Today, the digital world is more interconnected than ever, and managing business functions altogether is quite a hassle for organisations. Thus, often, they outsource their core operations, such as data collection, recruitment, sales, cloud hosting or software development, etc., to other service providers or connect their infrastructure to multiple software and products to perform their required operations.
Outsourcing such operations and incorporating third-party products into enterprise infrastructure expand business attack surface and open itself to multiple threats online, such as supply chain attacks. According to a 2022 survey, over 10 million people were affected by supply chain attacks.
This blog post will discuss the importance of third-party security assessments and how an organisation should include them in its business strategy to increase security and perform due diligence for the effectiveness of security controls.
What is a third-party audit?
A third-party security vendor audit is a comprehensive, independent assessment that helps businesses evaluate third-party vendors’ cyber risk and security posture with access to the organisation’s critical infrastructure, systems, and sensitive data.
The audit involves reviewing the vendor’s security controls, policies, procedures, and compliance to recognise system weaknesses that could potentially harm the organisation in the long run.
The main objective of a third-party security assessment is to gain clarity by assessing the security practices and controls of the vendor environment. This helps businesses determine whether the vendor meets their security requirements or not. Moreover, it also assists in making informed decisions and better managing the threats associated with third-party associations.
Ultimately, a third-party security audit provides valuable insights that help organisations ensure systems and data security.
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Before we jump into performing third-party audits or risk assessments, it is crucial to understand the types of risks that are associated with third-party vendors.
What are third-party risks?
Multiple risks affect businesses in terms of their third-party relationship. Some of the major types of cyber risk that third-party vendors need to be aware of are:
Compliance risks
This refers to risks when the vendor is not compliant with industry standards or regulatory guidelines that could lead to legal penalties or financial damage in case of any incident.
Operational risk
Those risks come when third-party businesses fail to deliver the required services, resulting in delays or disruption to the organisation’s operations.
Reputational risk
This involves reputational damage from the vendor in case of illegal activities, security or data breaches, data leakage, etc.
Technical risk
This includes all those risks that could affect the businesses in case of technical incidents.
Privacy risk
This involves all the privacy issues that could harm businesses if the vendor misuses their intellectual property or data.
Why is third-party security assessment critical?
To an extent, every business depends on third-party software or services to perform its day-to-day tasks. For instance, organisations rely on HRM software to manage payroll and other HR-related activities. They also collaborate with other MSPs for their marketing, sales, production, distribution services, etc. Such collaboration makes it easy for organisations to focus on their business goals while reducing the cost of performing all activities alone.
This dependency on third-party business partners is an attractive entry point for threat actors to gain access to the targeted organisation’s system. In case of a security or data breach, it creates a ripple impact throughout the entire supply chain.
To prevent such incidents, it is necessary for an organisation to thoroughly consider its third-party risk before engaging with any suppliers. With appropriate third-party risk management strategies and enforcing strong controls not just within their systems but also across the whole interconnected vendor environment, companies can minimise exposure to a great extent.
How do you do a third-party risk assessment?
In today’s time, when data breaches, especially third-party attacks, are in full swing, every organisation requires a solid foundation to identify and mitigate risks related to vendor relations.
There is no one or standard way to audit the third party; businesses can create a strategy to analyse vendors’ information security posture with access to sensitive data such as PII, PHI, and intellectual property (IP).
Here are five steps through which companies can perform third-party audits and secure their cyberspace from vendor risks.
Develop risk criteria
Before analysing third parties, organisations must first define the risk criteria for evaluating their third parties. Since information security standards vary from business to business, so does the remediation plan.
Therefore, it is necessary to understand what countermeasures your business needs and once you know your probable risks exposure. You can accurately determine and manage your third-party security risks.
Access all of your third-party risks
The second step is to assess your vendor offerings (services or products) and align them with your business security measures to recognise potential threats. To determine such risks, properly scrutinise any third-party services or products you may be considering.
Don’t forget to test the level of access such products or services might have to your infrastructure, data, and other assets.
