5 Essential Steps for Third-Party Risk Management Success

In a world full of security breaches and litigation, every organization needs a solid strategy to identify and reduce risks relating to the use of third parties, e.g., vendors, suppliers, partners, contractors, or other service providers. These risks — which can include financial, environmental, reputational, and security risks — exist because these types of companies often have access to intellectual property (IP), sensitive data, personally identifiable information (PII), and protected health information (PHI).

As these third-party relationships are vital to business operations, it’s critical for infosec teams to incorporate a third-party risk management (TPRM) component into their overall cybersecurity programs. However, working with a third-party vendor is inherently risky — you are trusting a business whose practices and processes you can’t control. So, when you’re working with a third-party service and trusting them with company, employee, or customer data, you can’t afford to take any chances.

Here are 5 essential steps for third-party risk management success:

1. Identify all of your third-party risks

   Risk identification is the first step in risk assessment or risk analysis, and a critical part of the risk management process — as you can’t manage what you don’t measure. The risk identification process begins with understanding your organization’s objectives. It should then include all potential risks, threats, and events that could harm its ability to attain those goals, whether or not they are under your control.

2. Classify vendors

   Create a list of third-party vendors based on their access to your systems, networks, and data. Then, assign some type of risk rating (e.g., high, medium or low risk) and communicate it to key stakeholders within your organization.

3. Define third-party performance metrics

   Objective measurement is important for monitoring third-party security performance across the organization. So, it’s important to develop metrics that will help you help assess, monitor, and prioritize third-party risk — especially as not all third-party relationships are the same and not all assessments have the same requirements. This level of insight will help you better understand the potential impact a vendor could have on your organization.

4. Determine the security frameworks and regulatory requirements

   Setting up a TPRM program is a complex process that involves managing hundreds, or even thousands, of vendors. So, it’s important to determine the compliance requirements for your organization, including which regulations and standards they and you must meet. While there is no single approach to TPRM, some commonly used frameworks serve as a solid starting point — e.g., those provided by organizations such as the National Institute of Standards and Technology (NIST) and the International Standards Organization (ISO).

5. Assess risk on individual third parties

   Creating a risk profile for each vendor will help you define your relationship and understand the products / services they’ll provide, as well as their importance to your organization. In addition, you’ll be able to define what type of physical, systems, and data access they should be given to your digital network.

By following these five steps, you’ll create a solid foundation for a successful TPRM program. However, it’s important to remember that TPRM is a continuous process. It should be an integral part of your onboarding practices and real-time monitoring of your business network.

Continuous monitoring of supplier risk is necessary because business partners and vendors can, and do, change their processes all the time. For example, a vendor might decide that outsourcing is the best choice for one service it provides to you, and therefore expose your organization to a new subset of unknown vendors.

To learn more — including an additional 5 steps to take on your path to third-party risk management success — check out our webinar: Rethink your Third-Party Risk Strategy in an Uncertain World.