Data breaches are cybersecurity events that significantly harm a company’s reputation, finances, and compliance posture. When information is leaked or extracted from your database via a third-party partner, that is known as a third-party data breach.
These events can have a devastating impact when your company handles sensitive information belonging to clients. According to a report by Ponemon Institute, slightly more than half of all organizations have suffered a data breach caused by a third-party vendor.
In 2019, two data breaches at Facebook data arose from third parties mishandling information on Facebook’s behalf. The first, 540 million records were in misconfigured AWS S3 buckets. Similarly, At The Pool leaked various information of 22,000 Facebook users, including unprotected passwords and email addresses.
In 2020, cybercriminals exploited vulnerabilities within Accellion’s (now known as Kiteworks) File Transfer Appliance, which transmits large, sensitive files across a network, to leak sensitive data such as Social Security numbers and financial information. Some of the organizations affected were the Reserve Bank of New Zealand, the University of Colorado, Qualys, and the State of Washington.
In today’s world of interconnectedness, third-party risk management must be a top priority as hackers continue to exploit vulnerabilities and poor information security practices across networks.
What Are the Three Most Common Types of Data Breaches?
Data breaches are a severe cybersecurity risk resulting from various sources. The most common attacks come from ransomware, phishing schemes, and SQL injections.
Ransomware is malware that encrypts data on a device or network, and the attacker then demands payment to give over the decryption key. Initially these types of cyberattacks were not related to data breaches. Still, in recent years a scheme known as ransomware-as-a-service (RaaS) has become popular and has made these attacks a threat to companies’ data protection strategies.
In addition to encrypting an organization’s information, RaaS schemes also extract the compromised data, which is then used to exert further pressure on companies. For example, hackers threaten companies to publish all information obtained (especially confidential information or customer data) if the attackers don’t receive the ransom payment.
Phishing attacks are a social engineering approach that can lead to several potential threats within organizations. The attackers pose as legitimate parties, trying to dupe employees into sharing access credentials so the attackers can then extract data. Targeted phishing attacks (“spear-phishing”) also extract customer data and sensitive information by posing as a supervisor within your organization.
SQL injections are cybersecurity threats that exploit vulnerabilities in your IT infrastructure to execute requests in your database. These cyber incidents can result in the forced extraction of sensitive information or customer data from your database, in addition to database deletion.
What Are the Top Three Reasons for Third-Party Breaches?
Like cyberattacks, third-party data breaches can happen for numerous reasons. Even so, there are common causes that can help you to evaluate your vendor security posture before engaging in third-party relationships.
Unpatched Security Vulnerabilities
No system is perfect; hence developers issue security patches and system updates to keep IT systems protected. Security teams must implement security policies with strict guidelines for software and application patches. These security policies must apply internally and externally for all service providers and third-party relationships.
These errors can range from misusing personal data to falling victim to a phishing attack. Your third-party risk assessment should evaluate each vendor’s security controls to prevent these events and to raise cybersecurity awareness within their organizational culture.
Malware can have different effects on your company. Some can remain hidden within your network while extracting information. Other malware can serve as a backdoor for hackers to gain privileged access to your network and execute downstream attacks.
Your third-party risk management program should consider the risk of these threats on your infrastructure, along with the level of protection your third-party vendors have against these threats.
What Are the Consequences of a Third-Party Vendor Breach?
Data breaches can cause enormous disruption to an organization’s operations and reputation. Even when your business is not directly at fault for these events, the consequences are shared. The effects of third-party data breaches are similar to a data breach within your own organization.
A report from IBM and the Ponemon Institute found that the average cost of a data breach rose from $3.86 million in 2020 to $4.24 million in 2021. The financial harm of these events is amplified in third-party data breaches, reaching an average cost of $4.33 million.
Depending on the data protection regulations governing your company, you may experience downstream legal liability for data breaches by your third parties.
For example, when the American Medical Collection Agency (AMCA) suffered a data breach in 2019, it put its healthcare clients in non-compliance with the Health Insurance Portability and Accountability Act (HIPAA). This event resulted in various class action lawsuits and state investigations.
Reduced Competitive Advantage
Recent ransomware attacks have demonstrated the operational impact of these kinds of threats, disrupting companies’ internal processes. Data breaches can lead to a disruption in your supply chain, causing further inconvenience and added costs for your organization. The unauthorized disclosure of patents and trade secrets by a third-party vendor can cause you to lose that competitive advantage.
When a data breach occurs, public opinion does not care if your vendor is at fault because in customers’ eyes, you are responsible for their personal data. As a result, your customers’ trust will be considerably affected if their information is exposed, either directly by you or through a third-party data breach.
What Can We Do to Protect Our Data from Third-Party Breaches?
To prevent these outcomes, companies must embrace a robust risk management policy and evaluate their risk landscape to determine the most effective measures to protect against these risks. Following these best practices is imperative to assure you are working with third parties that take cybersecurity seriously.
Vendor Risk Assessments
Determining the level of risk that a vendor represents for your company should be the first step before onboarding a third party. This assessment is crucial to avoid non-compliance because some regulations, such as HIPAA and the GDPR (Europe’s General Data Protection Regulation), require that your vendors handle data according to the same rules you follow.
Inventory Third-Party Vendors
Before you can determine the risk posed by the vendors you use, you need to identify the number of third parties and the specific information you share with them. Without this inventory of your third-party relationships, you cannot assess the risk to your company in any useful way.
Monitor Vendor’s Risks
The security posture of your third parties will change over time, so you must keep track of these changes. In addition, the modifications your vendors make to their security controls directly affect your third-party risk level. In addition to periodic audits, implement continuous monitoring measures for your vendors.
Sometimes third parties have more access to your information than they need. This unnecessary access can lead to avoidable risks.
Using the principle of least privilege (POLP) assures that your vendors only have access to the information required to perform their duties. At the same time, a zero-trust system minimizes risks related to human error and accidental loss of devices linked to your network. Together, these two systems are fundamental for any data protection program.
ZenGRC Can Help You Keep Track of Third-Party Risks
In enterprise risk management, managing hazards and adhering to industry standards can be complicated. But implementing a solid governance, risk, and compliance (GRC) solution makes compliance and risk management a breeze.
ZenGRC is a centralized, integrated third-party risk solution that monitors risks across your business. Don’t waste time with time-consuming spreadsheets when ZenGRC offers a single source of truth to expedite testing and audit management across all of your established standards.
Whether you’re improving an existing supplier risk management program or creating one from scratch, ZenGRC’s user-friendly interface is scalable. It comes pre-loaded with templates and compliance frameworks for quick implementation.
ZenGRC manages the vendor questionnaire process by streamlining distribution and collection. It will even aggregate results and assign risk scores to each vendor, giving you visibility to high-risk areas.
This one-of-a-kind software-as-a-service ensures that your organization complies with relevant regulatory and industry standards such as SOC 2, ISO, GDPR, HIPAA, and CCPA. Furthermore, it runs self-audits with a single click and preserves your audit reports for quick accessibility during audit time.
Contact us for a free demo and get started with worry-free third-party risk management.