As digital transformation and interconnected ecosystems continue to expand, effective third-party cyber risk management (TPCRM) is increasingly becoming a top priority for chief Information security officers and risk managers. Yet, despite this growing awareness, organizations continue to struggle with risk management practices that drain both human and financial resources while providing limited value in return.
A recent survey by Ponemon reports that organizations currently rely on spreadsheet assessments and/or risk rating tools to identify and manage third-party cyber-risk with 54% of respondents noting that the results of using these tools are only "somewhat valuable." Even more significant: only 8% of respondents believe the assessments and ratings led their organizations to take further action.
What’s missing in many of today’s TPCRM programs is visibility into vendor ecosystems and insights on which areas to focus on. Here are three tried and true strategies that can help you close the vendor visibility gap and optimize your program:
1. Engage the C-suite and executive board. Given the makeup of boards and the relatively new creation of the CISO role, cybersecurity and third-party cybersecurity, are not typical boardroom topics. That’s changing, according to a new BDO cyber governance study, which shows that cybersecurity is becoming a top concern for boards. One reason: the average cost of a data breach today is estimated to be $4 million and the cost of third-party breaches come in at $7 million. This is a trend that all security teams should capitalize on, because board involvement tends to drive cybersecurity maturity. According to Global consulting firm Protiviti, there is a high correlation between board involvement and highly mature vendor risk management (VRM) systems.
2. Get up to speed with new TPCRM delivery models. New delivery models and platforms, like exchanges, are critical to creating scalable programs that can evolve with your growing ecosystem and cyber threats. Bringing customers and third parties together not only facilitates information sharing, but it can streamline and accelerate manual and redundant data gathering tasks. By consolidating data into a single comprehensive platform, organizations can easily access and update that data as threat levels and mitigation efforts change. In addition, platforms that collect data in a structured, standardized fashion, and feature analytics, enable you to take action on the data you are collecting. So now you’ve progressed from simply collecting an assessment and checking a box, to truly identifying vendors and risk that require your attention. Many studies have shown that investment in ad hoc or piecemeal approaches not only do not provide value but they actually increase costs. At the same time, investing in better solutions and delivery models will increase effectiveness while decreasing the cost of maintaining your TPCRM program.
3. Prioritizing third parties by risk. Not all third parties are created equal and applying the same approach to your third parties is both cost prohibitive and impractical. A recent study from CyberGRX found that not prioritizing your third parties before assessing them can be four times as costly as taking the time to prioritize them. Given the resource constraints IT security teams are facing today, prioritization is critical for effective execution. Ranking your third parties by inherent risk will help you create a due diligence strategy with the most yield. Once you’ve conducted your due diligence, it’s equally critical to prioritize control gaps with the most yield, for example what gaps require immediate attention or are nonstarters. Understanding the critical risks and gaps helps you allocate your resources more efficiently.
At the end of the day, third-party cyber risk management isn’t just a security tactic, it’s a strategy. And it should be a comprehensive strategy that engages all appropriate stakeholders and enables informed decision making that actually reduces risk. These three practices are positive harbingers for TPCRM as the industry moves from compliance and reactive tactics to risk based and proactive strategies.
About the Author
Fred Kneip, CEO at CyberGRX
As Chief Executive Officer, Fred Kneip is responsible for the overall company direction of CyberGRX. Prior to joining the company, Fred served in several senior management roles at Bridgewater Associates, including Head of Compliance and Head of Security. Before that, Fred was an Associate Principal at McKinsey & Co., where he led the company's Corporate Finance practice. Fred has also worked as an investor with two later-stage private equity investment firms. Fred holds a B.S.E. from Princeton University and an M.B.A. from Columbia Business School