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A common theme for many organizations is that they don’t have time to do third-party information security risk management, or they don’t have the time to do it right. There are so many competing initiatives in an information security professional’s life, I get it. Do you have a case for not prioritizing third-party information security risk management, or not prioritizing it higher?

Let’s use logic to figure this out together.

NOTE: Notice I use the words “third-party information security risk management” in place of “vendor risk management”, this is because I think one is a little more accurate than the other. Third-party information security risk management usually fits within the scope of a larger vendor risk management program. For this article we’re going to focus on third-party information security risk management.

Three primary questions come to mind when thinking about the importance of third-party information security risk management:

  1. Is there a problem with NOT doing third-party information security risk management?
  2. If so, how big is the problem?
  3. What should you do about it?

Is there a problem?

So, you’ve got other priorities that prevent you from assessing and managing information security risks related to your vendor/third-party relationships. The fact that you have other priorities isn’t a problem, it’s reality. The fact that you may not be prioritizing third-party information security risk management, or that you may not be prioritizing high enough, could be a big problem.

Inherently, I know two things when it comes to third-party information security risk management:

  1. Nobody cares about the security of my information more than I do.
  2. Third-parties are the cause (directly or indirectly) of most known data breaches.

Nobody cares about the security of my information more than I do.

You know this is true, right? You spend thousands of hours, and many dollars trying to implement and manage good security controls within your organization. You’ve developed sound policies, worked tirelessly to make sure people are trained and aware of good security practices, you’ve spent thousands (maybe millions) on expensive technological controls like firewalls, intrusion prevention, data loss prevention, endpoint protection, and on and on.

You use third-parties to provide certain services to your organization. Maybe printing, maybe hosting, maybe IT support, who knows? Do you think the third-parties you use have spent the same amount of effort in protecting your information? Is thinking they’re protecting your information the same way you are, good enough? Play it out. Stay with me on the logic here.

We know that no matter what we do, we cannot possibly prevent all bad things from happening. We cannot eliminate risk, but risk elimination isn’t the goal anyway. Risk management is the goal and it’s the only thing that’s even remotely attainable.

Let’s say a vendor loses your information (this is more likely than you know, read the next section). Or, let’s say that an attacker gains access to your information through some sort of access that we’ve granted them. What happens next?

You conduct an investigation. Maybe there are lawyers involved. Maybe there’s customer data involved. Maybe you’re not sure. One thing is for certain, somebody isn’t going to happy. When the right (or wrong) somebody isn’t happy, somebody else needs to pay. The unhappy “somebody” might be a customer or group of customers, a government regulator, or the board of directors. The unhappy “somebody” might be all of the above.

The unhappy somebody is going to want answers. What answers do you think they’re going to want? They’ll want answers to questions like:

  • Did you know that your vendor was doing x, y, and z?
  • Did you ask how the vendor was protecting our information?
  • What sorts of questions did you ask the vendor about protection?

The quality of your answers will often dictate what and how much you’ll have to pay. No answers or bad answers will cost you more. Somebody almost always pays when something bad happens, the degree to which they pay, will largely be dependent on what answers they’ll have to defend themselves. This, in a nutshell, is defensibility.

Can ignorance be defensible, claiming you didn’t know any better? Short answer is “no”. The reason is outlined in the next section.

Third-parties are the cause (directly or indirectly) of most known data breaches.

Soha Third-Party Advisory Group conducted a study (Source: http://www.marketwired.com/press-release/soha-systems-survey-reveals-only-two-percent-it-experts-consider-third-party-secure-2125559.htm) last year that concluded the following; “third parties cause or are implicated in 63 percent of all data breaches.” You might be skeptical of this number, but the Soha Third-Party Advisory Group consists of some heavy-hitters in our industry, security and IT experts from Aberdeen Group; Akamai; Assurant, Inc.; BrightPoint Security; CKure Consulting; Hunt Business Intelligence, PwC; and Symantec. I didn’t write the study, but I believe that much of the findings represent the truth.


