Managing security risks associated with the use of third parties is a crucial aspect of an organisation's overall approach to managing security risk, especially as the reliance on third parties continues to grow. Third parties, such as cloud providers, suppliers, contractors, and partners often have access to sensitive data, systems and services that could be exploited.
Categorising Third-Parties
Not all Third-Parties present the same amount of risk through their use. Considering the scope of services provided, the data in use and the dependency your company has on the Third-Party will ensure resources are focused on those that present a high risk.
To categorise Third-Parties, the following aspects should be considered:
Business criticality: Determine the criticality of the services provided by the Third-Party. For instance, Third-Parties that provide critical services, such as cloud services or payment processors, pose a higher risk to your business compared to other third parties, for example, stationary providers.
Data access: Assess the type of data that Third-Parties have access to. Third-Parties who have access to confidential or highly sensitive data will require higher levels of due diligence than those that do not.
Regulatory & Standard Compliance: Determine if Third-Parties comply with industry regulations and standards. Third-Parties who fail to comply with regulations pose a higher risk to your business. Conversely, those that can demonstrate compliance to industry security standards, for example, ISO27001 certification or SOC 2 Type II reports, may demonstrate a higher commitment to security, and therefore may pose a lower risk. The validity and scope of those standards needs to be reviewed to be able to place reliance upon them.
Security posture: Assess the security posture of Third-Parties, including their security controls, policies, and procedures. Third-Parties with weaker security postures could present a back door to your data or into your environment. As mentioned previously, look for certification or independent assessments where you may place reliance, to reduce the overhead of this step.
Geographic location: Determine the geographic location of Third-Parties. Consider whether those countries have adequacy with regard to local data protection laws, or if the location presents a higher security risk to your business.
Identifying and Managing the Risks
Once Third-Parties have been categorised, then an appropriate level of due diligence and ongoing monitoring is required. The following steps can help businesses identify and assess security risks associated with the use of Third-Parties.
Perform Due Diligence based on Categorisation: Based on the categorisation the Third-Party has been assessed against, conduct due diligence to identify potential security risks. This can include reviewing Third-Party industry certifications, security policies and procedures, conducting security audits, and even, in some cases, security technical testing.
Contractual agreements: Ensure that contractual agreements with Third-Parties include security provisions that require Third-Parties to comply with your company's security policies, procedures, and standards, where relevant. The contract should also include a provision that requires the Third-Party to notify you of any security incidents. You may also include the right to audit, for example in a Data Controller/Processor relationship.
Regular monitoring: Monitor Third-Parties on an ongoing basis to ensure they continue to comply with security policies, procedures, and standards. This can include conducting periodic security assessments, technical testing and the use of a security management plan.
Periodic Service Provision Review: Over time, the role a Third-Party plays within your organisation can change. Periodically review the services provided to ensure their categorisation and associated due diligence remains correct for the associated risks with the services they provide.
Incident response Planning: Develop incident response plans that outline the steps to be taken in the event of a security incident involving a Third-Party. This should include procedures for notifying the Third-Party or being notified by them, containing the incident or monitoring their response, and reporting the incident to appropriate authorities.
Employee education and awareness: Train employees on the risks associated with the use of Third-Parties and how to identify and report potential security incidents involving Third-Parties.
ICA Consultancy has helped companies of various sizes and across numerous industries identify and manage third-party security risks, through pragmatic methodologies to outsourced Third-Party Risk Management activities.
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