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Third party risk assessment process has never been more important as organizations around the world are increasingly dependent on third party relationships. While these relationships are beneficial, they also expose these businesses to different types of threats aiming to gain access to sensitive information.
According to statistics, 41% of global companies have reported third party data breaches due to a lack of third party risk management measures. And among these, 51% of companies have started or are planning to implement risk assessment and management measures. It is because they have started to understand the nature and significance of third party risk assessment for their businesses.
Table of Contents
Understanding the Basics: What is Third-Party Risk Assessment?
Third party risk assessment process involves examining and reducing the cybersecurity threat related to third party vendors. A third party is an organization or an entity that businesses work with, such as vendors, partners, affiliates, agents, or distributors. Commonly, this is known as vendor risk or third party risk.
It involves risks such as environmental, security, reputational, etc. Besides, financial risks due to the access of vendors to digital assets are also reported. The purpose of the assessment of third party risks is to ensure that adequate cybersecurity measures are used to protect against vendor risks.
How Cybersecurity Weaknesses Spread
Through third party partnerships, security weaknesses can quickly spread. Cybercriminals may use, for instance, a system vulnerability in a third-party vendor’s system to access the vendor’s network. Once a hacker has gained access to the vendor’s processes, they may spread laterally to other systems and networks, including the clients of the vendor.
A serious data breach that impacts multiple companies may come from this. The more third party vendor services businesses use, the larger the attack surface and the more potential risks they could face.
Key Cybersecurity Threats Posed by Third-Parties
By ignoring third party risk assessments, third party threats pose several cybersecurity risks, including:
Data breaches
Hackers can access sensitive data, such as personally identifiable information (PII), financial information, and intellectual property, by taking advantage of flaws in third-party systems.
Attacks on the supply chains
Cybercriminals can enter a system of an organization and breach the hardware or software supply chain to inject malware or other malicious programs.
Ransomware attacks
Using ransomware, cybercriminals can encrypt a company’s data and demand money in exchange for the decryption key.
Business email compromise (BEC)
Cybercriminals might pose as potential vendors or partners in BEC attacks to deceive staff into sending money or sensitive information.
Importance of Vendor Cybersecurity Hygiene
Vender cybersecurity hygiene refers to the cybersecurity protocols and practices those third party vendors and partners utilize to protect their systems against cyber threats. It is not just a technical checkbox but a strategic imperative.
For businesses, it is important to ensure that third party vendors and partners have the best cybersecurity measures to avoid data loss and keep their cybersecurity intact. It will not only protect their business but also develop a trustworthy and resilient vendor relationship.
Some of the key benefits of vendor cybersecurity hygiene for businesses in protecting digital assets and reputation are;
1. Protection of data integrity of sensitive data transferred between your company and several vendors.
2. Prevention of data breaches
3. Contribution to the maintenance of business continuity
4. Protection of customer trust by preventing harm to organizational reputation.
5. Reduction of regulatory and legal risks related to business.
6. Reduction in burden of incident response teams
Best Practices: Integrating Cybersecurity in Third-Party Risk Processes
Essentially, integrating third party risk management in third party processes is required to ensure that the partners or vendors have fulfilled third party vendor risk criteria. In doing so, best practices for senior management include:
Establishing a risk management framework
Businesses need to establish a risk management strategy focusing on third party vendor risk assessments. This will ensure a beneficial business- vendor relationship.
Conducting due diligence
Businesses should perform continuous checks on third party partners and vendors to ensure due diligence of adequate cybersecurity measures.
Including cybersecurity protection requirements in business contracts
Considering service level agreements, a clause about cybersecurity requirements must be placed to ensure the prevention of data breaches.
Regular monitoring of third party partners and vendors
Regular monitoring of third party partners and vendors should be carried out to ensure that they are continuously fulfilling cybersecurity requirements.
Case Studies: Real-world Impacts of Neglecting Third-Party Cybersecurity
Neglecting third party risk assessments can lead to significant consequences for the businesses. Reportedly, there are several high profile data breaches caused due to various factors associated with third party vulnerabilities. Two of the case studies are briefly discussed below.
Toyota Supply Chain Attack
In 2022, Toyota announced a supply chain data breach that exposed customer data and vehicle information. It was a result of downstream risk, insufficient distribution and enforcement of data handling regulations. This incident emphasized the significance of managing third party risks within the supply chain and preventing compliance risk.
In another incident of data loss and affected day to day operations, Toyota revealed that the car location data of 2 million consumers had been exposed due to a database misconfiguration in the cloud environment. The breach happened between November 2013 and April 2023.
These data losses demonstrate potential consequences of inadequate supplier risk assessment and the need to prioritize third party risk management programs for the protection of sensitive data and the maintenance of customer trust.
TicketMaster
Ticketmaster, a North American corporation, data leak indicates another example of significant risks associated with third party vulnerabilities. The company suffered data loss of thousands of customers in the United Kingdom in 2018 and a fine of 1.25 million pounds due to a glitch in the chat of third party vendor, i.e. Inbenta Technologies.
The malicious software from the third party partner caused the leak of names, emails, phone numbers and credit card information of about 40,000 customers. For this, Inbenta Technologies was also labelled among high risk vendors.
The incident highlights the need for businesses to ensure best cybersecurity practices within their organizational systems as well as third party processes to reduce operational risk.
Evaluating Third-Party Security Postures: Tools and Techniques
Evaluation of third party security controls involves the assessment of the cybersecurity measures that third party vendors and partners use to make informed decisions. After establishing a risk profile to exercise risk management, several tools and techniques can be used to meet the industry standards, such as
1. Standardized questionnaires: Companies can use questionnaires to assess third party security risks and associated protocols and practices.
2. On-site assessments: Companies can perform on-site assessments to determine vulnerabilities in the systems of third party partners or vendors.
3. Penetration testing: Companies can perform penetration tests to determine vulnerabilities in the systems of third party partners or vendors.
4. Continuous monitoring: Companies can use tools such as New Relic One, Sensu, Prometheus etc. to continuously monitor the cybersecurity measures of third party partners.
Final Words
Third party risk assessments are important to ensure that third party vendors and partners use adequate cybersecurity measures to protect against cyber threats and prevent operational risks.
Organizations need to integrate cybersecurity in third party processes, regularly monitor third party relationships with partners and vendors, and use tools and techniques to assess third party security postures. Neglecting vendor risk assessment process can have serious consequences including financial damages and data breaches.