After this evaluation, state the potential consequences of a data breach, misuse, or other incident involving unauthorised access to your data. This should contain all possible scenarios and associated risks that could harm your business, whether they are within your control or not.
Perform risk rating
Once all the inherent risks are identified, create and maintain an inventory of your vendor, how much access they have to your infrastructure and their value to your business. After this, classify the risk severities as high, medium, and low according to the likelihood of breaches, incidents, threats, and other cyber security events.
Doing so will assist you in communicating it with your stakeholders and developing incident and risk management plans.
Analyse third-party vendors’ security posture.
Preparing a risk assessment questionnaire helps you understand vendor security posture and the best practices they follow. In addition, this could assist in identifying and mitigating critical flaws that affect your business.
Here, it is essential to understand that no size fits all. Similarly, you might have to customise the questionnaire according to vendor type and the best practices that apply to their niche.
You can create a third-party security assessment questionnaire according to your enterprise requirements, regulatory compliance that applies to you, the framework you follow or other security best practices or standards such as NIST, CIS, ISO, and Cyber Essentials.
A few examples of questions that often help companies understand their third-party security status can be:
- How often do they perform security assessments such as penetration testing and vulnerability assessments?
- Do they take any cybersecurity services?
- Do they have a network firewall, WAF, and relevant information security policies?
- What are their approaches to data security?
- How do they collect, store, protect, and handle clients’ data? What is their data retention policy?
- How do they collect and store all logs?
- Are policies and procedures reviewed annually and changed as necessary?
- Have they encountered data breaches or any security incidents recently?
- Do they have incident response, disaster recovery, and business continuity plans?
- Does their product comply with relevant industry standards?
- Do they follow a secure development lifecycle?
- What security measures do they have in place to manage access control?
- What encryption algorithm do they use?
- How do they manage and store their encryption keys and certificates?
- How many unsuccessful authentication attempts are allowed before the account gets locked out?
- Do they have a security awareness program in place for employees?
- How often do they test their employees with phishing emails?
- Are employees trained to report security incidents to the concerned team or department?
- Is their application secure against OWASP’s top 10 attacks?
The abovementioned are just a few questions, but adding more will help companies evaluate their vendors and risk management and assist in deciding if this vendor is suitable enough to build the relationship.
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Prepare a cyber risk management plan
With the questionnaire result, you will clearly understand all the threats your third party will impose.
Because of the supply chain, you can create an appropriate risk management plan to efficiently address third-party risk and respond quickly in case of any disaster, such as a data breach.
In addition, you can include all possible risk scenarios and consequences in your third-party risk management, incident response, business continuity, and disaster recovery plans to reduce the impact to an acceptable level.
Regular monitoring and annual assessment
As technology evolves, the security best practices also change with time. Therefore, it is crucial to perform due diligence regularly and not rely on one-time audits. Monitoring supplier risk is important because vendors and business partners often change their technology processes.
To secure the environment, companies should monitor third-party accesses frequently, track risk management plans, and improve their security controls and defence mechanisms.
Furthermore, perform the audit quarterly, if not at least annually, to review the changes and stay ahead of threats and risks to you through your vendors.
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Conclusion
Today, maintaining and managing cyber threats demands outstanding commitment, and one incident can not only harm an organisation’s reputation or damage the customer’s trust but also lead to lots of compliance complications and regulatory penalties.
By following the third-party audit approach, enterprises can have a robust foundation for their third-party risk management (TPRM) program. Regardless of company size and industry, it is still crucial for all enterprises to perform risk assessments to establish a secure relationship with vendors and service providers.
The proactive approach of third-party audits helps companies keep up with the ever-changing technological landscape and ensures that everything is streamlined with industry best practices and frameworks.
Contact us today to discuss your vendors’ security concerns.
Shahrukh, is a passionate cyber security analyst and researcher who loves to write technical blogs on different cyber security topics. He holds a Masters degree in Information Security, an OSCP and has a strong technical skillset in offensive security.
