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Cyber Security – Don’t Bank on It with Third Parties | @CloudExpo #Cloud

Third-party risk is hardly a new issue

The majority of an organization's revenues are dependent on suppliers, distributors and other third parties. But as Benjamin M. Lawsky, New York State's Superintendent of Financial Services, points out: "Unfortunately, those third-party firms can provide a back-door entrance to hackers who are seeking to steal sensitive bank customer data."

By now most everyone is well aware of the major data breaches afflicting Target and Home Depot - both triggered through a third party - that affected more than 100 million consumers. But the problem persists. A recent report from the New York State Department of Financial Services (NYDFS) revealed that nearly a third of 40 banks surveyed don't require their third-party vendors to notify them in the event of an information security or other cyber security breach. Other findings in the report include the following:

  • Fewer than half of the banks surveyed conduct anyon-site assessments of their third-party vendors.
  • Approximately 1 in 5 banks surveyed do not require third-party vendors to represent that they have established minimum information security requirements.
  • Only one-third of the banks require those information security requirements to be extended to subcontractors of the third-party vendors.

The elephant in the room that is yet to be adequately addressed is third-party risk: How can you implement appropriate cybersecurity if you have no idea that your third parties even have access to your IT systems?

Putting controls in place
Third-party risk is hardly a new issue. Regulators have issued guidance for years requiring that banks assess and manage the risk of doing business with third parties - particularly with IT vendors. And the financial services sector is not the only industry where companies are being urged to review their third-party management oversight.

The specter of hackers infiltrating major brands via some "low-risk," low-spend, non-IT third party, as well as increased regulations and regulatory enforcement, has elevated the topic of third-party risk to the boardrooms of all corporations.

Without company-wide processes and procedures to ensure that all third parties are systematically screened to verify whether or not they will have access to a company's networks, IT systems or data, third parties can put an organization at risk of reputational impact, regulatory exposure and revenue loss. Kaspersky Lab's "IT Security Risks Survey 2014" estimates that the average economic impact of a single data security incident is $720,000 in damages, and "one successful targeted attack could cost a company as much as $2.54 million."

But IT pros should take solace. This problem does not fall solely on your shoulders: It is a much broader issue than IT alone. For starters, here are five questions that should be asked, not just by IT but by colleagues across the organization:

  1. Do you know which third parties you are doing business with (all third parties, not just IT vendors)?
  2. Do you know which of your IT and non-IT vendors and third parties have access to your systems, networks or data?
  3. If the answer is yes, do you know why?
  4. How do you assess the risk - not just InfoSec - associated with these vendors and third parties?
  5. Are you confident that you and your third party have the correct controls in place to mitigate these risks?

Bottom line: Unless you are aware of the risk, unless you know that a third party is being given access to your company's data or needs to get behind your firewall, it's almost impossible to manage the risk appropriately. It would also be helpful to understand the business rationale for giving them this level of access in the first place.

Preparing a strategy
Despite the complexities involved, understanding these risks and preparing for them is achievable. Here are four ways to identify and mitigate potential IT risks across your disparate third parties:

  1. Know Your Third Parties: While it's easy to outsource work to third parties, it's not so easy to know who you're actually doing business with and who is delivering the goods or services. Companies often default to only completing due diligence and managing a limited number of "high-risk" or high spend third parties - or assuming that only traditional "IT vendors" pose an IT risk. Review whether your policies and technology allow you to identify, assess and manage all of your third parties for IT risk (as well as other risks of course).
  2. Know Their Business: It is not enough to hire third parties to help your company - you also have to know what business they are doing on your behalf. Ask yourself this question: If today you had to pull a list of which of your vendors or business partners have access to employee or customer personally identifiable information (PII), or to your IT systems, how long would it take? If you had to contact those companies for additional information, do you have accurate contact details?
    Did you know that the majority of companies lack accurate (or any) contact information for the majority (north of 75 percent) of their third parties? This means that you may have incomplete, inaccurate or outdated information about the work that your vendors and third parties are doing on your behalf and where and why they are doing it. Not knowing this information increases the chances of exposing your enterprise to risks and breaches.
  3. Know Their Risk: Less than half of companies regularly conduct due diligence on their third parties. While all third parties pose some level of risk, the risk and the level of seriousness differs depending on the role of the third party. For example, third parties that deal with payroll or taxes usually pose a higher risk of security to your company's data than the cleaning crew that comes in at night. Managing your third parties based on the risks that they pose requires knowing the risks in the first place and then having policies and procedures to control those risks throughout the life the contract.
  4. Know Their Access: Not knowing that a third party had access to system passwords is not a valid excuse when your client's records are stolen. Understanding what each party has access to - and why - will ensure that you have control over their access and can limit or deny access to sensitive information as appropriate.

Third-party risk management is critical. A company's revenues today depend on hundreds, thousands or hundreds of thousands of third parties - vendors, suppliers, contract manufacturers, brokers, distributors, resellers, channel partners and others. The majority of hackers, like most thieves, don't try to infiltrate the highly protected areas of your company; instead they're stealing credentials from unprotected "low-risk" third parties, such as an HVAC vendor. Is your company keeping pace to avoid situations that can damage your reputation and bottom line?

More Stories By Greg Dickinson

Greg Dickinson is CEO of Hiperos, a provider of third-party management software, connecting over 380,000 third parties to many of the world’s largest companies across a range of industry

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