Most organizations assess vendor risk in one way or another: be it with emails and spreadsheets or with dedicated tools. However, the challenges around efficiency and repetitive work remain. In addition, a lack of consistent reporting and continuous monitoring could make an organization vulnerable to data breaches.
Building a scalable third party risk management program (TPRM) can help you stay ahead and secure your supply chain.
A scalable program is one where you, on a continuous basis, mitigate the risk that arises from third-party and subcontractor relationships based on a business decision to outsource.
It is important to remember that the purpose of a third party risk management program is to understand where risk exists arising from the use of third parties and to remediate this risk to your organization. When establishing a program, focusing on ‘quick wins’ that allow you to demonstrate progress is an essential building block for program success.
Understand your inventory of third-parties. Start with the most important ones from a risk perspective. Those would be the companies that you exchange confidential and restricted information with, and the ones you grant access to your information and to your various platforms and infrastructure. Ask these companies who their third-parties are as well. Realize that building the full third party inventory will take an extended amount of time.
It will be useful to ask yourself these questions:
Put in place a data security appendix for new contracts with third parties being onboarded that provides for three critical things:
These steps will assist you in having a process that is efficient in assessing and mitigating the risk that arises from the use of third-parties. You could spend a lot of time and money trying to build the perfect program and not do anything to mitigate the risk that comes from outsourcing. This part of the conversation sometimes gets lost because people focus on making sure they have all the components of the program in place before they begin to address the risk that exists.
Defining clear goals early on will result in quick wins.
The program is not meant to assess, but to assess and mitigate the risk associated with third-party outsourcing relationships. However, many programs assess risk and stop. They don’t hold the third-party accountable for mitigation of the issues that were identified, so they don’t achieve the key goal of risk mitigation.
A scalable third-party risk management program should involve the ability to continuously monitor the controls that are in place at your third-party. So it might be helpful to ask:
Start with monitoring your most critical third parties to identify security issues that may exist which have the potential to be exploited. Run a limited pilot and don’t try to boil the ocean by performing security scanning of a large number of your third-parties initially. Build out a process that allows you to take action on findings and mitigate them. You can scale it later, and also discover unknown fourth-party / subcontractor relationships.
When you start looking at risk in your supply chain, you have to divide your third-parties into two groups:
This is the concept that I call “stopping the bleeding” that occurs when you continue to bring new companies on board and not properly address security, both from a risk assessment perspective and from a legal or contractual perspective.
The benefit is that new third-parties can be the starting point to build a scalable program. You start with the new, and then, when you have a program that is scalable and more mature, you go on to address existing third-parties through your new process.
So when a contract comes up for renewal, for example, you can address some of the contractual aspects that may not have initially been addressed prior to having a data security appendix for the contract in place.
It depends on the size and complexity of the organization and its third-party ecosystem, but everyone can start small and scale to meet organization needs. Different industries and different companies within industries have different risk profiles and use outsourcing to different extents, and some take greater risks than others.
One of the opportunities that companies have is to move to a continuous monitoring of their third-parties and away from a “point in time” assessment (say once a year). The greater use of technology means that companies will be less reliant on people to perform ‘point in time’ assessments in the future and they’ll have a more accurate and timely understanding of the risk that exists within their environment.
Your initial critical insights may come from the first ‘point in time’ assessment. After that, if you have a framework that allows you to continuously monitor the controls in place and the changes in the relationship with the third-party, it’s much more effective than doing an annual assessment, which over time yields less insight and is static in nature, while expensive to perform. This would tell you where you stand at a point in time, but how can you guarantee that form a security perspective you are OK for the remaining 364 days of the year?
The real value comes in understanding on an ongoing basis the security posture of the third-party.
To learn how our ThirdPartyTrust platform can help you scale your TPRM program, request a demo now:
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