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Third party risk management - you don't know what you don't know.

Updated: Mar 19

Cyber attacks are never one and the same - criminals constantly leverage new strategies in their efforts to exploit digital infrastructure. There's the first-party kind of attack, which most people are aware of and hopefully prepared for. These typically involve hackers who specifically target an organization's networks, applications, and data.

Then there are third-party attacks, which occur when a malicious actor is able to access sensitive information through affiliated organizations that have poor security protocols in place. They have the ability to compromise even the most privacy-oriented of organizations regardless of their individual security measures.

As dependency on the supply chain and AI technology continues to grow, organizations must have the ability to grasp their exposure to risk from a holistic point of view. This article will explain why and highlight the powerful difference that third-party risk management and attack surface management can make when it comes to strengthening an organization's security posture.

What Is Third-Party Risk Management?

Third-party risk management is the process of identifying, assessing, and controlling risks associated with an organization’s interactions with third parties. This includes evaluating the potential risks posed by vendors or other external organizations that provide services to your company. It also involves establishing procedures for monitoring those relationships and ensuring compliance as needed.

The purpose of third-party risk management is to protect an organization from any operational, financial, legal, or reputational harm it may be exposed to as a result of its interactions with external entities such as legal and accounting firms, technology and IT service provides, equipment suppliers, and other service providers. It's thought that by implementing proper third-party risk management procedures, businesses can proactively identify, assess, and mitigate risks that would cost them or their customers down the line.

Why Is Third-Party Risk Management Necessary?

The concept of third-party risk management lacks meaning to some business people as it is often viewed as an administrative responsibility. However, the reality is that these risks are real and can have significant impacts on a business’s bottom line if not properly managed.

Years of data show the true extent of this exposure. For example, nearly all of the firms (98%) surveyed in SecurityScorecard’s 2023 Research Report on the matter have had at least one third-party partner suffer a breach in the past two years.

There's no doubt about the fact that the problem is prominent. Meanwhile, the implications are numerous and far-reaching.

What Can Go Wrong?

It's easy to read about the risks of third-party vendor relationships and assume it won't happen to you. "That's unlikely," you might be thinking. But the reality is, anything can go wrong - and in many cases, do. In today’s adverse risk landscape, TPRM is a necessity for anyone that wants to run a sustainable business. Companies thinking about cybersecurity should change their mind set, from not if will it happen, but when and from where.

Here are some of the most common “failure” scenarios:

● Breach of service level agreement

● Poor quality of service or goods

● Delays in delivery

● Bad customer experience due to supplier's actions

● Security breaches resulting from inadequate data protection or cyber security measures

While some may seem small, they can snowball and wreak havoc on an organization's viability in more ways than one. Don’t believe us? Just take a look at recent data; as of 2023, the average cost of a data breach in the United States amounted to $9.48 million. And while financial implications virtually always make an impact, there are other types of vulnerabilities as well. Take a look at three of the biggest below.

Reputational: Your company's reputation is on the line with every move it makes and every product it sells. Faults in either respect, whether attributable to an in-house personnel error or, worse, a third-party vendor error, can have far-reaching consequences.

Legal and Regulatory: Outsourcing work doesn’t outsource accountability and responsibility. Companies have an equal duty of care to ensure that any data they provide or receive through third-party services is secure and compliant with applicable laws. The Panama Papers cybersecurity incident is a great example of what can happen when due process isn’t respected.

Customer Loss Risk: Poor supplier performance can negatively impact a company’s ability to deliver timely and secure service to its customers.

How Third-Party Risk Management Works

Third-party risk management is a multifaceted process that involves a lot more than simply 'being diligent' when selecting and establishing relationships with external vendors. Cyber threats can affect any part of the supply chain, whether you have control over it or not. You just don't know what you don't know.

Third-party risk management can be divided into three main components:

1. Risk Identification

Identifying potential risks involves assessing the scope and purpose of your relationship with external vendors. You need to understand how they fit into the grand scheme of your company’s operations, as well as assess their level of control over any sensitive data or systems. Consider administering cyber security questioners, cyber assessment surveys, and Red Team simulations to gauge where things currently stand.

2. Risk Mitigation

Once the risks associated with third-party vendors have been identified, they must be managed or mitigated through a variety of processes and procedures. This could include reviewing existing contracts to ensure that liabilities are appropriately allocated, setting up adequate security controls such as encryption and authentication protocols, or conducting regular vendor assessments and audits. It's also critical to have a plan in place for responding to any data security incidents that may arise from the use of third-party vendors.

3. Ongoing Risk Monitoring

Third-party risk management is an ongoing process, and organizations should ensure that their risk management framework is up to date with the latest industry best practices. It's important to keep track of changes in technology, regulations, and vendor relationships in order to stay ahead of potential risks.

Regularly review vendors' performance with regard to their contractual obligations, data security practices, and other key metrics to ensure that they are meeting your organization’s expectations. If any issues arise, they must be addressed in a timely manner. Don't be afraid to pull the plug if it's necessary!

Examples of things that should be monitored on a regular basis include the vendor's compliance with contractual obligations, such as service level agreements (SLAs), data security protocols, and privacy regulations.

Managing Third-Party Risks

Having the right third-party vendors in place can be the difference between success and failure for any organization, but determining which ones have quality cyber security processes in place will determine whether your organization continues or not. That’s why more and more companies choose to implement third-party cyber security risk management technologies. These solutions have the resources and insight necessary to help companies them identify, assess, and mitigate risks associated with their external vendors. They have the ability to identify risks that might emerge from unexpected area, even if they are not directly linked to their core operations.

By investing in the help of a qualified third-party risk management provider often means getting more than what you thought you were paying for.

Many businesses indicate that while technology has helped them insight into their third-party vendors’ security, it’s also identified important details about their supply chain that they hadn’t even considered before.

At Rescana, we understand that the fight against cyber crime is unfair; companies invest a wealth of effort and resources into protecting themselves from cyber threats, when at the same time, those who develop threats never stop. Our technology doesn’t just bring balance to the relationship - it shifts things in your favor.

“Every CiSO needs the ability to see how his organization looks from the POV of the attacker. With Resacna’s technology you can get this view within a few clicks. By connecting your third party assets and see the organization from an attacks’ POV”

Digital transformation is not a phased process. It requires proportionate growth from every facet of an organization - from people, processes, and technology to data security measures.

It is vital to remember that every stage of the process depends on the success of each prior step. If any one element fails, then it can have a ripple effect across all other elements, leading to serious issues down the line.

Working with an external risk management expert can make the process smoother and easier to manage, while also ensuring that you have a knowledgeable partner who understands exactly what it takes to successfully navigate the various risks associated with digital transformation.

Rescana can be that partner, providing comprehensive risk management solutions tailored to your organization’s specific needs. From vulnerability assessments and attack surface management to third-party risk monitoring, Rescana is here to help you stay ahead of the curve.