What is Third Party Cyber Risk Management

Third party cyber risk management refers to the process by which organizations identify, assess, monitor, and mitigate the risks associated with their external partners and vendors that have access to their data or information systems. The primary goal of this management process is to reduce the risk of data breaches, operational disruptions, and other security issues that may arise through the connections with these third parties. It is a critical component of an organization's broader cyber security strategy.

Small businesses often rely on a variety of third-party services and vendors to operate efficiently and to access expertise and technologies that they might not be able to afford or manage internally. The most common third parties that small businesses work with typically include: IT service providers, payment processors and financial institutions, professional services, suppliers and vendors, logistic and insurance companies and HR and payroll services. It’s important that all third parties adhere to your cybersecurity policies and procedures to ensure risk management and in many industries, compliance.

When it comes to third party risk management from an IT perspective, businesses generally rely on a Managed Service Provider or Managed Security Services Provider. In this blog post, we outline some of the key steps involved in third party cyber risk management:

Identification: The first step involves identifying all third-party vendors and partners that interact with your organization's systems or data. This includes everything from cloud service providers and IT contractors to suppliers and service vendors.

Risk Assessment: Each identified third party is assessed for the level of risk they pose. This involves evaluating the sensitivity of the data they access, their access levels to your systems, their own cybersecurity practices, and their compliance with relevant regulations (like the Personal Information Protection and Electronic Documents Act (PIPEDA) and The General Data Protection Regulation (GDPR, etc.).

Due Diligence: Before engaging with a third party, conducting due diligence is crucial. This involves verifying their security policies, data protection measures, incident response capabilities, and compliance standards.

Contracting: Contracts with third parties should include clear terms regarding data protection, security requirements, and breach notification procedures. This ensures that both parties understand their responsibilities in terms of cybersecurity.

Continuous Monitoring: Cyber risks are dynamic, so continuous monitoring of third-party practices and performances is essential. This could involve regular audits, real-time security monitoring, and periodic compliance checks.

Incident Management and Response: Establishing protocols for how potential security incidents will be managed and responded to is crucial. This includes defining roles, responsibilities, and communication strategies in the event of a breach.

Regular Review and Update: As both technology and cyber threats evolve, the risk management strategies and practices must be regularly reviewed and updated to ensure they remain effective.

Effective third party cyber risk management not only helps in protecting a business from potential threats but also assists in compliance with regulatory requirements, and protects the organization's reputation. Given the interconnected nature of modern business IT ecosystems, managing third-party cyber risks has become an indispensable aspect of organizational security strategy. If your business needs guidance in developing any of these strategies, reach out to us.