More organizations are relying more heavily on third-parties. While there are various good business reasons to do so, they also bring unknown risks to those organizations that require proper management.
Third-party risk management (TPRM) is the process of identifying, assessing, and controlling threats and other potential risks presented throughout the lifecycle of your relationships with third-parties. Dealing with these threats starts during the initial onboarding (procurement) and extends through the end of the offboarding process.
The challenge of third-party risk management lies in the fact that relevant risks occur at different times when suppliers or partners are in use. For example, there could be risks during onboarding and while the third-party is in use, or later when the organization wants to terminate this relationship. An organization should address the risks at these different points accordingly.
Not being in control of these risks may have a significant impact on your organization. Looking at it from a security perspective, for instance, you may have taken all appropriate measures to protect your organization from hackers, but if these measures do not take third-parties into account, your outsourced services may be at high risk.
According to the national cybersecurity center, over the past few years, third-parties have grown into the second-highest threat to organizations. This is also seen in the amount and size of third-party data breaches that are happening more frequently. For example, in December 2020, Solarwinds was hacked, which resulted in 450 out of the 500 fortune 500 companies being affected by a data breach, under which Microsoft had source code being exposed.
It is not only security risks that third-parties may bring. There are also increased privacy, compliance, financial, reputational, and business continuity risks. For example, have you ever thought about what happens if your hosting provider goes bankrupt? Or have you ever considered what happens if the organization responsible for managing your payments has issues resulting in no incoming payments?
Third-party risks require proper management to reduce these risks through a third-party risk management process. Implementing such a process will reduce risks and help you understand and improve your relationships with suppliers and partners.