Soha Third-Party Advisory Group

Can you claim you didn’t know better? When you’re tasked with answering the inevitable questions that are coming your way after a breach, do you really think you can claim you didn’t know?

To compound our ignorance as a defense problem, are the following facts:

Third-party data breaches are on the rise, at least in the United States. A study by Opus concluded the “percentage of companies that faced a data breach because of a vendor or third party was higher at 61 percent, which is up 5 percent from last year and 12 percent from 2016”. (Source: https://www.pymnts.com/news/security-and-risk/2018/third-party-data-breaches-cybersecurity-risk/)

A study conducted by Kaspersky Lab concluded that the costliest data breaches are those that involved a third-party, especially for small to medium-sized businesses (SMBs). (Source:  https://mobile.itbusinessedge.com/blogs/data-security/breaches-from-third-parties-are-the-costliest.html)

Opus & Kaspersky Lab

Do you need more justification for re-prioritizing third-party information security risk management? Maybe you run a security program based on compliance, only doing what you’ve been told to do. This isn’t a good idea because information security is about risk management, not compliance, but let’s say it’s the way you do things anyway. Compliance is king. What if I told you that regulators and examiners are aware of the risks, and they read the same news we do. They are increasing the pressure around third-party information security risk management, and they’re losing patience with organizations that haven’t taken the risk seriously. It’s better to get ahead of this curve now.

Back to our original question; Is there a problem with NOT doing third-party information security risk management? My opinion, using the logic we’ve outlined together, is “yes”. There is definitely a problem with you NOT doing third-party information security risk management.

Are you convinced that you need a third-party information security risk management solution? If so, let’s figure out the right solution. If not, we’ll still be here to help when you become convinced. I promise.

How big of a problem is it?

Our next question was how big of a problem is it, meaning how pervasive is the third-party information security risk management problem in our industry? I promise to provide a short answer.

At a macro-level, relying on my unscientific observations from working with (up to 1,000) clients and discussions with other information security professionals, I would estimate that as many as 90% of the companies ranging in size from 20 – 30,000 employees do not have a third-party information security risk management program of any substance (or formality).

The problem is big in our industry. I would caution against using this as justification for not have your own (program); however. The herd mentality seems to be less and less defensible too.

Our last question: what you should do about it (meaning third-party information security risk management)?

What should you do about it?

For your own good, hopefully I’ve convinced you that not doing anything or deferring this issue until it becomes a higher priority, is not a good option. If not, like I stated previously, we will be here for you when you change your mind.

A well-designed third-party information security risk management program fits the following characteristics:

  1. It’s not disruptive to the business. After all, your business is in business to make money (and/or serve a mission). If information security gets in the way, you’ve got problems.
  2. It’s measurable in a way that you can show progress. Going from nothing, or next to nothing, to a fully implemented third-party information security risk management program is not feasible or encouraged. A solution that allows for gradual adoption over time is the right way to go.
  3. Doesn’t take shortcuts. The definition of information security accounts for administrative, physical, and technical controls. Only accounting for technical controls isn’t going to cut it, especially when we consider the fact that your most significant risk is people.
  4. Organized, standardized, and repeatable. These things make your program scalable and useable. The way to accomplish this is to automate all parts of the program that can be automated, without taking shortcuts.
  5. Intuitive, easy to use, and easy to understand. Third-party information security risk management shouldn’t be rocket science. A well-designed third-party information security risk management solution should be logical, so much so, that you don’t need vast amounts of experience and expertise to run it.

We specifically designed SecurityStudio to fit all the criteria necessary in a best-in-class third-party information security risk management platform. We did so by using more than a combined 100 years of information security experience, and at a reasonable price that doesn’t unnecessarily take away from your other competing information security priorities.

I invite you to speak to a SecurityStudio representative about how SecurityStudio will work for you. Schedule a demo too while you’re at it!

