetration tests are resource-intensive, requiring time, money, and staff in order to carry out the assessments. Because of the costs, these kinds of assessments cannot be used for all third parties, and should be reserved for the most risk-critical third parties.

That leaves questionnaires to fill the void for most of the other third parties. However, questionnaires are self-reported, which makes using a ‘trust, but verify’ approach to risk management difficult to accomplish.

In a 2016 Deloitte Study on Third Party Risk Management, 93.5% of respondents expressed moderate to low levels of confidence in their risk management and monitoring mechanisms. With numbers like that, it’s easy to see why TPRM programs need increased attention. Without a way to independently verify the security posture of your third parties, you can only rely on the word of your third parties who are, for obvious reasons, incentivized to report positively.

Organizations should find independent third parties that can provide risk-based assessments of their third parties to validate that the findings from questionnaires are a realistic portrait of  the state of third party security.

There are a number of cyber security solutions that provide risk-first third party assessments. To find the right solution, you should research whether or not those solutions:

  • are accurately assessing third parties
  • can facilitate communication between you and third parties
  • are focusing on key cyber security areas that are indicative of a potential breach

3. Utilize Continuous Monitoring to Assess Third Parties Beyond Point-In-Time Assessments

The assessment methods mentioned in the previous section all have one glaring flaw in common – they assess third parties at a single point in time. Many times, the information gathered by security risk assessments is outdated by the time it falls into your hands. The speed at which hackers are developing new attacks and exploiting vulnerabilities is too fast for point-in-time assessments or annual reviews to provide any  insight into the real security posture of a vendor.

A PWC Third Party Risk Management report on the finance industry noted that 58% of companies using ad hoc monitoring experienced a third party service disruption or data breach, compared to only 37% of those that regularly monitor their providers and partners. Without having a way to know the security posture of your third parties on-demand, you’re managing risk with a blindfold on for most of the year. By only having point-in-time information that is quickly outdated, your ability to react to new vulnerabilities, or worse, a potential third party cyber security incident, is negligible. 

Implementing a continuous monitoring process into your third party risk management is a very effective way to decrease your reaction time and increase visibility into the security posture of your critical third parties

Through continuous monitoring, you’re bolstering the security of your third party by keeping them consistently accountable, which in turn, minimizes your overall risk to a potential security incident. 

How to Get Started Revamping Your VRM

We covered how to implement continuous monitoring in your TPRM program in part 2 of our How to Revamp Your VRM Program article series. Start by establishing a central TPRM office if you don’t already have one, prioritize and identify your most risk-critical and business-critical vendors, and then define your third parties’ security controls and processes that you’ll monitor on an ongoing basis. If you have the resources, look for automated risk assessment tools and solutions that offer continuous monitoring for your third parties.

Conclusion

Updating your TPRM program doesn’t have to be a complete overhaul of your department. Instead, you should use a risk-first perspective to define the aspects that are the most criticalto update. The three we highlighted here will yield the most dramatic changes in a TPRM program, reducing your unmanaged risk, and reducing your reaction time should a security incident occur.

By automating aspects of your TPRM program, using independent third party assessments, and adopting continuous monitoring, you’re not far from having a mature TPRM program that can easily assess any new third party as it comes, keeping your organization safe.

[Request a demo to see how SecurityScorecard's security ratings and continuous risk monitoring platform provides on-demand security intelligence for all your third-party vendors, and facilities communication between you and your third-parties to resolve issues as they appear throughout the business relationship.]

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