Third-party risk management best practices and why they matter
With organizations increasingly relying on third-party vendors, upping the third-party risk management (TPRM) game has become imperative to prevent the fallout of third-party compromises.
SecurityScorecard recently found that 98% of organizations are connected with at least one third-party vendor that has suffered a data breach in the last two years.
When letting a third-party vendor access an organization’s network, potential vulnerabilities become their shared problem and a compromise can have serious consequences for both. It can result in:
- Customer service disruption
- Violation of regulations or laws
- Reputational damage
- Supply chain disruption
- Financial fraud or exposure
One third-party compromise in particular marked the year 2023: A series of data breaches occurred due to the mass exploitation of a vulnerability in MOVEit, a popular file transfer software, leading to data theft from various international government entities and businesses.
Despite Progress Software patching the flaw in May, the Cl0p data extortion gang had already exploited the vulnerability extensively, with affected organizations continuing to disclose MOVEit-related incidents.
Why you must do TPRM
Third-party risk management offers numerous advantages for companies.
It enables organizations to avoid business disruptions by monitoring third-party vendor availablity, thus providing early warning signals to allow executives to take prompt action.
TPRM also maintains brand reputation by monitoring possible incidents and reducing IT and cyber risk exposure in third-party relationships. This enables timely defense against potential system vulnerabilities arising from the supply chain.
All of these factors play a crucial role in boosting customer trust, reducing costs, and minimizing overall operational risk.
TPRM best practices
Organizations should have a clear understanding of and visibility into their vendor network.
This can be accomplished by knowing and implementing best practices and all the steps of a TPRM lifecycle:
- Vendor identification and screening
- Evaluation and selection
- Risk assessment
- Risk mitigation
- Contracting and procurement
- Reporting and record-keeping
- Ongoing monitoring
- Vendor off-boarding
Organizations should establish a strong risk intelligence team to continuously monitor third-party vendors and make sure to have leadership support when investing in due diligence and regulation compliance.
They should also conduct regular audits to evaluate vendors’ adherence to security, health, and governance standards, and wisely invest in IT infrastructure and security to boost defenses against external threats.
“Organisations with higher TPRM maturity were more resilient and more agile to adapt to challenges in an ever‑changing external environment. The best organisations have shown that a comprehensive framework (risks interconnected, real-time monitoring in place, well sighted stakeholders) react quicker to the impacts of any adverse events,” a Deloitte 2023 Global third‑party risk management survey found.
Another step forward consists in the implementation of centralized risk management. The 2023 EY global third-party risk management survey revealed that 90% of organizations are heading toward centralized risk management, allowing them to “assess [their] third-party risk as a whole, apply consistency, prioritize risk and plan to make optimal use of resources to manage or mitigate risk.”