As mentioned in Phase 2 – Classification, High and Medium impact third parties need to be assessed for residual risk. Residual risk is another term that isn’t common to all people, so we’ll define it. Residual risk is the amount of risk that remains (residual) after the consideration of controls that are in place and any applicable threats. Residual risk assessments attempt to validate, qualify, and/or quantify risk related to threats and vulnerabilities, using inherent risk as a base input.

The first place to check for residual risk is an assessment that the third party may have already completed; an assessment that is high quality, fits our definitions of “information security” and “risk,” and represents risk. For SecurityStudio, this is the S2SCORE. The logic is simple: Does the third-party have a current S2SCORE or not?

Current Acceptable S2SCORE

If the third party has a current S2SCORE, then Phase 3 – Risk Assessment is complete for now, and the score is evaluated as part of Phase 4 – Risk Treatment. A threshold for S2SCORE must be set by the organization, and an automated comparison is made.

S2SCORE is calculated on a scale between 300 – 850, with 300 representing an infinite amount of risk and 850 representing no risk at all. Obviously, it’s not possible to have infinite risk or no risk, so all S2SCOREs fall between the range. Organizations that have not defined a specific threshold will typically accept a default S2SCORE of 660.

If the S2SCORE is acceptable, meaning it meets or exceeds your threshold, then the process is complete for you and the third party. That’s it!

If the S2SCORE is not acceptable, meaning it does not meet your threshold, then the process remains in Phase 3 – Assessment for next steps. An unacceptable S2SCORE follows the same process as not having a S2SCORE at all.

No Current Acceptable S2SCORE

Third parties that do not have a current S2SCORE and third parties that do not have an acceptable S2SCORE will receive a questionnaire that is commensurate with the level of inherent risk they pose to the organization. Third parties that are classified as High receive the High Residual Risk Questionnaire, and third parties that are classified as Medium receive the Medium Residual Risk Questionnaire.

All notifications to third parties are managed by SecurityStudio so that administrators don’t need to track and manage follow-up tasks.

All questionnaires are completed via an authenticated and secure online portal provided to the third-party provider.

High Residual Risk Questionnaire

By default, the High Residual Risk Questionnaire leverages simliar criteria* used in calculating the S2SCORE. This is important for (at least) five reasons:

  1. Validation of the questionnaire will result in a genuine S2SCORE that can be reused in other applications.
  2. The common set of criteria allows for better comparisons and consistent baselining across all third parties.
  3. Deliverables from the S2SCORE can be used to build the third-party security program and/or identify the greatest areas of concern accompanied by actionable recommendations. The S2SCORE provides value to the third party in this way.
  4. For the most impactful third parties, a S2SCORE can be validated by personnel who are certified by SecurityStudio® to complete validations. This ensures consistency across organizations who use SecurityStudio and S2SCORE.
  5. Validation of the S2SCORE can be done using in-house personnel, through SecurityStudio, or through any of the SecurityStudio partners. Today there are more than a dozen SecurityStudio partner organizations who are certified to perform validations.

Medium Residual Risk Questionnaire

By default, the Medium Residual Risk Questionnaire leverages the same criteria used in the calculation of the S2SCORE Estimator. The S2SCORE Estimator is a freely available assessment provided to anyone online and is also built into SecurityStudio. The important reasons why we’ve chosen to use the same criteria include some of the following:

  1. Any organization, with or without the use of VENDFENSE can get a score that can be leveraged without cost to the third party and be reused for third-party information security risk management if the inherent risk calculation results in a Medium classification.
  2. Ensures consistency within SecurityStudio and all other uses of the S2SCORE Estimator.
  3. The S2SCORE Estimator is an easy, and no-cost introduction to all that S2SCORE is and can be used for.

SecurityStudio S2SCORE

The result of the questionnaire process is a S2SCORE. The score is objective and automatic, and if the third parties are providing accurate and truthful information, the S2SCORE will be a true measurement of information security risk. There are times when you don’t believe that the information provided by the third party is accurate and true. These are times when you might want validation. There are also times when a third party is so critical to the success of your organization that you may want validation too. Regardless of the reason for validation, you are in control.

