Your business relies on a vast network of third-party vendors, from cloud service providers to software-as-a-service (SaaS) platforms. They’re the backbone of your operations, handling your most sensitive customer data and safeguarding your proprietary information. But the million-dollar question is, do you truly know who these crucial vendors are, and can you trust them to defend your invaluable data from ever-evolving cyber threats?
Is Vendor Risk Management Necessary?
Vendor risk management isn’t just a best practice; it’s a legal obligation. In a landscape governed by an intricate web of regulations like GDPR, CPRA, HIPAA, ISO, NIST, and PCI, businesses must establish robust third-party risk management programs. These programs aren’t merely about ensuring regulatory compliance; they’re also the cornerstone of your organization’s IT security controls.
Recent studies have shed light on the immense share third-party risk holds in information security. For many security, compliance, and risk management professionals, third-party risk ranks as one of the top sources of concern, rivaling threats that previously topped the list of cyber woes.
Let these statistics sink in for a minute:
64% of organizations stated that third-party risk management was viewed as an organizational strategic imperative by their boards of directors and executive teams.
98% of organizations have vendor relationships with at least one third-party that has experienced a breach in the last two years.
So, let’s explore some common vendor management challenges, we’ll also delve into the pivotal role that dedicated third-party risk management software plays in bringing peace of mind and elevating your organization’s defenses.
Challenges in Vendor Risk Assessment Policies
- Lack of a Holistic Approach
One of the critical challenges in third-party risk management is the tendency to equate it solely with the assessment phase. Many organizations focus on assessing third parties while overlooking other crucial components of a comprehensive risk management program. Risk management should extend beyond assessment to include risk profiling, appropriate language in contracts, and effective issue management. While some regulations offer guidance on setting up third-party risk management (TPRM) frameworks, the full scope of third-party risk management encompasses multiple aspects. Therefore, organizations should take a more holistic approach to address these challenges effectively.
- Limited Risk Coverage
Third-party risk management is often associated with information and data privacy risks, which are indeed critical. However, the article highlights that risk management should encompass a broader range of risk domains. This includes addressing concentration risk, geopolitical risk, credit risk, and strategic risk. Recognizing that different third-party relationships pose unique risks, organizations must ensure that their risk management programs are adaptable and consider these diverse risk factors. By doing so, they can better safeguard their operations against potential threats.
- One-Size-Fits-All Assessment Approach
A common challenge lies in using a uniform assessment approach for all third parties, regardless of their risk exposure. This can lead to inefficiencies and ineffective risk mitigation. Instead, organizations should tailor their assessment methods to match the specific risk profile of each third party. This involves employing a balanced mix of remote and on-site assessments and leveraging service auditor reports (SARs) to gain comprehensive insights into the controls and compliance of third parties. Defining parameters for assessment frequency, mode (remote or on-site), and scope is vital for an efficient and risk-appropriate vendor risk assessment process.
- Issue Management Challenges
Managing issues that are identified during risk assessments can pose challenges, particularly when it comes to defining ownership, setting timelines, and gaining cooperation from third parties in issue resolution. Effectively managing issues requires a well-defined process that clearly outlines the roles and responsibilities of various stakeholders, including the business units, senior management, suppliers, and others. A collaborative approach is critical to resolving issues and ensuring that they do not compromise the effectiveness of the third-party risk management program.
- Fourth Parties Are Overlooked
Many organizations focus primarily on monitoring and managing their third-party relationships while overlooking the risks posed by fourth parties. Fourth parties provide services to third parties, and they may have access to the primary enterprise’s data. This can expose the primary enterprise to additional risks. While third parties may have contractual agreements to manage their third parties, the importance of overseeing fourth parties should not be underestimated. Regulators emphasize the need for primary enterprises to establish inventories of fourth parties and assess their risks independently, particularly when these fourth parties have access to sensitive or confidential data. A mature third-party risk management program should include provisions for assessing and overseeing fourth parties as necessary.
- Diverse Regulatory Requirements
For organizations operating in multiple geographic locations, compliance with various regulatory requirements related to third-party risk management can be a complex and demanding task. These regulatory mandates may vary from region to region, creating additional compliance challenges. To address this challenge effectively, organizations can identify common requirements and trends across different regulations. While regulations may differ, they often share common elements. Organizations can create a comprehensive framework that addresses these shared requirements, making it easier to adapt to the specific mandates of different regions. By continuously monitoring regulatory changes, organizations can ensure their third-party risk management program complies with evolving legal standards.
Start Getting Value With
Centraleyes for Free
See for yourself how the Centraleyes platform exceeds anything an old GRC
system does and eliminates the need for manual processes and spreadsheets
to give you immediate value and run a full risk assessment in less than 30 days
Strategies to Overcome Vendor Risk Management Challenges
- Holistic Risk Management
Organizations should take a holistic approach to third-party risk management, extending their focus beyond the assessment phase. This includes incorporating risk profiling, contractual language, and issue management into their risk management programs. A high-level framework based on regulatory guidance can serve as a foundation, with additional enhancements and add-ons to create a comprehensive third-party risk management framework.
- Automated Vendor Risk Assessments
Automating VRM allows you to easily keep track of your vendor risk while keeping your VRM relevant to the changing tides. Automation ensures that vendors are onboarded in a smooth, fast, and clean operation. It means easy scanning and tracking, clear risk information on every vendor, and detailed reports. Most importantly, automation allows you to step back with the knowledge that your vendors are in good hands and focus on strategic decisions.
- Tailored Assessment Approach
Instead of a one-size-fits-all assessment approach, organizations should tailor their assessment methods based on the specific risk exposure of each third party. This involves a combination of remote and on-site assessments to gain a comprehensive understanding of controls and compliance. Defining parameters for assessment frequency, mode, and scope ensures that assessments are efficient and relevant to the risk profile.
Questionnaires are the most widely used vendor risk assessment tool. Regardless of industry, vendor risk assessment questionnaires are at the core of any vendor risk management (VRM) program. This is particularly true when an industry operates with tight regulatory controls like PCI or HIPAA. Third parties complete assessment questionnaires, which can be used to calculate a risk profile for the vendor.
- Inclusion of Fourth Parties
Organizations should acknowledge the risks associated with fourth parties and ensure they are included in the third-party risk management program. This involves assessing, monitoring, and managing the risks posed by fourth parties, particularly when they have access to sensitive data.
Leverage Centraleyes to Manage Your Vendor Risks
Centraleyes offers businesses a unique third-party risk management tool, allowing companies to fully manage their third parties using a single platform to onboard new vendors, assess, categorize, and prioritize them, continually monitor them, and view a comprehensive risk profile for every vendor with real-time remediation dashboards and downloadable reports. The platform shaves off hours of manual labor, allowing you to focus on the more pressing matters at hand with the knowledge that at least your vendor risks are no longer on that list.
The platform’s customized third-party dashboard uses a hybrid risk approach to automatically
provide a clear view of the highest-risk vendors, with actionable guidance on how to mitigate gaps. With real-time threat intelligence and active scanning, you will feel secure knowing you have strong security practices to manage your third- (and fourth!) party risks.
Centraleyes will transform how you work with your supply chain saving you immeasurable time, money, and resources.
Join countless satisfied customers who are effortlessly managing hundreds of vendors as we write this blog.
Start Getting Value With
Centraleyes for Free
See for yourself how the Centraleyes platform exceeds anything an old GRC
system does and eliminates the need for manual processes and spreadsheets
to give you immediate value and run a full risk assessment in less than 30 days
