The integration of technology on the operations of any business has become the hallmark of success. However, this development has exposed enterprises to substantial risks thus making it necessary to invest in risk management methodologies. One of the conventional approaches is the use of risk management tools to access the chances that a third-party vendor exposes your business to.
According to Ponemon 2018 study on the cost of data, third-party vendors can be highly expensive to your business in case of a breach (it could cost up to $13 per breach!). As such, it’s necessary to have a reliable vendor risk management program that will safeguard your data from malicious people.
Vendor Risk Management: its principle and why you need it
Third Party Vendors: Who are they?
These are IT suppliers that are contracted by the business to help it run its daily activities.
- Software-as-a-service (SaaS)
They offer web-based services that will transform the end-user experiences in your business — for example, working on the back-end on a client’s email.
These services provide you with the equipment but give you the ability to control the software environment. For example, offering data storage services without necessarily investing in physical hardware.
- Platform-as-a-Service (PaaS)
This offers a platform for your developers to all your websites, mobile applications, and other software. The cloud location should offer streamlined services and excellent speeds.
Regulatory Compliance for VRM
Regulatory bodies will require documented policies and procedures on the role of vendors, the risks they expose the business to, and concrete methods to manage the risks. The Payment Card Industry Data Security Standard (PCI DSS) added a detailed guide on the vulnerability management and the technical factors that every business should consider when using cloud services.
The European Union General Data Protection Regulation (GDPR) demands that all the data controllers access the set technical controls used by the third-party vendors. Also, the New York Department of Financial Services (NY DFS) has established a Cybersecurity Rule that propels you to possess a security policy for every third-party vendor you engage in your business.
What are the Risks Associated with Vendors?
Vendors have the potential to expose your data to external threats and severely affect the operations of your business. SaaS providers offer a significant SQL security risk to all web application process. The IaaS providers can expose the company to Distributed Denial of Service attacks that will leave your staff unable to access essential file locations. PaaS offers similar risks as IaaS and SaaS. This makes it critical to monitor all the vendor controls to avert any breach that could damage your business image and possibly halt your operations.
Components of a Vendor Risk Assessment
The following steps are crucial in evaluating the risk portfolio of your vendors:
- List of Vendors – You should compile a comprehensive list of all the vendors integrated into your business.
- Assess Criticality – Identify the vendors that aid in the daily operation of your business
- Review all Information Accessed – You have the sole responsibility to determine whether to allow access to information or not. Ensure that you document the information accessible to all your vendors. If one is accessing personally identifiable information or any other private data, ensure that they understand the security requirements before you allow access!
- Identify Threats – Ensure that you classify the threat that each vendor pose to the business
- Assign a Risk Rating – Rate the risks involved by your vendors getting access to your systems, networks, and data and classify it as low, high, or medium.
- Analyze the Risks – After you’ve assigned the ratings, ensure that determine the likelihood of the risk occurring (multiply the possibility of a risk by the level of a threat). This analysis introduces different aspects of vendor’s risks necessary in critical decision making.
- Creation of Risk Response – After determining the level of risk for each vendor, you should assess the impact that an occurrence would have on your business. Once you achieve this, you decide whether to take the risk, refuse, transfer, or mitigate it.
- Set Controls – Once you accept the risk, ensure that you have multifactor authentication, encryption, firewalls, unique login identifiers, and other protective measures
- Define the Terms for Service Level Agreement – Let your vendors understand your security terms. The vendor agrees to maintain the cybersecurity security measures; you can then engage them in business.
- Continuous Monitoring – Ensure that you follow-up with the vendor to ensure that they adhere to the laid-down security guidelines.
How the Use of Automated Tools Help in Vendor Risk Management
While vendor risk management can be cumbersome, you can use automated tools to streamline the process. These technological tools will help you to map all the regulations, standards, and controls thus making it easy to spot the gaps that can compromise security in your business. The tools will record all the dates and the exact time that every activity happen thus making it easy to trace any anomaly in the third-party operations.