Are you worried about third-party risks and how they may affect your business?
It’s a known fact that third-party risks are unavoidable in supplier-buyer relationships. One way that you can provide significant cyber security for your business is through the use of a third-party risk management plan. This is a type of process that focuses on assessing and managing risks that are associated with third parties.
Large organisations are also at risk of third-party risks
There is clear evidence to support how even a small vendor can pretty easily exploit data of a much larger organisation, such as the likes of Target. In 2013, Target had to pay an $18.5 million settlement as a result of a cyber attack that occurred in 2013 resulting in over 41 million private customer payment details being exposed.
Importance of a third-party risk management plan
Ultimately, as a director or owner of a business, you are responsible for managing any potential or active third-party risks. The core goal with this is to inject a significant amount of protection over your data and implement all processes necessary to ensure that data is being handled securely and responsibly.
Yes, risks can still pose and arise from within your organisation regardless of if you are outsourcing or not but precautionary measures need to be taken to ensure that data stored and handled by your business is as safe as possible. It is important to remember that third-parties are not the only factor that can threaten the security of your data, but their involvement does heighten that risk.
The most common types of third-party risks:
Financial
If a third-party risk was to impact your business, it could have a seriously detrimental effect on your financial success. Not only could the victims of the third-party take matters further down the legal route, but you may also lose rights to certain actions such as selling a new product as a result of poor supply chain management.
Reputational
When your business goes under fire, especially as a result of a high profile cyber security breach, it is not unlikely that the media will report on it which could threaten the reputation of your business resulting in loss of current and future customers.
Security
The biggest issue at hand, as a result of third-party risks, is the exposure or loss of private data. This can have a quick and negative snowball effect on your business resulting in loss of clients, legal action, profit decrease and unretrievable data loss.
Legal
A third-party risk will have an impact on your businesses compliance with local legislation and any other regulations or agreements previously made (UpGuard, 2022). This is especially crucial and detrimental for businesses in the financial, government or healthcare sectors.
Phishing attacks on organisations
Phishing is a common type of cyber attack where an attacker will attempt to gain unauthorised access to private data or credentials by tricking its targets. This is typically carried out in the form of an email where the attacker will impersonate a familiar individual and require the target to download malware through a link or attachment.
Currently, we are experiencing high volumes of phishing attacks on businesses. Cyber criminals have been taking advantage of users working from home where emails and cyber security training isn’t as frequently monitored and delivered as they would be within a permanent office setting. This has led to many organisations suffering from data exploitation or ransomware threats due to this particular cyber attack.
How to manage third-party risks
Businesses are heavily reliant on third-parties as a means of improving profitability, efficiency and decreasing their costs. As we have outlined in the blog, third-parties come with their fair share of risks that can have a seriously detrimental effect on your business.
Organisations are beginning to take more comprehensive measures to ensure that their third-party uses comply with the latest regulations, agreements and legislation whilst also protecting all confidential information and avoiding using any unethical practices that could threaten the security of your business.
- Analyse and manage third-party risks – Every third-party vendor relationship is different and comes with its own set of risks that need to be accessed in time. You should be looking at risks such as contract, political, process, compliance, legal and any potential system failures that could impact your business. A great way to protect your company if the unavoidable did happen is to strongly govern your third-party relationship through a carefully written contract that establishes the rights and responsibilities of the third-parties in use to help you manage them more efficiently.
- Screening & due diligence of third-parties – Conducting a comprehensive screening and due diligence program will give you a much better understanding of the third-party that you are working with. This process will help you categorise any potential risks that could come with the third-party in question and provide it with a risk score.
- Risks that are beyond cyber security – Cyber security plays a huge role in the risks that are involved with third-parties. However, it isn’t the only risk that should be prioritised and we need to look at the bigger picture. Consider financial risks, ethical risks, privacy risks, strategic risks, reputational risks, compliance risks and so much more.
- Contracting and procurement – As explained earlier in the blog, one way to protect your business against the risks that come with third-parties and to be able to have more control over them is to have a carefully written out contract in place.
The key takeaway is that despite the benefits that do come with third-parties and how they can help to take your business to the next level, they do come with their fair share of risks and it is imperative to know how to manage and identify these risks effectively.
For more information on third-party management or to speak with one of our IT specialists, call us on 0121 289 4477.
