Large-scale breaches that originate due to attackers targeting third-party weaknesses will continue to escalate until senior leadership and the C-suite starts taking third-party risk more seriously. A new survey out by the Ponemon Institute found that the C-level executives are not engaged in their organizations' third-party risk management processes and that a lack of formal programs in managing that risk is endangering the security and compliance of enterprises today.
Conducted among more than 600 individuals who have a risk management role in their organization, the Tone at the Top and Third Party Risk study takes a deep dive into how well enterprises are tackling the problem of threats targeted against their vendors and business partners.
About seven in 10 respondents believe that third-party risk is increasing or staying the same in their organizations, and 75% do see third-party risks as serious. The organizations represented in this research spent an average of $10 million in the last 12 months responding to security incidents coming as a result of negligent or malicious third parties.
In spite of that, enterprises don't view third-party risk as a primary risk management objective. Only 29% of respondents reported that their organization has a formal third-party risk management program and just 21% believed their organization's effectiveness in mitigating or curtailing third-party risk is highly effective.
As things stand, only about 30% of organizations assess security controls of business partners, vendors, and other third parties. When they do a review, the most common practice is a legal review. And one-third of organizations who do review controls said it would be unlikely that their organization would cease or terminate an agreement with a third party if the controls were found to be lacking compared to requirements. What's more, over half of organizations say that their risk assessment of third-parties doesn't give them visibility into the intellectual property or other high-value data in the hands of third parties.
Finally, many organizations aren't mitigating risk of third-party damage through insurance, either. Fewer than half of organizations require business partners or vendors to have cyber insurance, and only 26% of organizations carry cyber insurance that includes specific provisions to reduce the impact of breaches caused by third-parties.
This lack of focus and prioritization of third-party risk likely comes from the top ranks. The survey showed that only 37% of respondents agree that C-level executives in their organizations believe they're ultimately accountable for third-party risk management. And only about 40% of their board of directors are involved in overseeing the management of third-party risk.
"The research reveals the gap between the growing increase in third party risk and the lack of a governance strategy to mitigate or curtail the risk," the report says. "The business case can be made for dedicating more resources to third party risk management by estimating the potential costs to your organization due to negligent or malicious third parties."