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Thomas Whang

Is Third-Party Risk That Bad?

Is Third-Party Risk That Bad?

By Enterprise Risk, Executive, IMPACT for MSSPs, Impelix IMPACT Platform, Thoughts

As a CTO with 25 years of cybersecurity experience, I am never at ease with the state of cybersecurity. It’s not because we’re not doing our jobs, it’s just that our modern-day businesses operate as part of a larger business ecosystem and I am concerned about the additional risks operating like this brings to an organization. Specifically, I am talking about third-party risk.

It is a hidden weakness that may undermine even the most formidable organizations, much like Superman’s kryptonite. Financial losses, operational disruptions, and reputational damage can occur as a result of a vendor, supplier, or contractor’s single slip-up, leaving you feeling helpless.

Why is third-party risk so potent? It’s simple:

  • Increased Reliance on External Partners: We outsource more than ever before, from IT infrastructure to marketing campaigns. This expands our attack surface, making us vulnerable to the weaknesses of others. It’s the weakest link principle, you are “only as strong as its weakest link.”
  • Lack of Transparency: When it comes to the security and operations of third parties, we don’t always have complete control.
  • Complex Ecosystem: The web of third-party relationships can be intricate and ever-changing, making it difficult to track and manage risk effectively

I am not trying to instill fear in you, but the potential fallout is no joke:

  • Data Breaches: A third-party’s immature security posture could expose your sensitive data, leading to lawsuits, fines, and eroded trust.
    Top Third-Party Data Breaches of 2023

    Learn how you can take command of third-party risk once and for all.

    Check out our infographic >

  • Operational Disruptions: A critical vendor outage can cripple your entire business, costing you revenue and damaging customer relationships.
    Production at some of Stellantis’ North American assembly plants were offline for approximately 3 days.

    Source: BleepingComputer

  • Damage to Reputation: Hearing of your outside party’s cybersecurity incident can swiftly tarnish your brand, making it hard to entice consumers and investors.
    The public disclosure of the hack that affected more than 18,000 companies and many government bodies caused SolarWinds’ stock price to plummet.

    Source: SolarWinds

So, what can we do to avoid the kryptonite kiss of death? Here’s my playbook:

  • Proactive Due Diligence: Thoroughly examine potential risks before onboarding any third party as part of proactive due diligence. Look at their security measures, regulatory compliance, and financial soundness. Do not merely mark the box; delve deeply.
  • Contractual Safeguards: Craft watertight contracts that clearly define risk ownership, incident response protocols, and termination clauses. Make sure you’re not left holding the kryptonite bag.
  • Always Be Watching: Never Leave It Alone. Keep a close eye on how well your third parties are doing and how secure they are. To remain one step ahead of possible dangers, make use of technological and intelligence-based solutions.
  • Open Communication: Foster open communication channels with your third parties. Encourage them to share security updates, incident reports, and any concerns they may have. Remember, we’re all in this kryptonite fight together.
  • Build a Culture of Awareness: Educate your employees about third-party risk and how their actions can impact it. Encourage them to report suspicious activity and be vigilant about phishing attacks and social engineering scams.

If you follow these steps, you can make third-party risk work for you instead of against you. Your operational efficiency, competitive edge, and organization’s resilience can all be improved with a well-managed ecosystem of third parties.

Remember, in the game of risk management, Superman might be able to fly, but a proactive approach is the real magic bullet. So, go forth, brave risk managers, and conquer the kryptonite!

Just a friendly reminder to include kryptonite-resistant underwear in your budget... I mean, cyber insurance. Being cautious is preferable than being unprepared.


Sources:
Ponemon Institute and Shared Assessments survey - Third-Party Risk Management Benchmarking Study 2019
Predictions 2022: Cybersecurity, Risk and Privacy, Forrester Research, Inc., Oct. 28, 2021

Eight Steps to Implement an Enterprise Risk Management Framework

By Enterprise Risk, Executive, IMPACT for MSSPs, Impelix IMPACT Platform, Thoughts

In the fast-paced and dynamic world of business that we are in, having a robust enterprise risk management (ERM) framework is crucial for organizations to survive. With the constant evolution of the modern business landscape, it has become increasingly vital for companies to navigate potential risks effectively. By implementing a comprehensive ERM framework, businesses can proactively anticipate and address potential threats, ensuring their long‑term success.

