The typical organisation will most likely outsource a good part of their processes to other firms, known as third parties. And with research showing that 36% of organizations suffered a data breach due to a third party in the last two years, this is a new security risk area that is quick becoming priority.
Third- and Fourth-party risk is real, but manageable. What does a third (or 4th) party mean, and how can you protect your company.
Who are Third or Fourth Parties?
Third parties are entities contracted to deliver specific parts of your firm’s operation, including services providers, affiliates, digital suppliers, and all vendors that may have some sort of connection to your environment.
A fourth party is any entity to which your third party outsources some of their processes, simply your vendor’s vendor. Just as you outsource some of your processes, your vendor might also do the same.
These links pose a threat to your security (sometimes called “supply chain risk”) as a breach on the fourth party may affect the third party and you.
For example, if your online store outsources payment to a third-party payment platform, you will have to consider the risk of a security breach on the payment platform which could result in the personal data of customers to your online store being accessed.
How to Manage the Risks
Third-party risk management is evaluating and minimizing the risks arising to outsourcing to third parties, and due diligence is important before onboarding of new vendors.
To minimize supply chain risks, consider implementing the following:
· Clearly define your Risk Appetite
This is fairly obvious. Your organisation’s top management would exercise leadership in defining the acceptable risk levels, and this will form basis of all risk considerations in vendor management.
· Know your Vendors and Risk Appetite
It’s important to be clear on who all your vendors are. Subsequently, you want to collect as much information as the vendors as possible (using questionnaires, requesting ISO certifications, the vendors key third parties, etc) to be able to estimate the risks they pose to you. You can then decide based on where the vendors fit in your risk appetite
· Screen Vendors Properly
There should be proper security screening of intending vendors before partnerships are formed. Do your due diligence in evaluating the third party’s security strength.
· Have an Automated Process
Optimizing your risk management process involves ensuring that the security risks posed by these parties are correctly managed, and this could be vastly improved via automation. There are now tools that allow you continuously monitor the security risks/vulnerabilities in your vendors’ digital footprints, and in the footprints of their third parties (your 4th parties).
· Stay Alert
You cannot be entirely immune to cybersecurity attacks with new security threats popping up every day, so you cannot let down your guard.
Ensure that your security team stays up to date on the issues in the industry by attending conferences, talks, and webinars. You should also ensure they stay compliant with regulatory standards because the correct information and follow-up action will help keep your organization safe from third and fourth-party risks.
The process of optimizing your risk management program never stops. You will get feedback from your risk management. Keep improving on your assessment and stay alert. You can also involve experts if you don’t encounter any problems.