Introduction to Third-Party Risk Management and Cloud Security

It is really hard for businesses these days to be successful on their own without partnering with third-party vendors, suppliers, etc. Working with such partners always poses security risks as they get access to your client and company data. With the increase in supply chains, IoT issues, and cloud usage, third party risk management (TPRM) has become vital.

A recent survey showed that over 48% of organizations face security complications and risks with their third-party vendors. TRPM solution providers identify these risks and try to mitigate them as much as possible. In the following blog, we will learn more about the importance of third-party risk management and cloud security for organizations.

Content

Third Party Risk Management - What is it? (TPRM)
Importance of Cloud Security & Third-Party Risk Management (TPRM)
Best Practices for Third Party Risk Management (TPRM)
An Overview of Third-Party Risk Management Process (TPRM)
Conclusion

Third Party Risk Management – What is it?

TPRM refers to risk management related to identifying, assessing, and mitigating the risks that 3rd-party vendors pose to an organization. These third parties can include vendors, contractors, suppliers, distributors, or any other service providers. With TPRM, organizations learn about their partnerships, how they come into use, and the security measures these third parties have in place.

Depending on an organization’s requirement and scope of work, a third-party risk management program may vary. Different industries have different rules and regulations, still most TPRM practices are applicable to almost all businesses. They cover everything from operational, legal and compliance, financial, reputational, cybersecurity, and other risks.

Importance of Cloud Security & Third-Party Risk Management

It’s not a new concept, but the shift to cloud, rise in cyber attacks, and data breaches, have made TPRM very important. Almost all industries, no matter their size or location, now rely on these solutions. Third-party vendors can affect the following things –

Lapses and internal outage that affect operations
External outage which hampers areas within a supply chain
Vendor outage will affects the supply chain for organizations
Operational issues affecting data storage, gathering, and security

Make sure you have proper TPRM in place so that you are well-prepared to handle risks. In most cases, a company’s partners further have their own partnerships and vendors. This poses more risks because organizations aren’t directly in touch with them. For this, fourth party risk management comes into play and it is also an effective method.

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Best Practices for Third Party Risk Management

Whether you are a new business owner or have years of experience, the following best practices will help you with your TPRM strategy:

1. Prioritize Vendor Inventory

Not all vendors have an equal importance for an organization, some are really critical while some are not so much. For efficient risk management, you must categorize vendors into different tiers – from high risk and high importance to low risk and low importance.

Organizations spend a lot of resources and time in vendor risk management. You should collect as much evidence as possible and perform ideal due diligence before proceeding further with them. Vendors posing low threats can pass with less security checks. Your operations and supply chain will depend a lot on the type of vendors you partner with.

2. Use Automation Whenever You Can

When you automate your TPRM process, then it will become efficient, consistent, and repeatable. Automation can be introduced to the intake and onboard of vendors, vendor tiering and risk calculation, assessing and mitigating tasks, vendor performance and reviews, alerts and notifications, report running and scheduling, etc.

Each program for TPRM is unique so you have to check out the entire process and search for things which are possible to automate. Even small automations can save you time and resources, and work wonders in fighting various risks.

3. Prioritize Cybersecurity

Cyber data breaches increased by more than 70% between 2021 and 2023. When it comes to third party risk management, you must focus on cyber and cloud security. Hackers are trying to attack organizations and steal data through ransomware and other techniques.

Organizations must ensure that their third-party vendors don’t pose such threats. Apart from this, reputational, geopolitical, financial, strategic, compliance, operational, and ethical risks must also be taken care of.

Prioritize Cybersecurity

An Overview of Third-Party Risk Management Process

Managed third party risk is great for organizations but it is not a straightforward process. You have to think about all related factors and follow a dedicated framework. The following steps will help you with TPRM –

Develop inventories of your third-party relationships
Assess and categorize the types of risks posed by vendors
Keep risk management activities on priority
Set up teams for defense, governance, and audits
Review vendor risk management and benchmarking processes regularly
Have test methods for critical cybersecurity and other risks
Have proper plans to manage vendor threats and breaches

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Conclusion

Most businesses have to have partnerships with third-party vendors to succeed. They cannot ignore this, but what they can do is have an effective third party risk management program in place to fight all possible threats and risks.

In the above blog, we read about how TPRM and cloud security helps keep businesses safe. Organizations can identify and mitigate vendor risks, improve relationships with partners and customers, manage operations and their supply chain better, and have an overall better security in place. If you work with third-party vendors, don’t forget to utilize TPRM.

Author Bio

Nagaraj Kuppuswamy

Nagaraj Kuppuswamy is the Co-founder and CEO of Beaconer, an esteemed enterprise specializing in managed third-party risk using the cloud native AI based solution. With an extensive portfolio of accolades and industry certifications, Nagaraj stands out as a seasoned expert, boasting over 16 years of dedicated involvement in the field of Cybersecurity. Throughout the course of their career, he has predominantly focused on elevating the realm of third-party risk assessment.