Thursday 20th April 2023
BLOG: Best Practices for Managing and Mitigating Third-Party Risks – Lessons Learned
As businesses continue to expand and rely on third-party vendors and partners, the risks associated with these relationships have become a significant concern for organizations. A security breach or unethical practices by a third party can have severe consequences such as data breaches and reputational damage to the organizations. As a result, it has become crucial for companies to adopt best practices for managing and mitigating third-party risks.
In this blog, we will delve into the best practices that organizations can follow to mitigate third-party risks. These practices include conducting thorough due diligence, implementing contractual safeguards, monitoring third-party performance, providing cybersecurity training, and having an incident response plan in place. We will also analyze notable third-party risk incidents and the lessons learned from them. These insights will provide organizations with an opportunity to strengthen their third-party risk management strategies and safeguard themselves from potential security breaches and reputational damage.
Best Practices for Managing and Mitigating Third-Party Risks
- Conduct Thorough Due Diligence: Before engaging with a third party, organizations must conduct thorough due diligence to assess the vendor’s security and compliance practices. This includes reviewing their security policies and procedures, conducting background checks, and verifying certifications and compliance with industry standards. It is also essential to review the third party’s history of past incidents, such as data breaches or legal issues.
- Implement Contractual Safeguards: Organizations must implement contractual safeguards to protect against third-party risks. Contracts should include clear provisions outlining security requirements, data handling procedures, and incident response protocols. It is also important to include clauses allowing for regular security audits and assessments.
- Monitor Third-Party Performance: Organizations should continuously monitor third-party performance to ensure compliance with contractual obligations and security requirements. This includes monitoring data access, performing regular security assessments, and reviewing incident response plans.
- Implement Cybersecurity Training: Cybersecurity training for both employees and third-party partners is crucial to prevent security incidents. All parties should be aware of their responsibilities in protecting sensitive information and responding to security incidents.
- Have an Incident Response Plan in Place: Organizations should have an incident response plan in place that includes clear procedures for responding to a security incident involving a third party. This includes establishing communication protocols, identifying key stakeholders, and conducting a thorough investigation of the incident.
Notable Third-Party Risk Incidents and Lessons Learned
Target Data Breach: In 2013, Target suffered a massive data breach that exposed the credit card information of over 40 million customers. The breach was caused by a third-party vendor who was responsible for managing Target’s HVAC system. The vendor’s security credentials were compromised, allowing hackers to gain access to Target’s network.
Lesson Learned: Organizations must ensure that all third-party vendors have proper security credentials and adhere to industry best practices.
Equifax Data Breach: In 2017, Equifax suffered a data breach that exposed the personal information of over 145 million customers. The breach was caused by a vulnerability in a third-party web application framework that Equifax used.
Lesson Learned: Organizations must perform regular vulnerability assessments on all third-party applications and systems to identify and remediate vulnerabilities.
Cambridge Analytica Scandal: In 2018, it was revealed that political consulting firm Cambridge Analytica had harvested the personal information of millions of Facebook users without their consent. Cambridge Analytica obtained the data through a third-party app.
Lesson Learned: Organizations must perform due diligence on third-party apps and platforms to ensure that they are not harvesting sensitive information without user consent.
SolarWinds supply chain attack: In late 2020, SolarWinds, a software company that provides network management tools, suffered a supply chain attack that resulted in the compromise of several high-profile organizations, including government agencies and Fortune 500 companies. The attack was the result of a vulnerability in SolarWinds’ software update system, which hackers exploited to inject malware into the software.
Lesson learned: Organizations should implement a comprehensive supply chain risk management program that includes due diligence, monitoring, and regular security assessments of third-party vendors.
Third-party risks are a significant threat to organizations, and proactive management and mitigation are crucial. By implementing best practices, such as conducting thorough due diligence, implementing contractual safeguards, monitoring third-party performance, implementing cybersecurity training, and having an incident response plan in place, organizations can reduce the risks associated with third-party vendors and partners. Additionally, by learning from notable third-party risk incidents, organizations can strengthen their third-party risk management strategies and better protect themselves from potential security breaches and reputational damage.
The Orpheus Cyber approach
With our approach, no involvement from third-party organizations is necessary, making it simple to establish the platform. Clients can assess the cyber risk of their partners within a matter of hours, thanks to continuous supplier monitoring. This is more advantageous for the organization compared to annual or quarterly reviews, which only provide a snapshot of the risk. Additionally, clients can collaborate with their partners to diminish the risk by accessing the score details and confirming that the necessary measures have been implemented, rather than solely relying on their assurance. Find out more here.
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