Businesses rely heavily on third-party vendors and partners to provide essential services and support. However, with this reliance comes an inherent risk of cyber threats and vulnerabilities. With that in mind, it is crucial for organizations to have a robust and effective third-party cyber risk management strategy in place.

Identify Third Parties

The first step in third-party cyber risk management is to identify all the vendors, suppliers, consultants, and other external entities that have access to your organization's systems and data. This includes both existing as well as potential future third parties. Create a comprehensive inventory of all the third parties and categorize them based on the nature and level of access they have.
For example, a retail company might identify its point-of-sale (POS) system provider, payment processors, and cloud service providers as critical third parties with high-risk exposure.

Understand Inherent Risks

Once you have identified the third parties, the next step is to assess the inherent risks associated with each vendor. Conduct a thorough evaluation of the services they provide, their access level to your systems and data, their security posture, and their history of past incidents or breaches.
For instance, if you are a healthcare organization outsourcing medical billing services, you need to consider the sensitivity of the patient data being handled by the third-party vendor and the potential impact of a breach on your organization's reputation.

Prioritize & Assess

Prioritize the identified third parties based on the level of risk they pose to your organization. Focus your resources on conducting comprehensive risk assessments for the high-priority vendors first. This assessment should include evaluating the third parties' security controls, incident response capabilities, employee training programs, and compliance with relevant cybersecurity standards and regulations.
As an example, a financial institution may prioritize its payment processors and custodian banks as high-risk vendors due to the potential financial and reputational impact of any security breaches.

Streamline and Expand

Once you have assessed the existing third-party vendors, it is essential to streamline your processes and expand your risk management efforts throughout the vendor lifecycle. This includes incorporating cybersecurity requirements into your vendor onboarding and procurement processes, establishing strong contractual obligations regarding data protection and security, and regularly monitoring and auditing third-party activities.
Consider the example of an e-commerce company that incorporates cybersecurity clauses into their vendor contracts, mandating regular vulnerability assessments and penetration tests for their cloud service providers.

Review and Repeat

Cyber threats and vulnerabilities are ever-evolving, so it is crucial to have a continuous monitoring and review process in place. Regularly review and reassess the risks associated with your third-party vendors, paying attention to any changes in their services, access levels, or security controls.
For instance, a technology company may periodically review its software development outsourcing partners to ensure they are adopting the latest security best practices and techniques.

By following these steps and implementing best practices in third-party cyber risk management, organizations can significantly reduce the likelihood and impact of cyber incidents originating from third parties. Remember, it is essential to remain proactive, vigilant, and adaptive in the face of evolving cyber threats.

The five key steps - namely, identifying third parties, understanding inherent risks, prioritizing and assessing, streamlining and expanding, and reviewing and repeating - form the foundation for effective third-party cyber risk management. By incorporating these steps into your risk management strategy, your organization can enhance its resilience against the growing threat landscape.