- March 21, 2023
In today’s interconnected digital world, businesses of all sizes rely on third-party vendors to provide essential services. From cloud providers to software vendors, IT service providers, and payroll processors, third-party vendors have become a critical part of modern business operations. However, this reliance on third parties also brings significant risks, especially regarding cybersecurity.
As cybersecurity risks become increasingly complex and sophisticated, third-party cyber risk management allows organizations to identify, assess, and mitigate potential cyber threats and vulnerabilities that third-party vendors could introduce. Additionally, this approach ensures that appropriate measures are in place to protect corporate networks and data from the likelihood and impact of third-party security incidents.
This article explores the importance of third-party cyber risk management and discusses the implications of such risks on small and medium-sized businesses (SMBs).
Third-Party Cyber Risks Affecting SMBs
SMBs have been significantly affected by third-party cyber risks. As a result, SMBs need more resources and expertise to manage their third-party relationships effectively and may need access to the same cybersecurity controls as large enterprises. The following are some common third-party cyber risks:
- Supply chain attacks
SMBs can use goods and services from third-party vendors and suppliers. Therefore, if a cyberattack targets these vendors or suppliers, the SMB may also be affected. For instance, if attackers access a supplier’s network, they could access the SMB’s network through the supplier’s connection.
- Data breaches
SMBs may also store sensitive information with third-party vendors like cloud service providers or payment processors. If these providers are compromised, threat actors could publicly disclose sensitive data about critical business operations directly impacting SMBs. Thus, incurring lost revenue, reputational damage, and legal problems. Furthermore, a 2015 U.S. Cost of Data Breach Study from the Ponemon Institute found that third-party involvement in a data breach raised the cost per capita of data breaches more than any other factor.
- Insider threats
Certain third-party vendors and contractors may have access to the SMBs’ systems and data, and some may cause harm, either deliberately or unintentionally. For instance, an employee of a third-party provider may accidentally remove important data or knowingly steal critical information.
- Regulatory compliance
Many SMBs are subject to industry-specific regulations, such as HIPAA for healthcare providers or PCI-DSS for businesses that handle credit card data. If a third-party vendor complies with these regulations, the SMB may also comply.
The Importance of a Third-Party Vendor Risk Management Program
Implementing a third-party vendor risk management program entails establishing a comprehensive framework for identifying, assessing, and mitigating the cybersecurity risks associated with third-party relationships. This typically involves several key steps, such as conducting due diligence on potential vendors and suppliers, assessing the risks associated with each relationship, and establishing policies and procedures for ongoing monitoring and incident response.
Unfortunately, security researchers discovered that only 52% of companies have an active program to manage third-party cybersecurity risk systematically. To mitigate such gaps, GoldSky provides a range of solutions tailored to the needs of SMBs. For example, GoldSky can conduct comprehensive third-party risk assessments on vendors and suppliers to identify potential vulnerabilities, recommend risk mitigation strategies, and monitor and manage third-party relationships to ensure cybersecurity risks are continuously addressed. GoldSky can also help SMBs establish effective policies and procedures for third-party vendor risk management, including developing vendor management frameworks, conducting cybersecurity awareness training for employees, and implementing incident response plans during a cyber incident.
Third-party cyber risk management is a critical issue for businesses of all sizes — particularly for SMBs that may lack the resources and expertise to manage their third-party relationships effectively. By implementing a comprehensive third-party vendor risk management program, organizations can identify, assess, and mitigate the cybersecurity risks associated with these relationships, protecting themselves and their customers from potential cyber threats. This involves conducting due diligence on third-party vendors and suppliers, establishing effective policies and procedures for ongoing monitoring and incident response, and investing in cybersecurity insurance to help mitigate the financial impact of a cyber incident.
By partnering with a cybersecurity services company like GoldSky, SMBs can receive the support and expertise they need to establish effective risk management strategies and ensure the continuity of their operations. Overall, prioritizing third-party cyber risk management is crucial for SMBs to maintain the trust of their customers and protect their businesses from potential cyber threats.