Despite having a solid security architecture in place, third-party risks are still a threat to your company as it isn’t certain how they may go on to use the data stored within your organisation.
Outsourcing and partnering with other companies or suppliers will increase your chances of third-party risk, as more users have unrestricted access to your company data.
This is not only a threat as you can’t be sure how trustworthy external sources are, but third parties can create more vulnerabilities that create further opportunities for hackers to infiltrate into a network.
Therefore, third-party risks can quickly become full-scale cyber attacks and can end up putting the reputation of a company along with its confidential information in danger.
In this post, we will be looking at all there is to know about third-party risks, from what they are, to risk management, to how to prevent these threats from infiltrating your organisation.
So, let’s get started with a clear definition.
What Is a Third-Party Risk?
For example, if your business were to hire a third-party vendor to carry out specific tasks such as data inputting, or organising company files, this poses a potential risk to company information.
Allowing any third-party access to the files within your organisation is a risk, as it isn’t always certain how trustworthy the external source is and whether or not the information they are entrusted with will be safe.
This is because third parties include anyone or any business separate from your organisation that may offer software, goods, supplies, or services and therefore may have the motive to attack.
This external category includes vendors, suppliers, staffing agencies, contractors, or any other individual who doesn’t work for your company but works with them on specific projects and has access to certain company files.
Hence why relying on third parties can be risky, as you have to put your trust into another company or individual, and the way they conduct business and carry out tasks.
As such this can lead to an increase in vulnerabilities as third-party access to files can make it easier for cyber criminals who pose more of a threat to get into your network.
Therefore, creating a third-party risk management plan can help to mitigate the likelihood of external attacks on your organisation.
Why Is Third-Party Risk Management Important In Cyber Security?
Third-party risks are extremely common and can be highly damaging to businesses.
Whether the external source compromises the reputation of a company, affects financial information, or gains access to sensitive information, all third parties can cause companies to lose customers, clients, or their business altogether.
As many companies work in the cloud, or in an off-premise IT infrastructure due to remote or hybrid working, or working across multiple offices, it becomes harder to manage third-party risks.
Equally, when sharing information with outside parties there is a knock-on effect as there is a range of other sources, such as their own third parties, that can access this data.
As a result of this, these third parties (fourth parties to your organisation) have access to your company data as well as the original external source that you hired or are partnered with.
Third-party risk management is important as it can threaten all organisations big and small and filter down to customer databases.
For example, customers, clients, partners, suppliers or any other sources associated with your business may feel the effects of a third-party attack, as once an external hacker has access to your network it can be difficult to know which information they’ve found and how they’re using it.
Types of Third-Party Cyber Security Risk
There are a few different types of third-party cyber attacks, but at their core, they are defined as the potential exposure of an IT infrastructure or host of data from one company by an external source.
Therefore, these attacks could be carried out with malicious intent by a hacker, or conducted by a supplier or company that was thought to be trustworthy.
These third-party risks come in several different forms, including:
- Third-Party Data Breaches – just as data breaches are carried out by cyber criminals they can be conducted in the same way when third-party vendors are involved. For example, if you share data with another company, a hacker may gain access to the third-party network and steal the data from them without even having to come into contact with your organisation’s network.
- Compliance Issues – global institutions such as the National Insitute of Standards and Technology (NIST) set rules and guidelines on how companies are allowed to share data and provide third-party access. Failure to comply with these guidelines can result in legal and public relations issues for companies, as guidelines are in place to prevent pathways for hackers into networks from forming through third-party access.
- Ransomware Attacks – the likelihood of ransomware attacks has increased as hackers now focus their efforts on software that is popular among many large organisations. This way they can distribute ransomware to a larger pool of users at the same time through a third-party and carry out attacks without being noticed.
How to Prevent an External Attack
Now that we have covered what third-party risks look like it’s important to understand how to prevent external attacks as much as possible.
The first step is choosing the organisations or individuals you are planning to work with, and ensuring that they pose an acceptable or smaller degree of risk.
