Organizations need many things to operate efficiently. But the two most valuable resources are hard to come by. They are availability and money. This is why many businesses are choosing to outsource both their core and non-core systems to third-party service providers. Not only does this choice help to reduce costs, but it also boosts speed-to-market. However, without vigilant management and the correct due diligence, these relationships can be risky.
Many enterprises have reported some sort of harm resulting from the action, or lack thereof, from a third-party vendor, including breached systems, financial loss, and increased regulatory exposure.
These are frightening threats. Luckily, thoroughly understanding the third-party risk management cycle can help your enterprise efficiently map out each stage to ensure you’re taking a best-practice, holistic approach to manage your third-party ecosystem.
While the third-party risk management cycle can be extremely detailed and vary by industry, there are four general steps that enterprises should have in place, including identification and onboarding, ongoing third-party monitoring, communications, and attestations and assessment.
1. Third-party service provider identification and onboarding
This step is targeted at automating an objective, standardized approach for seeking out third-party service providers to work with and onboarding them through the use of data and due diligence.
Third-party identification is the process of finding new third-party service providers or existing ones to partner with for new business relationship intents. The goal is to thoroughly detail the relationship’s purpose and include the beginning definition of risk, compliance, and performance needs and concerns so that the best relationship can be properly identified.
Once your organization has chosen the best third-party service provider, the next step in the cycle is to screen them to ensure that the third-party can meet the expectations of the relationship and does not introduce unnecessary compliance exposure or risks. The screening process will also go through due diligence steps to see if the third-party service vendor is a good fit for the enterprise.
Once the third-party service provider successfully passes the initial screening, the next step is to negotiate and contract processes in order to establish a business relationship.
When these are finished, your organization will then move into the onboarding phase. This includes setting up the third-party service provider in your system with master data records, contact and payment information, cybersecurity insurance, and licensing documentation. Further onboarding steps include fully communicating the company’s code of conduct, successfully completing associated training requirements, and conducting inspections and audits.
2. Continuous monitoring
Organizations must be conducting monitoring that is separate from individual relationships on a routine basis. The purpose of this is to monitor for external and regulatory threats as well as opportunities that affect the third-party management program. A large number of factors, including economic, environmental, geopolitical, internal business, and regulations can impact the success of the business relationship. This includes such potentials as industry developments, commodity pricing or availability, geopolitical threats, natural disasters, and other disruptions.
3. Communication
This is the phase in the lifecycle where your firm manages all interactions and communications with the third-party vendor. This should be done annually or when particular threat conditions are triggered. This step will include:
Code of conduct communication and reminders:
This will keep the third-party vendor abreast of the code of conduct and related policies they should be following.
Training:
This includes training on company policies and procedures.
Attestation:
Routine attestation by third-party service providers includes their conformance to policies and contractual necessities.
Self-assessments:
Employees of the third-party vendor should also be asked to evaluate themselves.
Reporting:
Routine reporting on compliance, risk, and performance should be conducted on the relationship.
4. Assessments
This stage includes thoroughly and continuously monitoring the third-party vendor relationship over their lifecycle within the enterprise. The monitoring should include:
- Reporting issues and resolutions
- Performance monitoring
- Due diligence and compliance monitoring
- Audits and inspects
How can carriers protect themselves from third-party risks?
In addition to understanding the third-party risk management lifecycle, organizations can partner with SecurityScorecard to constantly monitor external and internal risks before they become an issue. You can vigilantly manage your entire ecosystem and monitor third-party threats by utilizing our platform to capture, report, and remediate real-time third-party vendor security risks.
Forming a solid business relationship with a third-party service provider is vital for a company’s ongoing success. Continuously monitoring risks that come with partnering with a third-party vendor is equally, if not more, critical.
SecurityScorecard can offer your organization cybersecurity stewardship when you choose to hire a third-party vendor.
