This post was originally published by Abi Tyas.
Third-party risk management is important because failure to assess third-party risks exposes an organization to , data breaches, and reputational damage.
To reduce the inexorable associated with vendor relationships, regulators globally are introducing new laws to make a regulatory requirement. This can include the management of sub-contracting and on-sourcing arrangements ().
What is third-party risk management?
is the process of analyzing and controlling risks associated with outsourcing to third-party vendors or service providers. Increasingly, the scope of vendor management extends to sub-contracting and on-sourcing arrangements to mitigate fourth-party risk.
This is particularly important for high-risk vendors who process information.
This means due diligence is required to determine the overall suitability of third-parties for their given task and increasingly, whether they can keep information secure.
Due diligence is the investigative process by which a third-party is reviewed to determine if it’s suitable. In addition to initial due diligence, vendors need to review on a continuous basis over their lifecycle as new security risks are introduced over time.
The goal of any is to reduce the following risks: : The risk of exposure or loss resulting from a cyberattack, or other security incidents. This risk is often mitigated by performing due diligence before onboarding new vendors and ongoing monitoring over the vendor lifecycle.
Operational risk: The risk that a third-party will cause disruption to the business operations. This is generally managed through contractually bound service level agreements (SLAs). Depending on the criticality of the vendor, you may opt to have a backup vendor in place to ensure business continuity. This is common practice for financial institutions.
Legal, regulatory and compliance risk: The risk that a third-party will impact your organization’s compliance with local legislation, regulation or agreements. This is particularly impor ..
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