Now that the third parties have been assessed for residual risk, we move on to Phase 4 of VRM– Risk Treatment.

*Vulnerability scanning data, crime rate index, and natural threat data is not employed in the High Residual Risk Questionnaire but is used in the full S2SCORE and validated S2SCORE.

free information security risk assessment tool

Now that you’ve completed your vendor inventory, it’s time to classify them according to the risk they pose on your organization. Third-party classification is about rating your third-party providers according to the amount of inherent risk they present to your organization. The term”inherent risk” isn’t necessarily in everyone’s vocabulary, so let’s explain what it is. Inherent risk is the amount of risk that your vendor poses to your company based strictly on how you intend to use them. It’s a very simple process to classify your third-party providers according to inherent risk.  The point in doing this is to make sure we only spend your valuable time, and the valuable time belonging to your partners, on the risks that really matter.

Inherent Risk Questionnaire

The classification process starts with the Inherent Risk Questionnaire. This is a simple questionnaire that is completed by the person within your organization who is responsible for the third-party relationship.  This is usually the person who relies on the third party to complete certain tasks on behalf of your organization, or it’s the person who arranged for using the third party in the first place.

The questionnaire is very simple and straightforward, consisting of less than 10 questions.

VENDFENSE is very flexible and meant for all organizations. We pre-populate the system with default inherent risk questions to include in the Inherent Risk Questionnaire; however, we can also include custom questions.

Classification

Third-party providers are classified according to the inherent risk they pose to your organization. The classification is automatic, based on objective criteria defined and built into the SecurityStudio Classification Scoring System. The responses provided in the Inherent Risk Questionnaire lead to a classification of High, Medium, or Low. You could choose different words or different classifications, depending on your needs. The point is that the classification criteria should be objective, be a representation of inherent risk, and the classification levels you choose should be simple and logical.

A very important reason for classifying vendors according to inherent risk is to support the reasoning that not all vendors should be subjected to the same level of scrutiny because not all vendors pose the same amount of inherent risk.

High and Medium Impact

High and Medium impact (or inherent risk) third parties require additional review.  The third parties that were classified as High or Medium impact are moved into processing at Phase 3 – Third-Party Risk Assessment.

Low Impact

Low impact third parties are not a significant concern for most organizations. The processing of Low impact third parties is done after the classification. Low impact third parties are usually not reviewed again until the next cycle (quarter, semi-annual, annual, etc.)

In some cases, the percentage of third parties who are Low impact risk is as high as 80%. This is important to note. If an organization has 1,000 third parties that they work with, as many as 800 (or more) of these third-parties don’t need any further review beyond the initial inherent risk classification. This also means that there are 800 less questionnaires to keep track of and 800 less third parties that we need to secure.  Also important is the fact that we have demonstrated our due diligence by ensuring that all third parties were classified according to objective criteria.

Once the Classification step is complete, you’re ready to start  Phase 3 of VRM – Assessment.

free information security risk assessment tool

In the simplest sense, a good vendor risk management program is made up of four phases: Inventory, Classification, Assessment and Treatment. These four phases make up a well-designed third-party information security risk management program.

Phase 1 – Vendor Inventory


We can’t effectively protect the things we don’t know we have from the things we don’t know about. Every third party that the organization does business with must be included in the third-party inventory. It’s not that every third party poses a significant risk, it’s that we must show our due diligence regardless.

Everything starts with third-party inventory. The inventory of third-party providers is what feeds the SecurityStudio system. The purpose of the inventory phase is to get all your third parties into the system and ensure that your third-party inventory remains current.

The bulk of the work comes during implementation. After the system is set up and running, you rarely make any significant changes. Occasionally, you may decide to audit the third-party inventory by comparing the list of third parties maintained within SecurityStudio with the list of third parties maintained in other areas of the business. After the initial system setup, the inventory can be easily audited on an ongoing basis.

There are two parts to vendor inventory if you’re just getting started: the initial inventory and the onboarding process. Once you’re up and running, you will mostly focus on third-party onboarding.

