In real terms, third-party risk management is about identifying the vulnerabilities of your outside vendors and determining approaches to overcome these data security concerns. But the question is, why is third-party risk management necessary, and how can it be accomplished?
So, let us find the answer in this article.
It is becoming increasingly common to hear that companies are disclosing a breach of their confidential data. Unfortunately, these data security lapses have significant consequences, such as regulatory scrutiny, lawsuits, fines, and consumer dissatisfaction.
Why Does Data Breach Take Place?
Surprisingly, one of the reasons it happens is dealing with vendors of one’s organization. In the era of globalization, outside vendors – third parties – are an essential component of the IT ecosystem for the majority of large companies. Quite evidently, it is impossible to perform pivotal functions in the absence of them.
But the question is, how does one ascertain whether they will handle the data with due consideration? Assuredly, no one wants to work with a careless partner, particularly with the data. The reputation of the vendor has a direct impact on one’s organization. In the IT space, one may ask the question: Have the vendors employed the appropriate measures to ensure your data is not at risk?
Third Parties: Often the Weak Link
The vendor can either have access to the information of one’s company or its products can be a part of company’s infrastructure. Thus, the risk at the vendor’s end has a direct impact on the company’s reputation. A careless attitude towards managing this risk can lead to the loss of confidential information. Thus, it can lead to serious business consequences. Notably, the lag time between a breach and a business learning by their vendor is essential. The more time it takes, the more difficult it is to react effectively.
The type of attack, where the adversary compromises the vendor in order to get a foothold in its target’s infrastructure, is called a supply chain attack. One of the most notable and most serious incidents of this type happened just recently. SolarWinds, a company producing IT infrastructure monitoring tools suffered a breach where the attackers were able to sneak a backdoor in its monitoring tool Orion.
Through this software, the attackers were able to compromise yet unknown number of SolarWinds’ customers. Since this company gained dominance on the market, it has many prominent clients including most of the Fortune 500 companies and major governmental organizations. One of the first victims of this attack was the cyber security company FireEye, which had its red teaming tools stolen.
Overcome Security Concerns with an Effective Policy in Place
For the sake of data protection, companies should map out their data flow and regulate how this intersects with their vendors. The vendors who have lower security standards can undermine even the best internal data protection policies.
The first step toward protecting the data’s overall security is to prioritize third-party risk management to the top. Companies should develop an adequate strategy to achieve this objective, including updating cybersecurity policies to reflect vendors’ risks.
Secondly, a company should monitor where the most sensitive information flows. In the case of business dealing with sensitive personal information, for example. It should track every vendor having access to this information on their systems at a given point in time.
After identifying this data, a company should look to the vendors’ security and risk controls they have in place. Let’s say a company’s payment processor has defects in one of the vendor’s infrastructures. In such a case, the relationship may justify an investigation.
The companies should also select their vendors carefully and verify before signing a contract that this vendor has sufficient cybersecurity practices in place. In case of software companies, make sure that they implemented SDLC.
Implement the zero-trust principles and role-based access controls to applications and servers, not just for users. Furthermore, analyze what could happen if an application got compromised via legitimate update during the risk assessment. Then, put controls in place to minimize the impact of such an attack.