Third-party services are crucial to every organization. Almost all organizations use them to distribute its workload. But what if the third party has not taken adequate security measures? Who can you trust? Well, this is where vendor risk management (VRM) comes to your aid.
Vendor risk management is the process of identifying, analyzing, evaluating, and mitigating risk to save the organization from any sort of data breach or data compromise.
With the advent of big data analytics, cloud computing, and IoT, businesses are increasingly utilizing third-party vendors to implement these technologies. With that, businesses can do what they do well and leave data management in third-party hands.
While relying on a third party and outsourcing data can be very beneficial, there is the question of whether the third party is managing your data well. If the vendor lacks solid security measures, your organization may be at risk of reputation, operational, information, and transactional compromises. VRM plans and helps mitigate any such cybersecurity risk.
This blog will help you identify the best ways to spot vendor risks and how to mitigate them.
What Is Vendor Risk Management?
Vendor risk management (VRM) is a branch of knowledge that deals with the management and monitoring of any problem resulting from third-party vendors and suppliers of IT products and services. It is the process of identifying and mitigating the risk occurring from third-party data and service management. VRM programs help the organization avoid any business disruption or potential third-party risks.
For example, you may contact a third-party accountancy firm to manage your client’s data. Now, your client’s information is in the accountancy firm’s hands and the data’s safety is dependent on the firm’s security measures. Any compromise in the data could lead to it slipping into the hands of a hacker. To make things worse, your organization could be hit with financial losses and a negative reputation.
The December 2020 Microsoft vendor data breach is an of this happening. One of its vendors, SolarWinds, suffered a security incident when Russian hackers targeted the organization to gain access to sensitive information.. Because SolarWinds is a Microsoft vendor, the hacker gained access to some Azure, Exchange and Intune source code. If a tech giant like Microsoft can be breached because of lax in security measures of its vendor, it would have been much worse for smaller companies.
In recent years, there has been a growing trend to opt for third-party vendors to increase productivity and profit. Any outside intervention like that of accountants, lawyers, marketing teams, and so forth invites more risk. VRM helps mitigate these risks and avoid future losses.
What Is a Third-Party Vendor?
A third-party vendor is an organization or body which you have appointed or have a written agreement on behalf of the customer to provide you with services and products your company requires. Below is a list of third parties your company might use:
- Suppliers and manufacturers: Your company might depend on many other small companies’ products and services, from IT services to food catering.
- Service providers: Service providers includes marketing and advertising, tax and legal firms, logistics, cleaning staff, etc. They make up the most crucial parts of a company.
- Contract workers: Many companies require contract workers to function. This includes tech staff, coders, maintenance staff, managers, etc. Even though their employment could be short, they have access to sensitive information during their stay.
- External staff: External workers like freelancers and temporary staff poses a significant risk. Any mishandling of office data could lead to a loss of sensitive information.
Common Types of Third-Party Risks
- Strategic Risk
Strategic risk is when a bad decision taken by a third party may result in the principal company’s loss. This may lead to loss of profit due to inefficient decisions taken by the vendor. The failed decision may also not align with the parent company’s goals.
- Reputation Risk
This is a very common risk in today’s world where a vendor’s reputation may affect the principal company’s reputation. The public will often attack the latter’s association with the former. Loss of data due to the vendor’s bad security measures may result in the principal company losing its reputation.
- Operational Risk
A disruption, such as a natural disaster or data breach, may lead to hindrances in a vendor’s work, thereby slowing down the principal company as well.
- Information Security Risk
If the principal company shares sensitive data with its vendor, a data breach of the third-party vendor may adversely impact it. Hackers may even target the parent company through the third party.
Why We Need Vendor Risk Management
- To identify a potential problem before it strikes. The risks and threats associated with a vendor’s data compromise can be assessed beforehand.
- To manage the vendor’s proper functioning and maintain a swift & loyal relationship with vendors.
- To mitigate the loss of agreement or data with the vendor.
- To conduct a regular assessment of the risk associated with the vendor.
- To optimize performance and reduce costs by having a single body to deal with vendors
The Need for Chief Information Security Officers
Opting for VRM is not only the need of the hour but a necessity for organizations when even a giant like Microsoft can’t trust its vendors and have its data compromised by Russian hackers. Finding an authorized third-party vendor and maintaining a loyal and swift relationship with it is the job of a Chief Information Security Officer (CISO).
A CISO is a high-level executive in a company who ensures the strategic, measured, and planned management of its assets. His/her responsibility includes security operations and assessing cyber risks, data loss, and fraud prevention. He/she assesses what went wrong in a breach and prevents the same crisis from repeating. CISOs make sure all the security risks are checked and covered for any potential threats. CISOs needs to be trained appropriately to manage third-party vendors outside the organization.
EC-Council’s Certified Chief Information Security Office (CCISO) program is an industry-leading certification that helps you gain the real-world experience necessary to succeed at the highest executive levels of information security.
CCISO covers the five important domains of Information Security Management:
- Governance and Risk Management (GRC)
- Information Security Controls, Compliance, and Audit Management
- Security Program Management & Operations
- Information Security Core Competencies
- Strategic Planning, Finance, Procurement, and Vendor Management