Vendor Inventory

Most organizations don’t know who all their third-party providers are, and the place to start building your third-party inventory is through your finance department. The theory is that if you have a third-party provider, you must be paying for them somehow. There are three places to look for third-party providers initially for your inventory:

  • Third-party providers who are sending you invoices
  • Third-party providers who are being paid with a corporate credit card
  • Third-party providers who are paid by an employee who is being reimbursed for the expense.

Vendor Onboarding

Onboarding is focused on ensuring that all new third-party providers are accounted for in the vendor risk management program before they begin providing their product or service. Uploading third parties into the SecurityStudio system is a snap. You can either upload them one at a time or do a mass upload using a spreadsheet. Employees and finance personnel can enter new vendor information directly into SecurityStudio or we can link to an existing intranet site that you already have set up.

Once the Inventory and Onboarding steps are complete, you’re ready to start  Phase 2 of VRM – Vendor Classification.

free information security risk assessment tool

The topic of vendor risk management (VRM) is on the lips of nearly every CISO, IT Director, CTO/CIO and business owner in the country, and with good reason. Security breaches have reached near epidemic proportions and businesses don’t need to just worry about data being stolen. The real issue is what happens after the breach occurs when regulators, lawyers, and your own customers come after your business, trying to determine who is at fault for the breach.

Using third-party vendors adds another layer of complexity to finding the source of the breach, but even though it may have been the fault of the vendor, your business could still be liable. It’s critical to both track and monitor all vendors with a good VRM program and also classify them as low, medium or high risk so you can focus on those vendors that pose the most risk to your business. This business-critical process can help keep you out of hot water in the event of a third-party breach, but how do you know if your business is ready for a VRM program?

Use our quick guide below to determine if you should invest in a VRM program:

For a free demo of SecurityStudio, the vendor risk management tool that can help your business become simplified, standardized, and defensible, sign up.

free information security risk assessment tool

Vendor security risk management is not easy. It’s often a monotonous combination of spreadsheets, questionnaires, following up with people, and uncertainty. It’s often frustratingly tedious, and it can actually cause otherwise strong information security programs to falter. The best relief is to take a three-step approach to vendor risk management. Simplify. Standardize. Defend.

Simplify

Managing information security risk amongst a population of vendors and third-parties is a complex problem for most organizations, and therefore most organizations either don’t manage vendor information security risk management at all, or they don’t do it well.

Don’t Manage Vendor Information Security Risk at All

There are five common reasons why organizations don’t manage vendor information security risk:

  • They don’t have enough confidence in their own information security program.
  • They don’t have experience managing vendor information security risk; where to start or what it’s supposed to look like.
  • They don’t know what questions or things that they should inquire about.
  • They don’t know who all their vendors are.
  • They have other priorities, and don’t get the time to tackle vendor information security risk management.

Question: Why don’t you do vendor information security risk management?

Don’t Manage Vendor Information Security Well

There are five common reasons why organizations don’t manage vendor information security well:

  • Their vendor information security risk management program is incomplete; missing vendors, missing parts of information security, incomplete questionnaires, no scoring/comparison, shortcut inherent risk and/or residual risk, etc.
  • The vendor information security risk management program is painful to manage.
  • The vendor information security risk management is program is disorganized.
  • The vendor information security risk management program relies too much on subjectivity or opinion.
  • They’re just doing something for the sake of doing something. There’s no commitment to doing it right.

Question: What pains do you experience, or what concerns do you have about your vendor information security risk management approach?

Standardize

A vendor information security risk management program must be repeatable and standardized. Standardization enables the other two important features (Simplify and Defend). You need to be doing vendor information security risk management first to truly appreciate the value in standardization. A lack of standardization leads to run-away complexity and a program that is not defensible (against litigation, inquiry from regulators, etc.).

Defend

Defense comes in two forms:

  • Defense against the breach risk posed by your vendors
  • Defense against the lawyers, regulators, and angry customers if or when a breach occurs.

