We hear quite a bit about third parties and risk management in the IT and cybersecurity industry today. This topic (also referred to as TPRM or VRM) is usually included in key panels and conferences as one of the primary discussions relating to business and enterprise security and is a very important point for the safety of the entire connected industry.
October is well-known in the tech industry as cybersecurity awareness month, and as such topics like third parties and third-party risk management are high on the agenda as we continue into the new decade.
To put this into perspective, the focus on third party risk management is mentioned four times in May 2021 White House ‘Executive Order on Improving The Nation’s Cybersecurity’;
- “(vi) maintaining accurate and up-to-date data, provenance (i.e., origin) of software code or components, and controls on internal and third-party software components”
- “The Director of CISA may recommend use of another agency or a third-party incident response team as appropriate”
- “ Developers often use available open source and third-party software components to create a product”
“(a) Information from network and system logs on Federal Information Systems (for both on-premises systems and connections hosted by third parties, such as CSPs) is invaluable for both investigation and remediation purposes”
Not only is it true that third-party risk management is key for small businesses, although they are at greater risk of consequences, it also applies to organizations of any size (including government organizations.) The Kaseya cyber incident is ample evidence of how important third party risk management is.
This is why it is important to understand what TPRM and risk management are, have a look at helpful statistics, and finally understand how to practice business in the best way possible so that your organization does not fall victim to third-party risks.
What is Risk Management?
Risk management in the realm of information technology refers to the systems, tools, solutions, and processes that allow the analysis and understanding of online risk events and threats that may occur in this realm.
The proactive management of risks, like threat detection and security process optimization, should ideally minimize threats and uncertainty as well as maximize business security and therefore efficiency.
Human risk management is one of the most prevalent issues that require attention within any organization today. Competent workers are necessary more than ever, and you would need to search for various strategies to reduce the chance of something going wrong within your workforce.
The commonly applied steps in a risk management process are as follows:
- Identifying the risk
- Analysis of the risk
- Classifying the risk
- Mitigating the risk
- Monitoring the risk
A risk can be:
- Human error like staff dishonesty
- Hardware and software problems
- Malware
- Third-party risks
- Viruses
- External threats like cyberattacks and hackers
- Phishing and other scams
- Fraud
- Credential theft
- Other security breaches
What is Third Party Risk Management?
TPRM or VRM is a form of management that concentrates on third-party risks, as per the risk management process steps above. Third parties by definition are services, software, or vendors that organizations may work with who offer products that the industry or consumer requires.
In terms of IT, third parties may involve anything from software that operates as an extension, to plugins, to software programs that can be downloaded from a third party for use on an operating system.
It is software that is not available directly from major vendors -hence these are produced independently by ‘third parties.
By legal definition, third party software is that which is purchased or rented by the first party contractor and is not explicitly owned by the first party contractor or its subsidiaries.
TRPM in IT is a strategy or process observed by organizations that enforces standards and best practices where the use of third-party software or products is concerned.
Third Party Risks Statistics
Third parties can be risky because they can be disconnected from some security processes and strict verification processes.
Also, third-party apps and software are readily available for download, in most cases, and they can pose a serious risk to supply chains. To clarify the perspective even more on why third party scenarios can be risky, we can take a look at some third party risk statistics;
- Cyberattacks involving third parties are on the rise
- Over 60% of cybersecurity experts believe that third-party breaches are common
- With a rising number of software vendors, the industry has become more susceptible
- SMBs are more likely to use third-party solutions
- Risk management and compliance policies do not cover third parties sufficiently
Third-party software and solutions that are not secured are vulnerable to cyberattacks, viruses, trojans, botnets, ransomware attacks, and more.
Sometimes, shady third parties are the source of these issues themselves. Most evident is the fact that the Google Play Store fosters so much unverified third-party software.
The same goes for the large amount of software that is easily downloadable online via direct download that does not have any security policies or evidence of security audits.
However, some organizations are very sensitive about third-party risks e.g. Apple’s App Store is very strict about verification and filtering out bad software and apps.
How to Protect Your Organization From Third Party Risks
Protection from third-party risks is where a good TRPM solution comes in, that will reduce or eliminate the possibility of financial damage and brand reputation damage due to third-party cybersecurity issues. An effective TRPM strategy would need to comprise;
- Complete transparency when it comes to third party relationships
- Risk assessment should be built into the strategy from the ground up
- Monitoring of the third-party relationships and formal contracts
- Utilizing a resiliency plan
- Keeping an audit record of all processes and situations
- Ensuring that the third party conforms to policies and data protection regulations
- Correct offloading of the third party when the relationship is terminated
A solid TRPM solution will improve all aspects of an organization’s business flow and reputation; trust, security posture, customer experience, profitability, and efficiency.
The possibility of supply chain attacks and cyberthreats will be greatly reduced, if not eliminated.
Some examples of modern TRPM solutions that have high scores from Gartner and other agencies include features such as; automation of risk assessments, automated due diligence processes, customizability according to organizational complexity, risk management scaling, intelligence feeds, and risk impact forecasts.
Some of the top TRPM (VRM) software out there includes names like; ARAVO, Black Kite, BitSight, Coupa TRM, and Galvanize among several others.
