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4 Key Steps to Your Third-Party Risk Management Process
Security Best Practices & Advice

4 Key Steps to Your Third-Party Risk Management Process

By Aviva Spotts Jul 31, 20222 min read

If you’re like most organizations, you are highly dependent on third-party vendors to efficiently run your business. On the flip side, vendors present a level of risk that can have serious legal, financial and business repercussions, making vendor risk assessments more essential than ever. But how do you effectively manage hundreds, if not thousands, of vendors on a continuous basis?

What is Third-Party Risk Management?

Third-party risk management (TPRM) is a type of risk management that involves identifying and eliminating operational risks related to third-party relationships.

Why is Third-Party Risk Management Important?

Third-party risk has been an issue for years, but recent events and increased outsourcing have brought the discipline to the forefront like never before. Disruptive events can affect businesses and their partners – no matter the size, type, or industry. Cybersecurity incidents are common when working with third-party providers. In fact, more than half of the breaches over the past two years have been caused by a third party, not by the company itself.

What is the Third-Party Risk Management Lifecycle?

The third-party risk management lifecycle is a process that organizations use to identify, assess, and mitigate risks posed by third-party relationships. The third-party risk management lifecycle is an ongoing process that should be revisited on a regular basis. As third-party relationships change and new risks emerge, the risk management plan should be updated to reflect these changes. A typical relationship with a third-party involves a series of stages, as we outline below.

Third-Party Risk Management Process

Here are four key steps that should be part of your process for assessing your third parties’ compliance posture:

1. Mapping your vendors according to inherent risks

The first step is to make sure you have a complete list of every vendor that supports your organization. Profile each vendor, grouping them with similar type vendors. List what service they provide, the criticality of that service, the types of data they are handling, whether and how much they handle sensitive data and the internal contact managing the vendor. This will help you determine which questionnaires to send out to your vendors, according to your regulatory requirements and risk appetite.

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2. Sending questionnaires and receiving evidence

Completing security questionnaires is a lengthy process that often involves multiple team members on the vendor side. It is not uncommon for vendors to have questions or need clarifications about the questionnaire, so be prepared for some back-and-forth communication between you and your vendors during this process.

The vendor is then required to respond to the questionnaire by providing relevant evidence corresponding to each control. It is imperative that you provide a timeline for completing the questionnaire and that it is returned in a timely manner. Remember, your organization’s security posture, as well as regulatory compliance, is dependent on the security of your vendors.

3. Assessing your vendors’ attack surface

At the same time that you send questionnaires, it’s important to perform an assessment of your vendors’ public-facing digital footprint to unveil their assets and any possible cyber gaps. Such an assessment can also serve to verify answers to the questionnaire.

An attack surface analysis should examine at least three layers: 

  1. IT and network: Parameters involving DNS servers, SSL-related protocols and more
  2. Applications: Parameters involving Web applications, domain hijacking and more
  3. Human: Parameters involving social posture, presence of dedicated security team and more

4. Monitoring continuously 

Hackers are constantly using new and advanced methods to exploit new vulnerabilities and engage in cyberattacks. In addition, suppliers frequently add new assets and software and may also change or update their internal policies. All of these can result in new cyber gaps

For these reasons, it’s important to implement continuous monitoring of vendors throughout the business relationship to uncover issues, detect suspicious activity and stay updated about security policy changes.

How Panorays Can Help

Vendor security risk management is a necessary process, but not a simple one. In fact, it could be long, tedious and frustrating when working with tens, if not hundreds or thousands of vendors. With Panorays’ automated solution, you can expedite the process of managing the third-party vendor risk process and retain competitive advantages above your business competition. 

Want to learn how you can quickly and easily automate your third-party security risk management program? Click here for a step-by-step guide. 

This post was originally published on January 20, 2021 and has been updated to include fresh content.

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Aviva Spotts

Aviva Spotts is Content Manager at Panorays. She loves all things cyber–especially when she gets to write about it–and is famous for talking about herself in the third-person.

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