Defense from Vendors

We know that no matter what we do, we cannot possibly prevent all breaches from occurring. So, where are breaches most likely to occur?  According to a recent study conducted by Soha Systems, 63% of all breaches are attributed to a vendor, directly or indirectly. * It’s hard to deny the fact that a breach occurring through a vendor is one of the most likely breach events. There’s no excuse for ignoring the risks posed by vendors or taking a half-hearted approach to vendor risk.

There are five common mistakes organizations make in assessing risk related to vendors:

  • Vendor information security risk management is primarily done to meet a regulatory requirement or to “check the box.”
  • Shortcut solutions are implemented to assess and manage information security vendor risk.
  • The logic behind the vendor information security risk decisions is not tied to how risk works (inherent risk or residual risk).
  • Vendor information security risks are accepted without a clear understanding of the risks or the most effective methods of remediation.
  • High (inherent) risk vendor responses are not adequately validated.

Question: Where are there gaps in your vendor information security risk management program?

Defense from the Crowd

We already know that the most likely source of a breach is through a vendor. Even if we do everything that we can to reduce this risk, some risk will remain. When a breach inevitably happens, we need a defense against a whole new breed of attackers. Lawyers, regulators, public opinion, and our own customers become our attackers. They want answers and they want retribution.

Our defense becomes something called due care. Due care refers to the effort made by an ordinarily prudent or reasonable party to avoid harm to another, taking the circumstances into account.

Nobody expects perfection, but everyone should expect due care. Due care is where defensibility lives, and it’s imperative in our vendor information security risk management program. The question becomes, what would an ordinarily prudent or reasonable party do if they knew a vendor breach was eventual? Not accounting for vendor information security risk is indefensible.

For organizations with vendor information security risk management programs, here are some of the most common reasons why they could be less defensible:

  • Vendor information security risk decisions are subjective— or opinion-based.
  • Seemingly obvious information security risks are not adequately considered.
  • The personnel making risk decisions are not qualified to do so.
  • Roles and responsibilities for vendor information security risk management are not shared amongst qualified groups or are not formally defined at all.
  • The methodology used for vendor information security risk management is not shared by a group outside of your organization, or it is shared by a small group or organizations.

Question: Where is your vendor information security risk management program defensible, and where is it not?

Conclusion

SecurityStudio is the most comprehensive solution to simplify, standardize, and defend. It’s a vendor information security management solution that was built by former vendor risk managers who have walked the walk.

To learn more about how a solution like SecurityStudio can help your vendor information security risk management processes, schedule a demo.

free information security risk assessment tool

Cyber insurance is a rapidly-growing extension of the insurance industry. Data is now an important possession the same way your car and home are. However, insurance companies are having challenges in determining how much to charge and how much coverage that gets you. Luckily, there’s a metric for that.

Vendor risk management is a critical portion of every organization’s information security program. The number of vendors the average business works with is growing, and the amount of sensitive data we let them have access to is as well. Despite this, many organizations still struggle to effectively manage the risk of their third-party vendors. By not understanding and handling these potential risks well, your organization is more prone to experiencing an information security incident through one of these vendors. Do you know where you stand in protecting your data from vendor risk breaches?

Almost all organizations fit into one of four categories when it comes to managing the data risk their vendors pose— none, painful, partial, or good. Let’s find out where you fit.

None

The largest category of the four is the “None” category, in terms of the number of organizations. According to our estimate, more than 50% of organizations in the United States do not have a third-party information security risk program.

Some of the reasons you may end up in this category include:

  • Not knowing any better.
  • Not knowing where to start.
  • You’ve tried before and failed or gave up.
  • You don’t see the value in establishing a good third-party information security risk management program.

If you’re in this category, what legitimate justification do you have?

If the numbers don’t lie, then you can assume that a data breach will happen by, or through, one of your third-party providers. An estimated 60% of all data breaches are caused by third-parties— directly or indirectly.  Your decision to not account for this significant risk is difficult to defend against in the court of public opinion, the court of law, or the court of regulatory compliance.

