Organizations often collaborate with third parties to outsource certain tasks to experts. Even though partnering with outside organizations has its own set of benefits, it comes with its challenges too, the biggest being the security of the company data.
Third Party risk management is extremely crucial for organizations to combat the perils when sharing access to your data with outside organizations.
A Third-party risk management framework helps in gauging the risks involved when third parties such as vendors, suppliers, contractors, partners, etc. gain access to an organization’s confidential data and how it can be misused by them. The main goal of a tprm program is to alleviate the various possible risks due to the involvement of third parties in a firm.
Why is third-party risk management important?
Third-party vendors gain access to a considerable amount of your data which can have an adverse effect on cybersecurity. Regardless of the size of your organization, cybersecurity hazards remain, hence third-party risk assessment is extremely vital to secure intellectual property and other classified information. The process of tprm includes diagnosing, assessing, and curbing the potential risks involved when company data is shared with outsiders.
6 types of third-party risks
Cybersecurity Risk: Danger caused to sensitive data due to cyber-attacks. One way to avoid cybersecurity risk is by performing due diligence before onboarding new third parties.
Operational Risk: The risk involved when the business operations of the company are obstructed due to third-party organizations. This causes an interruption in business leading to delays in the ongoing project.
Legal, Regulatory and Compliance Risk: The risk involved when third parties impact the compliance of the company with legal frameworks such as agreements, legislation, and regulations.
Financial Risk: When the fiscal standing of the company gets disrupted due to third parties which can cause grave losses to the company.
Reputational Risks: The risk caused by third parties which could have a detrimental effect on the organization’s reputation. Results could be poor customer service, below-average customer satisfaction, etc.
Strategic Risk: The risk caused when there is a disruption in achieving the required objectives because of the incompetence of third parties.
What are the best practices for tprm?
1) Vendor Inventory Prioritization: Depending on the importance of the vendors in your organization, segregate the information based on the requirement of the project. This practice will ensure that you don’t give away too many vital details. To achieve efficiency in the tprm program, it is suggested to distribute the third-party organizers into specific tiers:
Tier 1: High Risk
Tier 2: Medium Risk
Tier 3: Low Risk
2) Automate as many processes as possible: To increase efficiency, automating the majority of the redundant tasks eliminates the maximum risks involved. TPRM frameworks are built differently catering to each organization’s requirements. In terms of automation, companies must identify key tasks which can be automated thus resulting in saving the company’s time, money, and resources. In the tprm program, multiple areas can be automated such as onboarding new vendors, suppliers, etc., sorting third parties into tiers, sending alerts, scheduling regular reports and more.
3) Move beyond cybersecurity risks: When an organization decides to involve a third-party organization, quite often they believe that the only possibility of risk would limit to cybersecurity. Though being agile on potential cyber risks is a good practice, companies must think beyond that. While architecting your tprm program, there are several other risks which can affect your organization such as:
- Ethical risks
- Fourth-Party risks
- Environmental risks
- Privacy risks
- Compliance risks and more.
Advantages of third-party risk management
Third-party risk management software allows your organization to build a tprm program which helps in mitigating risks caused by the third parties involved. The biggest advantages are:
- Refined Security
- Increased customer trust
- Improves time management
- Allows companies to save money
- Reduces risks and much more
The Cybersecurity Centre of Excellence (CCoE) is a joint effort of the Government of Telangana and DSCI to create a safe and secure cyberspace and curate reliable solutions for cybersecurity. Our objective is to push India’s IT ecosystem and build best practices, standards and execute initiatives in the cybersecurity and privacy domain. We encourage innovation by incubating startups, hosting delegations, showcasing products in experience zones and much more.