Authored by: Nagaraj Kuppuswamy, Co-founder and CEO of Beaconer
Implementing proper cybersecurity measures and managed third party risk has become crucial for organizations that want to protect their data, systems and operations.
Remember that time you clicked a suspicious link from an unknown sender? Social engineering attacks targeting employees are just one example of the ever-evolving cyber threats businesses face. But the danger doesn’t stop there. Third-party vendors, contractors, and suppliers can also be weak points in your cyber armor. In this article, we will discuss the importance of cybersecurity and third party risk management.
The Threat Landscape
Cyber threats are growing more advanced with attackers using sophisticated methods to gain access to sensitive systems and data. Phishing, malware, ransomware and supply chain attacks are some common methods used by cyber criminals.
Many recent high-profile data breaches have involved third parties – vendors, contractors and other partners that have access to an organization’s systems and data.
In 2023, a staggering 45% of data breaches involved third-party vendors, according to Verizon’s Data Breach Investigations Report. These external partners, from software providers to accounting firms, can serve as unintended gateways, their lax security practices creating backdoors into your organization’s network.
For examples, the Target breach in 2013 occurred through an HVAC vendor. Hackers didn’t directly attack Target’s systems; instead, they gained access through a vulnerable HVAC vendor, highlighting the interconnectedness of the modern threat landscape. The cost? A whopping $202 million, a stark reminder of the devastating consequences of third-party vulnerabilities.
Similarly, the infamous NotPetya attack in 2017 which crippled businesses worldwide, was spread through a compromised software update from an accounting firm.
The cost of data breaches is tremendous, with the average cost being $4.45 million according to a report. This highlights the need for robust cybersecurity measures and third party risk management programs.
Importance of Cybersecurity Measures
There are several core cybersecurity measures and third party cyber risk assessment procedures that organizations need to implement: Allowing access to sensitive data and systems only to authorized personnel through strong password policies, multi-factor authentication, and role-based access. Using firewalls, intrusion detection/prevention systems, and encryption to secure networks and defend against attacks.
This creates barriers for malicious actors. Having documented plans to detect, analyze and quickly respond to security incidents to minimize damage.
Educating employees on cyber risks and best practices through regular training to reduce risk of human error. Identifying and patching known vulnerabilities in software, applications and devices to reduce opportunities for exploitation. Using antivirus, antimalware and endpoint detection and response tools to monitor endpoints and detect threats. Maintaining backups of critical data for recovery in case of incidents like ransomware.
These measures work together to provide defense-in-depth security and make it harder for attackers to penetrate systems and networks. Consistently implementing them is key for effective cyber risk management.
Managing Third Party Cyber Risks
In addition to first-party cyber risks from within the organization, third party partners can also introduce significant cybersecurity risks if their security posture is lacking.
Third parties may include vendors, contractors, managed service providers, legal and accounting firms among others.
Some key risks include:
Supply chain risk where third parties provide a pathway for malicious actors to gain access to target organizations through compromised software or hardware.
Data leakage where sensitive data shared with third parties may be exposed in a breach if encryption and access controls are weak.
Loss of control by relying on third parties for security services leading to loss of full control and visibility. Weak security measures if partners do not adhere to adequate security standards exposing the organization’s data and systems to compromise.
To manage these risks, organizations should conduct third party due diligence on prospective third parties to ensure they meet security standards. Use contracts to mandate security requirements and accountability for third parties. Limit data sharing only to what is required for the business relationship. Implement monitoring systems to oversee third party access and activity. Require notification of any security incidents experienced by the third party. Evaluate third party risks periodically through audits and reviews. Maintain contingency plans in case a third party relationship needs to be exited.
Essentially, third parties require the same scrutiny as employees when it comes to cyber risk mitigation. Their practices have a direct impact on the organization’s security posture.
The Role of Third Party Risk Management
Third-party risk management (TPRM) is the practice of assessing and monitoring risks introduced by vendor relationships. It became a key focus area after major breaches like Target demonstrated the dangers of supply chain exposures.
TPRM isn’t just about ticking boxes; it’s about proactive risk management
TPRM goes beyond simple vendor assessment. It’s a comprehensive program that encompasses the entire lifecycle of your third-party relationships, from initial onboarding to ongoing monitoring and termination.
Moving beyond the inventory stage, a sound TPRM program should be a dynamic, multi-layered shield:
1. Proactive Assessment: Don’t wait for a breach to happen. Conduct thorough due diligence on all third parties, even seemingly low-risk ones. Utilize questionnaires, penetration testing, and security audits to assess their security posture, data handling practices, and incident response capabilities. Don’t be afraid to ask tough questions! Go beyond just security; evaluate financial stability, compliance with regulations, and even potential reputational risks.
2. Risk Scoring and Prioritization: Not all vendors are created equal. Assign risk scores based on your assessment and prioritize high-risk partners for deeper scrutiny and stricter controls. This ensures you’re focusing resources effectively and not wasting time on low-risk relationships.
Classify each vendor and assign a score based on their potential risk level. This helps prioritize your focus and resources.
3. Continuous Monitoring: Trust, but verify. Don’t rely on one-time assessments. Implement ongoing monitoring through security information and event management (SIEM) solutions, regular audits, and penetration testing. Stay updated on any vulnerabilities discovered in their systems and promptly address them.
4. Contractual Safeguards: Don’t leave your security to chance. Include strong security clauses in your contracts with vendors, outlining data access restrictions, incident reporting requirements, and termination procedures for non-compliance.
5. Communication and Collaboration: Building trust and open communication with your vendors is crucial. Share your security expectations, provide training, and establish clear escalation procedures for reporting incidents. Remember, they are an extension of your security perimeter.
6. Cut ties when needed: Don’t hesitate to terminate relationships that pose an unacceptable risk. It’s better to be safe than sorry. Nowadays businesses are even beginning to undertake fourth party risk management programs seriously.
Don’t stop at your immediate vendors. Consider the risks posed by their sub-contractors and partners. This multi-layered approach provides a holistic view of your supply chain vulnerabilities.
A TPRM team or leader is essential to oversee this entire life cycle. Security and legal teams play an important advisory role in designing the program. With emerging regulations like the Cybersecurity Maturity Model Certification (CMMC) which requires supply chain security management, TPRM is becoming an imperative. It brings much needed visibility and control over third party cyber risks. Nowadays businesses are even beginning to undertake fourth party risk management programs seriously.
Conclusion
Cyber threats are constantly evolving and third parties are becoming prime targets for attackers to infiltrate their clients. This makes it crucial for organizations to invest in locking down both first-party and third party cyber risks. A multi-layered defense strategy combined with robust third party risk management gives organizations the best chance of thwarting cyber threats.
Cybersecurity and vendor risk programs require substantial investment but pay dividends by preventing potentially disastrous breaches and losses. In the digital age, these capabilities provide the keys to resilience and survival.
Image by Freepik
About the Author: Nagaraj Kuppuswamy
Nagaraj Kuppuswamy is the Co-founder and CEO of Beaconer, an esteemed enterprise specializing in managed third-party risk using the cloud-native AI-based solution. With an extensive portfolio of accolades and industry certifications, Nagaraj stands out as a seasoned expert, boasting over 16 years of dedicated involvement in the field of Cybersecurity. Throughout their career, he has predominantly focused on elevating the realm of third-party risk assessment. You can connect with him through Linkedin.