The bottom line is; not doing anything to address third-party information security risk is not defensible. It would a difficult defense to claim that you didn’t know. Either you did know and you’re not being truthful about it, or you legitimately were ignorant of how important this is. Both are bad defenses when trying to explain how and why you were breached. You’re admittedly and willingly avoiding one of the most significant information security risks facing your organization.

Painful

This second category is organizations that are doing some type of vendor risk management, but it’s a painful process (a checklist can be handy). This category is typically comprised of organizations that either want to do the right thing or are being forced to do the right thing.

Want to do the right thing

These are mostly well-run organizations that want to secure information because it’s the right thing to do in their opinion.

Forced to do something

These organizations are being pushed or forced into implementing a third-party information security risk management program by one or more regulatory (direct and/or indirect), legal, or contractual requirements.

The Typical Painful Approach

Regardless of why the organization has implemented a third-party information security risk management program, the program is painful. It is usually wrought with subjectivity, inefficiency, ineffectiveness, and disorganization.

Here’s a typical real-world example of a painful program. A person within the organization has been appointed as the “Vendor Risk Manager.” She begins by developing a policy and a process. The process includes vendor on-boarding, some training, and questionnaires. She inserts the first vendor into the newly designed process and quickly finds that there are some serious pain points:

  • She must run and maintain the entire process.
  • She doesn’t know each third-party provider, what they do for the organization, or how much information they have access to. The upfront research she needs to do is cumbersome and disruptive to her other duties. She tries to get the business to help, but the business views the process as a hindrance and isn’t enthusiastic about helping.
  • She sends questionnaires out to third-party providers with the best contact information she can find, but many of the questionnaires end up going to the wrong people. Some questionnaires even go to the wrong third-party provider.
  • Most of the third-party providers don’t really want to complete the questionnaires, and when they do, the subjective nature of the questions is interpreted in the best possible light for the provider, not the company trying to assess risk.
  • Tracking which questionnaires that were sent to which third-parties is difficult.
  • Following up with third-parties to get their questionnaires completed is often inconsistent or forgotten altogether.
  • Addressing third-party questions about the process and about how to complete questionnaires is time-consuming.
  • Reviewing each questionnaire and marking them for remediation is subjective and inconsistent.
  • Fighting with third-party providers for remediation of specific risks (or perceived risks) is contentious and draining.
  • Fighting with the business leaders within the company is useless.

Eventually, the third-party information security risk program falters as employees and vendors think it as more of an inconvenience than a way to improve the organization. If it’s made too painful for the vendors, they may even choose not to do business with our organization.

The painful approach is expensive and a waste of valuable resources. 

Partial

The partial approach is where organizations end up if they either don’t fully understand information security risk or don’t care if they’re not addressing information security risk well. These organizations often ask for things from a third-party that don’t specifically address risk or attempt to employ an easy button that only addresses a part of information security risk.

Ask for Things

Are you an organization that asks for something like a SOC 2 report or maybe ISO certification?

Asking for these things just so that you can check it off a list is not sufficient.  It’s important to read the reports and certification documents to make sure they address which risks are applicable to you and your work with the third-party. The motivation for the third-party in obtaining these things is to do as little as possible to obtain the report or certification. They are motivated to narrow the scope and get to a passing grade as quickly and cheaply as possible.

This may or may not sufficiently address third-party information security risk, and needs to be properly vetted before the box is checked. Businesses who ask for things and don’t vet the responses are only practicing partial vendor risk management.

Easy Button

A popular partial option used by many organizations is to employ an easy button. There are products and services on the market today that pose as third-party information security risk management tools, but only address one or two parts of information security risk. The most popular of these easy buttons are threat monitoring tools, security rating tools based on external and/or internal vulnerability(ish) scans, and continuous monitoring solutions.

Each of these tools are good at addressing one part of information security risk— most often external technical risks.

But information security risk is more than just external technical risks. Information Security is managing risk to information confidentiality, integrity, and availability, using administrative, physical, and technical controls – all together being security controls.

How do we address physical risk? After all, it doesn’t matter how well our firewall is operating if someone can steal our server.

