In today’s interconnected digital landscape, third-party risk management (TPRM) has become a critical component of any robust security program. According to the 2024 State of TPRM Report, 90% of organizations now consider TPRM a growing priority, up from 63% in 2020. The report also highlights that 26% of organizations are managing over 250 vendors, a significant rise from 13.5% in 2020, emphasizing the expanding risk landscape. Understanding the importance of TPRM, the consequences of neglecting it, and how to implement it effectively is essential. This blog will delve into these core elements, highlighting why third-party risk is crucial, what happens if it’s not taken seriously, and how Mark43 is leading the way in effective TPRM.
Understanding the Importance of Third-Party Risk
Modern security programs operate on the principle that an organization’s security is only as strong as its weakest link. Third parties often have access to sensitive systems, data, or networks, making them an extension of your attack surface. A robust TPRM program helps map and understand your extended ecosystem and perimeter of security, identifying critical connections and high-risk integrations.
With the increasing reliance on remote work and cloud services, TPRM ensures visibility and security beyond traditional on-premises infrastructure. It reduces data breach risks by ensuring that vendors meet stringent security standards, minimizing the risk of unauthorized access or data leaks. Effective TPRM ensures encryption, secure transmission, and storage practices for sensitive data handled by vendors.
In parallel, TPRM enhances regulatory compliance. Frameworks like SOC 2, NIST, GDPR, HIPAA, PCI DSS, and FedRAMP emphasize robust third-party management as a critical security control. Integrating TPRM into your security program demonstrates compliance and helps avoid penalties for non-compliance. TPRM documentation provides a clear audit trail of risk assessments and mitigation strategies, supporting external audits and inspections.
TPRM also supports incident response by ensuring that third-party contracts include clear guidelines for breach notification, collaboration, and accountability. Incident response simulations that include critical vendors prepare both parties for real-world scenarios, reducing chaos during crises.
Lastly, TPRM safeguards reputation and trust. Customers, partners, and investors are increasingly scrutinizing how companies manage their vendor relationships, making TPRM a key part of brand reputation. Public fallout from third-party breaches can tarnish your organization’s image, even if your own security controls are strong. Transparent TPRM practices demonstrate accountability and a proactive stance on security, building stakeholder confidence. Vendors with a strong security posture can serve as a competitive differentiator, as customers feel safer trusting your organization.
The Dangers of Overlooking Third-Party Risk
Neglecting TPRM can have severe and far-reaching consequences, as evidenced by several high-profile incidents in recent years:
- Target Corporation (2013): Attackers accessed Target’s systems through an HVAC vendor, compromising payment card data of 40 million customers and personal data of 70 million individuals. The breach cost Target an estimated $162 million in legal settlements and response efforts.
- Equifax (2017): Hackers exploited a vulnerability in a third-party software component, exposing sensitive data of 147 million consumers. The breach resulted in Equifax paying $700 million in settlements and fines.
- Uber (2022): A third-party IT vendor, Teqtivity, was breached, exposing Uber employee data and corporate reports. Uber faced reputational damage and costs likely in the millions for legal fees, vendor replacement, and enhanced monitoring.
- MOVEit File Transfer Software Breach (2023): Exploited vulnerabilities in the MOVEit software impacted over 2,000 organizations and exposed data of 62 million individuals. The total financial impact is estimated to be around $9.93 billion across affected entities.
- Ticketmaster (2024): A breach of Ticketmaster’s cloud storage vendor, Snowflake, leaked data of over 500 million customers. While specific financial losses are unclear, similar breaches typically result in millions in customer notification, litigation, and regulatory fine.
These incidents underscore the importance of taking TPRM seriously. Failure to do so can result in significant financial losses, regulatory penalties and irreparable damage to an organization’s reputation.
How to Effectively Tackle Third-Party Risk Management: Mark43’s Proven Approach
Implementing an effective TPRM program involves several key steps:
- Implement a Risk-Based Vendor Assessment Framework: Prioritize vendors based on the criticality of their services and the sensitivity of the data they handle. Use tiered assessments to allocate resources effectively, focusing the most scrutiny on high-risk vendors. At Mark43, all vendors receive a risk score derived from conversations with the business owner, information gathering from the third party themselves, and a review of the documentation provided by the third party.
- Ensure Contractual Safeguards: Include clauses requiring vendors to maintain specific security controls, such as data encryption and regular vulnerability assessments. Define clear incident notification timelines and audit rights to ensure accountability in case of a breach. At Mark43, all vendor agreements are reviewed by the Legal team to ensure security safeguards.
- Collaborate Across Departments: Engage legal, procurement, and IT teams during vendor onboarding to ensure a holistic risk evaluation. Establish clear communication channels for ongoing vendor management and incident response. At Mark43, Security, IT, Legal, Finance, and GRC have a hand in the TPRM process, ensuring a holistic approach to securely onboarding third parties.
- Leverage Technology Solutions: Adopt automated platforms to streamline workflows, such as sending and analyzing vendor questionnaires. Integrate TPRM tools with existing systems like GRC platforms or SIEM solutions for a unified view of risks. At Mark43, we leverage automation in Jira and the MS Power Platform to streamline the assessment process and visualize data derived from the process.
- Have an Incident Response Plan for Vendors: Collaborate with vendors to create incident response playbooks, ensuring both parties are aligned on roles and responsibilities. Include third-party specific scenarios in regular incident response drills to test and refine your processes. At Mark43, critical third parties are included in Incident Response plans and exercises.
- Regular Reassessments: Schedule periodic reassessments of vendors to account for changes in their operations or security postures. Incorporate lessons learned from past incidents to continuously improve your TPRM processes. At Mark43, all third parties are reassessed at a frequency defined by their risk level, with higher risk third parties assessed more frequently than lower risk third parties.
In conclusion, third-party risk management (TPRM) is a vital component of any robust security program for tech and SaaS organizations. By understanding its value, recognizing the significant consequences of neglect, and implementing effective strategies, organizations can safeguard their operations and build trust with their customers and partners. At Mark43, we are committed to maintaining the highest standards of TPRM, ensuring the security and integrity of our services and vendor ecosystem, while providing 24/7/365 peace of mind for our valued customers and integration partners. If you’re looking for support or guidance on establishing a TPRM program, Mark43 is here to help. To learn more about our security offerings, visit www.mark43.com/platform/security-compliance/.
