Cloud computing has greatly revolutionized the business world by bringing about an acute change in the interaction between organizations and technology. The new opportunities provided by hybrid and multi-cloud architectures dictate the use of these modes. However, as these complex environments have become inherent features in business environments, businesses rely heavily on third party vendors, making third party risk management services more imperative than ever.
Why Third Party Risk Management is Becoming a Necessity With the Introduction of Hybrid and Multi Cloud Environments
By: Beaconer, Aug 17, 2024
Content
The Rise of Hybrid and Multi Cloud Environments
Various organizations are turning to hybrid and multi-cloud information technologies as a tactical strategy for organizing their IT processes. A hybrid cloud uses both the on-premise data centers and public or private clouds and has the benefits of the two. This model also allows the almost seamless shift of workloads between the local infrastructure and the cloud, providing both efficiency and cost savings.
Conversely, multi-cloud is the use of services from different cloud computing providers to render these services. This approach is effective in excluding vendor lock-in, which means organizations can access the right services in the market. Thus, businesses can improve the overall flexibility of workloads and create insurance against certain issues connected with latency.
The Growing Dependence on Third Party Vendors
Organizations have started using multi vendor and hybrid cloud solutions and, in turn, outsourcing cloud management solutions. These vendors include Infrastructure-as-a-Service (IaaS), software-defined hosting, Cloud storage, Security solutions and services, and SaaS applications. Outsourcing these functions has a number of advantages; however, it also generates many threats.
The use of third parties makes organizations delve into outsourcing or contracting other parties to perform delicate operations with the best TPRM software. The reliance generates risks because any weakness or break in a vendor’s system can lead to a threat to the organization’s security, compliance, and reputation.
Key Drivers Behind the Necessity of TPRM in Hybrid and Multi-Cloud Environments
Let’s discuss the important factors responsible for making TPRM necessary in hybrid and multi cloud environments.
Increased Complexity and Interdependencies
Hybrid and Multi-cloud architectures are complex architectures with several platforms, applications, and vendors it could incorporate. Such a structure generates many interlinkages, and when one of them is altered, the changes will affect the others. For instance, a cyber attack on a CSP may lead to information leakage, interruptions, and penalties from different organizations.
TPRM for third and fourth party risk thus plays a crucial role in such situations, depicting such interconnections and, in turn, evaluating the likely consequences that risks may have. With this understanding of how different components, from vendors to systems, work, organizations can plan contingency measures for security breaches and avoid organizational hitches.
Regulatory Compliance and Data Protection
This is mostly in areas of data protection and privacy of clients or end-users, and the general environment is gradually tightening its screw on businesses. Rules like the General Data Protection Regulation (GDPR), the Health Insurance Portability and Accountability Act (HIPAA), and the California Consumer Privacy Act (CCPA) enshrine the duty of looking after personal data.
Where an organization operates out of hybrid or multi-cloud capacities, it must ensure that its third party vendors comply with these regulations. In some cases, for non-compliance with the rules and regulations, the company has to pay heavy penalties, be legally responsible, and even face a bad reputation. TPRM has a major function of assessing the vendors’ positions on respective regulatory requirements as well as adequate data protection controls.
Cybersecurity Threats and Vulnerabilities
Cycling attacks characterized by higher frequency and complexity have amplified the need for security. Multi-cloud or hybrid structures for cyber risk assessment are susceptible to cyber attacks, as they have a variety of inlets and ways the offender can try to enter. The risk with a conjoining of multiple points of entry is that a breach in one vendor’s system can cascade across the various sectors of the network.
TPRM provides different organizations with tools to understand the third party vendors’ cybersecurity level and strengthens the security measures. This includes achieving security assessment at a minimum, working security into contracts and vendor policies at a preferred minimum, as well as setting response procedures.
Vendor Lock-In and Flexibility
This leads to the multi-cloud environment, where one of the primary benefits is the non-attachment to a specific provider, which enables the organization to switch between them easily. However, having flexibility in their supply chain has its disadvantages: switching between different vendors takes work and is replete with certain difficulties.
With TPRM, organizations can assess the risks related to vendor lock-in and ways of avoiding them. This includes checking the effects of vendor lock-in, data transfer, and contract conditions that enable easy transference to other vendors.
Implementing an Effective TPRM Strategy
Thus, organizations must be more active in the regulation of third party risks, especially since TPRM has become more crucial in hybrid and multi-cloud settings. Here are some key steps to implement an effective TPRM strategy:
Identify and Categorize Third Party Vendors
The first step in TPRM is, therefore, to identify all the third-party vendors involved in the management of an organization’s cloud infrastructure. Gartner predicted that by 2026, 75% of organizations will opt for a digital transformation model that uses the cloud as the fundamental platform. This encompasses the primary service providers, as well as second-tier and third-tier contractors or allies who may be capable of obtaining confidential information or primordial systems. Once those are established, then vendors need to be classified on the basis of the level of risk that they pose. Even in normal activities, some risks may be higher as a result of the nature of business operations or the type of data they deal with and, therefore, should attract higher levels of vetting and monitoring.
Conduct Thorough Due Diligence
In the current setting, organizations that contract third party vendors should ensure that they evaluate the latter for risks before working with them. It is important to analyze the financial situation of the vendor, his approach to the protection of data, adherence to the requirements of the current legislation, as well as a number of other factors. In the same regard, there should be a look at the vendor’s contracts and SLAs to conform to the organization’s growth risks.
Establish Ongoing Monitoring and Assessment
TPRM is not a one-off process but a consistent procedure that ought to be checked and evaluated. It is recommended that organizations review their third party vendors at least quarterly to determine their effectiveness, compliance status, and the level of risk they pose to the organization. These may be achieved by conducting periodic security audits, analyzing incident reports, and observing new developments in the vendor’s business environment that may affect their risk level.
Develop Incident Response and Contingency Plans
It is always possible to find that third party risks are still present no matter how meticulously they are controlled. Thus, the organizations need to implement incident response and contingency plans in order to be ready for possible disruptions that the third party vendors can initiate. These plans should describe actions to be made in case of breach, outage, or other incident, communication procedures, escalation, and recovery actions. Indeed, this means that there ought to be a plan as a way to reduce the effects of an incident there and then effect a quick mitigation.
Conclusion
Businesses need to understand the growing significance of Third Party Risk Management because of the growing adoption of hybrid and Multi-Cloud Platforms. Organizations must appreciate that dependency on third party vendors brings about various risks that have to be addressed regarding their operations, information, and image.
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.