People are often our biggest risk. It’s important that information security programs take administrative controls into account to mitigate the human error of information securirty.

The easy button solutions work well for the easy parts of information security, but they leave out the most significant risks. Use them for what they’re good at, but don’t assume you’ve got yourself covered if they’re all your using.

The partial approach is incomplete and leads to a false sense of security, which is sometimes worse than no security at all.

Good

A good third-party information security risk program is one that doesn’t compromise any part of our previous definition of third-party information security risk. It conducts its information security program in a manner that is simplified, standardized, and defensible.

Simplified

The simplest approach to third-party information security risk management is one where all third parties are vetted, and where vetting is done in a consistent and objective manner.

Simplified and easy are not the same. Simplified means that there isn’t any waste and everything in the program has a specific purpose. The components must all work seamlessly together and processes must be streamlined.

In the simplest sense, a good third-party information security risk management is made up of five components;

  • Policy (and supporting documentation)
  • Inventory
  • Classification
  • Assessment
  • Treatment

Standardized

A good third-party information security risk management program must be standardized. The same process must be followed every time. It’s not that we don’t continually refine and improve the program, it’s that we do so in a manner that is planned and consistent. In order to ensure standardization, the following must be true:

  • All third-parties must be assessed for the inherent risk in the same way.
  • All third-parties must be assessed for the residual risk in the same way.
  • Inherent and residual assessments must be objective.
  • Risk scoring must be consistently applied.
  • Thresholds must be set for all third-parties; driving risk treatment decisions.

Standardization can be achieved through rigid processes, but that could easily defeat our efforts to simplify. The best way to standardize is to use automation. Automation ensures that specific business rules are applied in a consistent manner, and it removes the non-standardization that often comes with human behaviors and decision-making.

Defensible

No matter what we do, we cannot prevent all bad things from happening. We live with a certain amount of risk, and there is no feasible way to eliminate it all. Organizations must consider how to defend themselves against the potential onslaught of regulatory investigations, civil suits, and loss of revenue.

Nobody expects a perfect approach to third-party information security risk management, but everyone should expect a reasonable approach to third-party information security risk management. Terms like due care, due diligence, and reasonable (or prudent) person are all very important when it comes to defensibility.

We aren’t lawyers, so we’ll borrow from publicly available sources to define these terms.

  • Due care refers to the effort made by an ordinarily prudent or reasonable party to avoid harm to another, taking the circumstances into account. It refers to the level of judgment, care, prudence, determination, and activity that a person would reasonably be expected to do under particular circumstances.
  • Due diligence in a broad sense refers to the level of judgment, care, prudence, determination, and activity that a person would reasonably be expected to do under particular circumstances.
  • Reasonable or Prudent man is a hypothetical person used as a legal standard especially to determine whether someone acted with negligence. This hypothetical person exercises average care, skill, and judgment in conduct that society requires of its members for the protection of their own and of others’ interests. The conduct of a reasonable man serves as a comparative standard for determining liability.

It seems perfectly reasonable for a person to establish a third-party information security risk management program according to the terms that we’ve defined. It’s easier to make the case that you practiced due care, which makes you more defensible.

Doesn’t Compromise

The last characteristic of a good third-party information security risk management program is that it doesn’t compromise what we define as information security or risk.

If we’re going to call it a third-party information security risk management, or something similar, it must account for information security risk. If we’re going to address only technical controls or the technical aspects of information security risk, then call it something like third-party IT risk management or third-party cybersecurity risk management.

These things are different. The differences may seem subtle in wording, but they are monumentally different in practice. There are no shortcuts in third-party information security risk management, we must account for administrative, physical, and technical controls or aspects.

A good third-party information security risk management program accounts for administrative, physical, and technical risk.

Take Action

Almost all organizations fit into one of four categories when it comes to managing the data security risk their vendors pose— none, painful, partial, or good.

If you need assistance in determining where your vendor risk management program sits, and how you can help to make your organization more simplified, standardized and defensible, schedule a demo.

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