Marrying IT Risk Management With Enterprise Procurement

Enterprises have increasingly found that their vendors and other third parties are putting shared information at risk, but the disconnect between procurement professionals and IT risk managers has made it difficult to address information security risks during the vendor contract process.

What's more, the volume of vendor contracts in the enterprise would make it prohibitively expensive to simply put all vendors on the hook for the same information security requirements. That is why many IT risk management professionals advocate for better integrating supply-chain information risk management into the vendor management process.

"The challenge for those very large organizations is in dealing with very large numbers of suppliers who can't be dealt with individually, and where, for cost reasons, you can't apply the same rigorous requirements on every contract," says Michael de Crespigny, CEO of the Information Security Forum (ISF). "Otherwise you end up imposing a lot of costs to acquire because those costs ultimately get passed back to the acquirer by the supplier."

Last week, the ISF released a new report on this challenge experienced by its members, "Securing the Supply Chain," alongside a new process called the Supply Chain Information Risk Assurance Process (SCIRAP). SCIRAP is meant to help organizations better prioritize information risks within the supply chain in a way that makes sense for business stakeholders. The development of the process was driven by mounting statistics and anecdotal evidence within individual organizations of the consequences that stem from ignoring supply-chain information risk management.

For example, the Ponemon Institute reported in 2012 that 42 percent of breaches are the result of third-party mistakes. According to Larry Ponemon, founder of Ponemon Institute, the cyberunderworld has definitely taken notice of the deficiencies in security at the third-party vendors that service high-value enterprises being targeted by cybercriminals.

[How well do you normalize data for risk management? See Does Your Security Data Mesh With Risk Metrics?.]

"A lot of the bad guys have realized that sometimes the easiest way to get inside of a big company, like a large bank or pharmaceutical agency, is to basically identify subcontractors and vendors that have a link to the IT infrastructure or information," Ponemon says. "It's a lot easier to hack and break into the vendor than it is to break into the more sophisticated company with a better security posture."

However, Ponemon echoed de Crespigny's observations about the sheer problems of scale in managing vendors at large enterprises. As a point of example, he related a case study he did with a large pharmaceutical company that worked with 14,000 vendors, 11,000 of which captured data owned by the firm that was considered sensitive or confidential. And those are just numbers: Each one of them represents complex interactions, some of them governed with only loose relationships between the vendor and the contact within the enterprise.

"When a lot of organizations enter into an agreement, it's a handshake, and maybe it's legal because you've actually signed a contract, but there's really no testing or vetting in place that's meaningful," Ponemon says.

According to de Crespigny, ISF worked with its members to codify a process by which acquirers could implement mechanisms to identify the most risky suppliers and address risks by a rational prioritization. At its foundation, the process identifies a number of factors about the information handled by suppliers that organizations should take into account, such as whether the organization is handling personally identifiable information, intellectual property, or key information about how the business runs.

"Around those we came up with a method that helps them think about how they follow the information on a contract-by-contract basis and identifying individual contracts they should be focusing on to impose particular information security requirements," he says, explaining that it boils down to establishing within the supply chain the risk management fundamentals of assessing risks so that it's easiest to address the biggest risks first. "What you need to do is to do it according to where the risk lies so you get really deep assurance where you need it, and you impose very light requirements where the risk and the consequence is not so great." According to Ponemon, not only is it important to flag riskier vendors by the type of shared information they are entrusted with, but also by their geographic location.

"Culturally, there are different countries with different sensibilities about security and privacy and you need to take that into account," he warns. "Also important is the ability to use the ability to use the in-country legal system in the event that you do have an issue."

Equally important to identifying the risky vendors, though, is working with procurement to mitigate the risks before purchases are made, de Crespigny says.

"What enterprises are finding is that it's very difficult to agree on security requirements and purchase contracts -- they're looking for a way to make that easier," he says, explaining the key is in "integrating that in the vendor management or procurement processes that are already in place. Information security needs to work with procurement. They can't come and bolt this on after the event." Have a comment on this story? Please click "Add Your Comment" below. If you'd like to contact Dark Reading's editors directly, send us a message.