Third-Party Risk Management 101: Busting Myths & Unveiling Best Practices

Software publishers are the most common source of third-party breaches, causing a whopping 23% of these incidents for three years running⁽ⁱ⁾.

In an era where data security is paramount, this statistic serves as a stark reminder of the vulnerabilities that can emerge when businesses engage with external entities.

That’s where Third-party Risk Management (TPRM) swoops in to save the day!

TPRM is not just a buzzword, it’s your secret weapon in the battle for data security. It ensures your business stays strong in the face of risks and maintains its stellar reputation while you navigate the tricky world of third-party partnerships.

However, to harness the full potential of TPRM, you must master the playbook inside and out. This means debunking myths, understanding the nitty-gritty, and knowing the do’s and don’ts. Also, things like managing the size of your network, complying with rules, maintaining good communication with vendors, and using reliable data sources.

In this blog post, we’ll explore the best practices and key considerations for a successful third-party risk management program to safeguard your business.

Top 5 Third-Party Risk Management Myths Debunked

In recent years, several myths have surfaced about managing third-party risk programs. These myths cover various aspects, including network size requirements, compliance factors, vendor communications, and data sources.

Here are the top five myths about Third-Party Risk Management.

Myth #1: Private Businesses Do Not Need to Highlight Data Breaches

Fact: Whether you’re private or public, you’ve got to disclose data breaches. In fact, California has a rule – it’s all about the breach size, not whether you’re private or public.

Myth #2: Only Mega-Companies With Multiple Vendors Need TPRM

Fact: You might think having more vendors means more risks, but it just takes one misstep. Whether you have many vendors or just a few, you need to pay attention.

Myth #3: TPRM Doesn’t Concern Top Leadership

Fact: 75% of businesses consider managing vendor risks an important matter for their top executives⁽ⁱⁱ⁾. If the board of directors isn’t involved in TPRM decisions, it could result in a shortage of support and resources.

Myth #4: Customers Will Still Stick Around After a Data Breach

Fact: When a data breach occurs, it impacts customers’ trust and confidence. As a result, it affects your bottom line and the overall value of your company. Moreover, if customers start doubting your ability to safeguard their data, they might take their business elsewhere.

Myth #5: TPRM is Not Required as All Systems are Properly Managed

Fact: The demands for external connections are always changing as we engage with vendors. Temporary connections, if not properly managed, can persist and eventually become potential data security hazards due to negligence or insufficient protection.

Key Considerations for a Successful Third-Party Risk Management Program

Over 60% of businesses consider partnering with 1,000+ third-party vendors, which include partners, subcontractors, and suppliers⁽ⁱⁱⁱ⁾.

While these third parties foster business growth and competitiveness, they also bring potential cyber risks and added complexity.

That’s why businesses need to focus on reducing the most significant risks by implementing a third-party risk management program.

Here are the key considerations for a successful TPRM program.

Set Your Business Goals

Building a comprehensive list of third-party partners and specifying the actions needed for protection is crucial. Create a risk map covering various types of risks like geopolitical, financial, reputational, compliance, privacy, strategic, operational, digital, resiliency, business continuity, and cyber risks. This list helps identify particular risks when assessing third-party partnerships and deciding how much risk the organization can handle.

Involve the Stakeholders

For a successful TPRM, everyone must be on board. Getting stakeholders to support and actively participate in the process is vital. Include key players like risk, compliance, procurement, security, and business partners from the start, involving them in crafting and executing your TPRM strategy.

Evaluate Vendor Risk

After reaching the minimum security requirement, organizations should communicate with the vendor to gain insight into their internal security practices, which are typically not available to external parties. A vendor risk evaluation may involve using security questionnaires, which are a valuable method for understanding a vendor’s security measures. These questionnaires cover a wide range of security aspects, such as information security and privacy, data privacy, information security policy, and others.

Select a Vendor

After assessing a vendor’s risk level and their capacity to address security issues, choose the vendor that aligns with your organization’s risk tolerance, compliance requirements, and business importance.

Continuously Monitor Vendor Security

Once vendors are approved, it’s crucial to continuously monitor their security, especially if they have access to your systems and sensitive data. Moreover, continuous security monitoring automates tracking security, vulnerabilities, and cyber threats, benefiting both your organization and vendors.

Conclusion

In our digitally connected world, businesses depend on external vendors for growth and innovation. However, this reliance brings the risk of third-party breaches. This is where a robust TPRM program steps in.

Such a program is vital for mitigating risks, protecting reputation, and shielding leadership from liabilities. It centers around a risk-based approach, systematically identifying and addressing potential threats.

Ready to Implement a TPRM Program in Your Organization? Talk to Us!

Statistics References:

⁽ⁱ⁾ Black Kite
⁽ⁱⁱ⁾ SignalX
⁽ⁱⁱⁱ⁾ Diligent