Third-party risks are a very serious and ever-more pressing need than ever before. Our monumental reliance on software as a service (SaaS) tools only grows with each new technology that we integrate into our lives, homes, and workspaces.
Meanwhile, more than 80% of companies share their cloud data with third parties. With the increased use of SaaS and other services, it is essential to understand the risks associated with third parties and how to best manage them. This is the best way to prevent malicious actors or accidental data loss.
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How to Approach the Issue
Third-party risk management involves assessing the potential security vulnerabilities associated with working with outside parties; such as financial or reputational damage, data breaches, or legal liabilities. It also includes developing strategies and processes to identify, assess, monitor, and mitigate these risks. By understanding the potential risks and implementing appropriate measures for managing them, you can reduce your exposure to liability and ensure that your systems remain secure.
Meanwhile, it’s not just about your data being sold. Your application vendors also have their own vendors, and they have their suppliers, and the supply chain goes on near-endlessly after that. That’s a lot of organizations with access to your data, all the way down the line!
All this necessarily opens you to the possibility of phishing and ransomware, as well. If a hacker can break into an organization and steal some of your personal data, then they could ransom the company or use it to phish you directly for more information.
Managing Third-Party Risks
Be aware and careful of who has access to view the data you store on the software that you use. This will enable you to make better decisions about the privacy of your confidential information.
Pivoting to better protect your data may involve internal and external changes to your security posture as it currently stands, and that might even stymie productivity for a short time. That minor obstacle, however, is nowhere near as important as securing your data for the future.
3 Tips to Help Organizations Avoid Third-Party Risks:
- Perform Due Diligence: Before engaging with a third-party partner, it’s essential to perform due diligence to assess their financial stability, reputation, and compliance with legal and regulatory requirements.
This involves conducting background checks, reviewing financial statements, and verifying credentials and references. By conducting due diligence, organizations can identify potential red flags and make informed decisions about whether to engage with a third-party partner.
- Establish Clear Contracts: Contracts should clearly outline the scope of work, timelines, deliverables, and payment terms. They should also include provisions for data protection, confidentiality, and intellectual property rights.
By establishing clear contracts, organizations can ensure that both parties understand their obligations and responsibilities, reducing the risk of misunderstandings or disputes.
- Implement Ongoing Monitoring: Ongoing monitoring is essential to identify and mitigate risks that may arise during the course of the engagement. This involves regularly reviewing the third-party partner’s performance, financial stability, and compliance with legal and regulatory requirements.
It also involves monitoring for changes in the business environment that may impact the third-party partner’s ability to fulfill their obligations.
By implementing ongoing monitoring, organizations can identify and address potential issues before they become major problems.
Third-party risks are a critical consideration for organizations that engage with external parties. With the increasing complexity of business operations and the growing use of technology, effective third-party risk management has become more important than ever. By implementing a comprehensive third-party risk management program, organizations can identify, assess, and mitigate these risks effectively.
This includes establishing robust policies and procedures, performing due diligence on third-party partners, and implementing ongoing monitoring and oversight. Failure to effectively manage third-party risks can result in significant consequences, including financial loss, legal and regulatory penalties, and damage to the organization’s reputation. By proactively managing these risks, organizations can minimize their impact and ensure their continued success.
Ultimately, effective third-party risk management is a critical component of a comprehensive risk management program and essential for protecting an organization’s assets, reputation, and long-term viability.