This can be decided by scoring inherent risk for each external source to help determine who you can and should trust, and which companies are too much of a threat to your company data.
Then once you have chosen your vendor it’s important to use every method possible to protect data as it is passed through third and fourth parties.
So, let’s take a look at measures that can be put in place to help prevent external attacks, starting with assessing third-party risk.
Score Inherent Risk
Put simply inherent risk is the risk a third-party poses before access controls or security measures are put in place.
Therefore, it’s important to consider that you can’t adopt the same approach for all companies or individuals you work with, as each third-party will present a different level of threat.
As such, it is useful to categorise all third parties you are planning on working with based on what kind of access they will need to do the job. Then it will become clear which data each external source could pose a threat to and this will make it easier to assess if your company is willing to take that risk.
Once you have put each third-party into a category, you will be able to see a full-scale overview of each one and this will help avoid cyber attacks later down the line.
Although it may be tempting to put trust into a company you have worked with before or one that has been recommended by someone you know, it is important to always score inherent risk regardless.
As a result, if you fail to do so this could be the difference between working with a trusted source and keeping your data secure, and your organisation becoming the target of a serious cyber attack.
In order to be slightly more certain about the safety of your company data, you should consider which third parties will be required to share a certain amount of data with others, for example, larger umbrella companies, or the government.
This may pose an additional risk to your company data as a previous contract may override the contract you draw up with your chosen third-party and your data may be further exposed to fourth and nth parties without your sign-off.
Include Cyber Security In Initial Contracts
When drawing up initial contracts between your company and a third-party company it’s important to include a clause on cyber security.
This will help vendors to be aware of the compliance rules and regulations, for example where data should be stored and access controls.
The contract should outline specific information including, but not limited to:
- Who third parties can share your data with
- Access controls including which files require restricted access
- Cyber security reviews and audits
- The ability to amend the contract when further data access is required
This way you know exactly how far your data is travelling and which fourth and nth parties can access information about your company.
Identify and Be Aware of 4th and Nth Party Vendors
As we mentioned before, just as you are sharing data with third parties, those you are working with may be required to share the data further with others.
This could be to help complete tasks on time or to a certain standard using the expertise of others, so whilst it is often harmless, it can still pose a risk.
This means, it’s essential to look into their extended supply chain as some of their third parties (your fourth parties) may include threats and could pose a future risk to your data.
This measure should come as an addition to researching third parties so you can be sure that the risks are minimal and there are no hidden surprise attacks.
Regularly Assess Risks
Third-party risks will likely change over the course of a few weeks or months, or however long the contract between you and the external source lasts.
As a result of this, it’s important to ensure that the assessment of risk is an ongoing practice within your organisation.
As you continue to build relationships with third parties and work with them on more than what was originally outlined in the contract, they will gain more access to data than originally intended.
Unfortunately, without a new contract in place, access controls to data won’t be accounted for and this could pose a risk to the new data that is being shared.
Although partnerships continue for longer than contract periods, it’s vital to ensure contracts are updated and still reflect the access to data that was originally put in place.
What Is a Third-Party Risk and How to Prevent An External Attack
Third-party risks are common as more often than not, organisations work with external vendors in order to get specific jobs completed on time and to the right standards.
However, when it comes to cyber security, involving another organisation or supplier can open the door to a host of cyber criminals that are looking to steal your data and possibly ruin the reputation of your organisation.
In order to combat these third-party attacks, it’s important to identify certain measures such as risk assessment and research in order to ensure the companies you work with pose a small risk and can be trusted with the data you’re sharing with them.
Here at TLR, we can offer specific cyber security services such as staff training and digital risk protection services to support your needs when it comes to preventing third-party risks.
These solutions can improve your teams knowledge of the fundamentals of cyber security, and ensure you have the correct protection that is aligned with your business and therefore the vendors you work with.
If you feel TLR could help build your confidence in cyber security and improve your overall security architecture, get in touch with a member of our team today!