6 Ways to Jump-start Your Third-Party Risk Management Program
Business leaders around the world like you increasingly rely on the expertise of third-party organizations to provide vital services at reasonable long-term costs without disrupting internal productivity. Unfortunately, though, these great rewards do not come without risks.
Do you have a well-oiled third-party risk management plan in place? Do you feel confident about the third-party businesses to whom you are considering allowing access to sections of your computing system? In either case, all you may need is a solid strategy to get your third-party collaborations under way while keeping risks at bay.
Keep reading to learn six things you can do to put your customers’ and stakeholders’ minds at ease while also protecting your own brand and interests.
1. Understand the Primary Reasons Why Third-party Risks Are on the Rise
Thanks to the ever-expanding world of business technology and fast-paced business environments, the option to outsource specialized tasks to competent third parties is becoming increasingly essential to businesses like your own.
With these vital new relationships, which require a degree of third-party access to your system, you need to make sure that those third parties are on the same page as your organization when it comes to facing the brave new world, awash in a sea of technology and risk. We all know that hackers are always looking for ways to invade your system, even if they must find new ways to manipulate any or all vulnerabilities in your third-party’s operating system to do so.
Take a look at the primary reasons third-party risks are rapidly on the rise in the 21st century:
In the global marketplace, you may work with third parties across the country or on the other side of the world. It is important that, no matter where your third parties are located, they understand all the rules, policies, regulations and standards with which they must comply to keep your risk at a minimum.
Virtualization has revolutionized the way that most organizations conduct business. More and more companies are working with cloud providers and virtual data centers or using hosted apps. All of this entails transferring data well outside of a business’s firewalls. It has become increasingly clear over the past few years that there are inherent risks involved with virtualization, making it essential to peer more closely at third-party organizations’ respective ecosystems.
As business professionals travel around the globe, or simply around the corner, it has become common to do work while on-the-go, using a laptop, tablet or smartphone. Have your third-party partners shored up their mobile devices to ensure security and accountability while using a data plan or Wi-Fi?
2. Determine the Different Types of Data Under Your Care When Preparing Your Third-party Risk Management Program
Regardless of your industry, you are likely housing one or more types of important data. At the bare minimum, your HR department tends to confidential employee data. However, like most modern organizations, you probably have a wealth of additional data you need to protect from the many potential risks when working with third-party businesses.
Here are a few of the most at-risk types of data:
- Protected Health Information (PHI)
- Payment Card Industry (PCI) Transactions
- Personally Identifiable Information (PII)
- Intellectual Property
- Human Resource Information
3. Identify Key Risks When Jumpstarting Your Third-party Risk Management Program
Hackers, cyber-criminals, internal issues with inadequate compliance and acts of nature are just a few of the sources from which you can anticipate risks for your business. Knowing all the possible risks—even many of the classics, which are still in play—is a core step in giving your third-party risk management program a firm boost.
Following are a few of the most prevalent risks your organization may face when working with third-party vendors who might not have properly acknowledged or addressed such considerations:
- Malware, Malicious Spyware and Ransomware
- Computer Virus
- Rogue Security Software
- Trojan Horse
- Computer Worm
Many of these risks may seem rudimentary—perhaps to the point of seeming a little anachronistic—but it is important to remember that active risks and threats that fully intend to compromise your system are rampant, coming from every conceivable direction and source.
The following risks are even more germane to modern computing processes:
- Process Risks
- Political Risks
- Undesirable Events
- Contract Risks
- Legal and Regulatory Non-Compliance Risks
- Information System Failures
As you identify any one of these risks, it is vital that you should follow up with an analysis of the specific drivers that may increase third-party risk.
4. Manage and Assess Third-party Risks That Are Most Likely to Negatively Affect Your Organization
Once you have identified your most vulnerable data, the potential risks that may affect your business and the reasons for those risks, you can begin to look at specific risks that your third-party may bring to the table.
The risks involved with third-party engagements are often complex and multi-dimensional since they may extend across vendors, suppliers, contractors and service providers. Each carries its own risk just out of your view. Additionally, each risk that each party carries may have varying degrees of potential effect on the core third-party organization with whom you are working.
Here, you can use the previously mentioned lists of possible risks to identify and analyze each third-party business’s possible risk factors.
To avoid these risks from the outset, you might focus on these key steps:
- Develop contracts that govern third-party relationships, applicable to a broad swath of organizations.
- Frame policies and implement key controls that serve to mitigate third-party risks. Employ appropriate monitoring and testing processes, with the assistance of your Enterprise Risk Management (ERM) team to make sure all risk mitigating controls are working, per policies and as planned.
5. Implement a Third-party Screening Process Before Signing an Agreement Together
A little vetting could go a long way toward either discovering that a vendor poses too many risks to your business, or gaining the peace of mind you need to move forward in your professional relationship.
Just like you would vet and onboard a new employee, do the same regarding third-party professionals under consideration for engagement.
Gather the following information to help make the best assessment of each vendor before committing to engagement:
- Learn the business’s base location, countries of operation, other clients served and all the types of services they offer.
- Perform interviews with third-party clients who are willing so you can gain insights into the level and quality of service, regarding system controls and protection of data.
- Request reports from the third-party’s own internal system audits and assessments, if available.
- Ask to review the company’s own technology policies and procedures manuals, files and documentation.
- Inquire as to what types of fourth parties are involved in the mix. If you use a third-party, the chances are strong that your third-party vendors also outsource some aspect of their business to a subcontractor to provide products or services. It is important that you learn about each of these companies and any potential access they may have to your system data. Insist that your third-party candidate divulge this information upfront and into the future as they outsource future projects, for the life of your mutual engagement. Fourth parties will be subject to your same policies and procedures as the third-party business.
6. Plan for Regular Evaluations of Your Third-party Risk Management Program
As technological risks continually evolve, so must your preparation for and response to them. It is important to work with your auditing team to consistently monitor, manage and update your third-party risk management program.
There Are Many Reasons Why You Should Invest in Optimal Third-party Risk Management
If you cut costs to save time and increase profits, only to experience a data breach due to developing an inadequate third-party risk management program, you will have gained little, if anything.
Experiencing any type of data compromise leaves you open to regulatory fines and sanctions, a wedge in customer and stakeholder confidence, damage to your brand reputation, civil litigation and settlements, and loss of the competitive edge in your industry.
Reach Out to Our Auditing Team for Help Developing Your Third-party Risk Management Strategy and Plan
Are you ready to jumpstart your third-party risk management plan with these tips? Could you use a little more help? Whether you have just started outsourcing projects, or you need to kick your current programs into overdrive, our experienced I.S. Partners, LLC. team is here to help. We know how important it is to clear your desk by engaging experts for non-core responsibilities, but we also want you to keep your business safe by identifying, avoiding and mitigating unnecessary risk.