Third party risk management (TPRM) is a critical component of any organization’s cybersecurity program. TPRM is the process of identifying, assessing, mitigating, and monitoring the risks associated with third-party relationships. These relationships can include vendors, suppliers, contractors, and other service providers. In this article, we will explore the framework and process of TPRM and discuss the benefits of implementing a TPRM program.
The Framework For Third-Party Risk Management
The framework for TPRM includes four key stages: Identify, Assess, Mitigate, and Monitor. Let’s take a closer look at each stage.
The first stage of TPRM is to identify all third-party relationships within the organization. This includes defining the scope of these relationships, creating an inventory of third-party relationships, and assessing the criticality of each relationship.
Defining the scope of third-party relationships involves identifying all of the vendors, suppliers, contractors, and other service providers that the organization relies on. Once this scope is established, the organization can create an inventory of these relationships, including information about the services provided, the data shared, and the systems used.
Assessing the criticality of each relationship involves evaluating the importance of each third-party relationship to the organization. This evaluation can be based on factors such as the impact on the organization’s operations, financials, or reputation in the event of a security incident.
The second stage of TPRM is to assess the risks associated with each third-party relationship. This is the process of evaluating the security and privacy controls of each third party, as well as identifying any vulnerabilities or threats that could impact the organization.
The evaluation of security and privacy controls involves reviewing the third party’s security policies, procedures, and standards. This can be done through questionnaires, audits, or assessments of the third party’s systems and processes. The evaluation should consider factors such as data encryption, access controls, and incident response plans.
Identifying vulnerabilities and threats involves assessing the third party’s risk posture and evaluating the potential impact of these risks on the organization. For example, if a third party has weak security controls, it may be at risk of a data breach that could impact the organization’s data or systems.
The third stage of TPRM is to mitigate the risks identified in the assessment stage. This starts with developing a plan to address the identified risks and defining specific requirements for third-party contracts.
The plan to address identified risks should be tailored to the specific risks identified in the assessment stage. For example, if a third party has weak security controls, the plan may include requirements for the third party to improve their security posture, such as implementing additional security controls or undergoing a security assessment.
Defining specific requirements for third-party contracts involves including contractual provisions that protect the organization’s data and systems. This may include requirements for data encryption, incident reporting, and indemnification clauses.
The fourth stage of TPRM is to continuously monitor the performance of third-party relationships and update risk assessments as needed. This involves ongoing monitoring of the third party’s security posture, as well as any changes to the organization’s relationship with the third party.
Ongoing monitoring can be done through regular assessments, audits, or questionnaires. It is important to establish clear reporting requirements and to define a process for addressing any issues that arise during monitoring.
The Process of Third-Party Risk Management
In addition to the framework for TPRM, there is also a process for managing third-party relationships. This process includes three key stages: pre-engagement, during the engagement, and termination and offboarding.
The pre-engagement stage involves conducting due diligence on potential third-party relationships and defining the scope of services to be provided. This includes researching the third party’s security and privacy controls, evaluating their risk posture, and ensuring that they meet the organization’s standards and requirements.
The pre-engagement stage is also an opportunity to establish clear expectations for the relationship, including service level agreements, data security requirements, and incident response procedures. These expectations should be included in the third-party contract.
During the Engagement
The engagement stage involves ongoing monitoring and reporting of the third-party relationship. This includes regular assessments of the third party’s security posture, monitoring for any changes to the relationship, and managing any incidents or remediation that may be required.
It is important to establish clear reporting requirements and to define a process for addressing any issues that arise during the engagement. This can include incident response procedures, escalation paths, and communication protocols.
Termination & Offboarding
The termination and offboarding stage involves developing and implementing a plan to terminate the third-party relationship and transition to a new third party, if necessary. This includes defining a process for data transfer or destruction, ensuring that contractual obligations are met, and terminating access to systems and data. Establishing a clear plan for offboarding to minimize the impact on the organization and to ensure that data is properly managed and protected is important.
The Benefits of Third-Party Risk Management
Implementing a TPRM program can provide several benefits to organizations. These benefits include:
Protection Against Data Breaches & Other Security Incidents
By identifying and assessing the risks associated with third-party relationships, organizations can take steps to mitigate these risks and protect against data breaches and other security incidents. This can include improving security controls, implementing incident response plans, and developing a clear plan for offboarding third parties.
Reduction of Financial & Reputational Risk
Third-party relationships can pose significant financial and reputational risks to organizations. By implementing a TPRM program, organizations can minimize these risks by ensuring that third parties meet their security and privacy standards and that contractual obligations are met.
Demonstration of Compliance With Regulatory Requirements
Many industries are subject to regulatory requirements that mandate the implementation of TPRM programs. By implementing a TPRM program, organizations can demonstrate compliance with these requirements and avoid potential fines and penalties.
In conclusion, implementing a TPRM program is a critical component of any organization’s cybersecurity program. By identifying, assessing, mitigating, and monitoring the risks associated with third-party relationships, organizations can protect against data breaches and other security incidents, reduce financial and reputational risk, and demonstrate compliance with regulatory requirements. Organizations looking to implement a TPRM program can use TPRM software, providing automated processes and valuable insights into the risks associated with third-party relationships. As the threat landscape continues to evolve, it is essential for organizations to implement a comprehensive TPRM program to protect against third-party risks.