How Third-Party Risks Have Evolved in 2021

The Covid-19 pandemic permanently changed how many companies operate. With remote work increasingly common and supply chain challenges more frequent, many organizations overhauled how they approach day-to-day operations. That included more reliance on third parties for mission-critical goods and services – which, consequently, drove up organizations’ third-party risk challenges as well.

Today, third-party risks are increasingly dangerous to many companies. Hackers and cybercriminals have adapted quickly to the new digital landscape, and as a result, companies must do better at third-party risk management to protect themselves and their customers.

What Is Third-Party Risk Management?

A third party is an outside contractor or vendor that provides a service for your company. For example, the party could be a bookkeeper who handles your company’s finances, a cloud storage service, the vendors throughout your supply chain, or any number of other providers. Outsourcing these functions and tasks is often necessary, but doing so expands your “risk range,” creating potential new vulnerabilities.

Third-party risk encompasses a wide array of threats and will depend heavily on the type of services your contractor provides. For example, traditional malware and phishing hackers may target smaller contractors that don’t have the robust security measures of a larger company. In addition, your intellectual property could be in danger via any vendor with access to your company’s proprietary materials. Reputational risk is another worry, since any security breach that affects your vendors could reflect poorly on your organization.

Third-party risk management (TPRM) is a field within risk management that focuses on identifying and mitigating risks associated with the use of third parties. A strong TPRM program allows your organization to monitor and analyze the threats posed by third parties and to determine where those threats exceed your risk thresholds.

Why Is Third-Party Risk Management Important?

TPRM is important because the risks posed by third parties can be so severe. For example, you might entrust confidential customer data to a third party that subsequently suffers a data breach; your company would then face legal liability and costs for that attack. Hackers can also use the online connections you have with your vendors as a means to attack you; they target the vendor first, and then penetrate into your systems for future attacks. Regulatory compliance frameworks are also increasingly concerned with third-party risk, and breaches of your contractor’s defenses can result in fines and lost business for you.

A TPRM program can reduce the likelihood of those risks affecting your business and the impact of the threats in a landscape or ever-increasing reliance on vendors.

Third-Party Risk Is Changing with the Digital World

Covid-19 forced countless companies to move some, if not all, of their workforce to remote positions. Most organizations were not prepared for the new security challenges that arose from that unprecedented shift.

For example, staff working on their personal devices may have weakened your networks’ endpoint security. In addition, the cloud storage service providers and third-party applications that improve remote workflow might also undermine your overall risk profile. These potential risks also affect your contractors – and while your own organization may have accounted for these new threats, you don’t always know whether your vendors did the same.

Moreover, many governments have responded to the pandemic and lockdowns by shifting their compliance requirements. The healthcare industry, for example, had to adapt its high expectations for privacy compliance to tele-health (which has taken off since the start of the pandemic).

If your compliance requirements have changed, your contractors must also comply. Overlooking a compliance issue in a contractor could have potentially disastrous results for your company, and these changing requirements must factor into your third-party risk management program.

The pandemic devastated the global supply chain, and those strains have continued even as much of the world returns to normal. Supply chains were increasingly managed via technology before the pandemic, and that trend shows no sign of slowing down. While convenient, these supply chain automation solutions are also subject to potential breaches and system errors, and it’s essential to have contingency plans in place to assure that your data protection and keep your operations running smoothly.

Ensure Your Third-Party Mitigation Plans Work for the Modern Age

With new threats constantly on the horizon, developing a risk mitigation plan that includes your third-party vendors is essential. Here are some factors to keep in mind to establish a successful third-party risk management plan.

• Prevention is key. It’s not enough to solve issues as they arise; that lack of strategy will provide too many opportunities for hackers to access your data. You should integrate third-party risk assessment into your regular risk assessments. You might not have access to your vendors’ internal risk prevention processes, but you can prepare for how your company will mitigate the damage should a breach affect a third-party contractor.
• Include risk management protocols in your contracts. This measure is essential for companies in industries subject to government regulations. Any compliance risk that applies to you will also apply to any of your contractors, and your company can be held responsible for their vulnerabilities. By adding regulatory requirements to your third-party relationships, you can better ensure that your contractors meet your compliance goals.
• Use technology to your advantage. Hackers move fast, but security techniques constantly evolve to match those changing threats. Leveraging new advancements in information security and risk management can allow for continuous monitoring and give you a critical edge in the face of potential attackers.

Manage Third Party Risks with Reciprocity ROAR

Reciprocity ROAR is an innovative risk management solution that helps track your cybersecurity risk in real time throughout your entire organization – including third-party vendors. Reciprocity ROAR enables you to streamline vendor assessments and create questionnaires that allow your contractors to give you the information you need quickly to assure that their risk management aligns with yours.

You get the visibility you need to keep ahead of risks and effectively convey the impact of risk on high-priority business activities when you use The Reciprocity ROAR^® Platform. Such contextual information allows you to prioritize investments and make sound business decisions while improving security.

If you’re concerned about your third-party risk management program, schedule a demo to learn how Reciprocity ROAR can secure sensitive information and improve your overall risk posture.