What is ERM?

Enterprise Risk Management (ERM) is a crucial process that plays a significant role in the success of organizations. It serves as a comprehensive framework that enables businesses to identify, assess, and effectively manage various types of risks. These risks encompass a wide range, including financial risks, operational risks, and even reputational risks. By implementing ERM, organizations gain a holistic understanding of the potential risks they may face. This understanding allows them to develop proactive strategies to mitigate these risks and ensure the smooth functioning of their operations. ERM acts as a guiding light, illuminating the path towards a more secure and resilient future for businesses. Financial risks, such as market volatility or economic uncertainties, can pose significant challenges to organizations. ERM equips businesses with the tools and methodologies to assess and manage these risks effectively. By doing so, organizations can safeguard their financial stability and make informed decisions that align with their long-term objectives. Operational risks, on the other hand, encompass a wide range of potential disruptions to business processes.

In essence, ERM serves as a protective shield, safeguarding companies from the uncertainties and challenges that arise in today’s complex business environment. It enables organizations to assess risks holistically, considering both internal and external factors that may pose a threat to their operations. Moreover, an effective ERM framework fosters a culture of risk awareness and accountability within an organization. By encouraging employees at all levels to actively participate in risk management efforts, companies can harness the collective intelligence and expertise of their workforce. This collaborative approach enhances the organization’s ability to identify and respond.

How Can an Organization Implement ERM?

While there is no universally recognized or defined ERM framework, there is a well-established methodology that can improve any company’s chances of successfully implementing ERM. Here is one way on how an organization can implement an effective enterprise risk management (ERM) framework:

Step 1: Leadership Commitment and Alignment

The journey starts when the leaders of the company are committed and on the same page. The top leaders need to not only agree with the idea, but also work to make it happen. It is very important to show that your culture values strategic choices that take risks into account.

Step 2: Create a Risk Appetite

Every organization has a risk tolerance level that it is willing to accept. It is critical to explicitly define and express this risk appetite. It serves as a guiding beacon, assisting in navigating the turbulent seas of risks and possibilities.

Step 3: Create a Strong Policy Framework

Developing a solid policy framework is analogous to preparing the foundations of a sturdy building. This process entails creating policies that explain the risk management philosophy, objectives, and tactics of the organization. This framework should be comprehensive, addressing all potential risk aspects, such as financial, operational, reputational, and strategic risks.

Step 4: Identifying and Assessing Risks

With a robust policy framework in place, it’s time to explore the enormous terrain of potential dangers. This step entails identifying and assessing potential hazards that may affect the organization. Various tools, including as SWOT analysis, PESTLE analysis, and risk heat maps, can be used.

Step 5: Putting Risk Response Plans into Action

Once the risks have been found and evaluated, the organization needs to develop and execute risk response strategies. Some of these tactics could be to completely avoid the risk, while others could be to accept the risk and share it with other stakeholders. The plan should be based on a careful analysis of how each identified risk could happen and how likely it is to happen.

Step 6: Monitor and Report

Transparency and open dialogue are vital for an ERM framework to work effectively. It is important to set up a mechanism for all stakeholders, including employees, board members, and investors, to get regular updates on risk management activities. This makes sure that everyone in the company is aware of the risks.

Step 7: Training and Development

Organizations should invest in training and development programs to equip their teams with the necessary skills and knowledge to manage risks effectively. It fosters a culture where every individual becomes a risk manager in their own capacity.

Step 8: Monitoring and Review

The final step in the journey is the constant monitoring and review of the ERM framework. This is a continuous process that helps in fine-tuning the risk management strategies and making necessary adjustments as the external and internal environments evolve.

Closing Thoughts

Implementing a successful ERM framework is an ongoing journey, not a one-time effort. It is a voyage full of discoveries, changes, and enhancements. By following these steps, organizations may confidently and agilely traverse the complicated world of risks, transforming potential threats into opportunities for growth and innovation.

So, set out on this trip with enthusiasm and energy, and direct your business toward a future that is not only secure but also replete with opportunity. Until next time, safe risk‑taking!

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