Any organization that relies on third-party vendors to provide critical services or functions is at risk for a data breach, system failure or other incident. While it's impossible to completely eliminate the risk of an incident, organizations can take steps to manage and monitor these risks.
In this blog post, we'll discuss six common third-party risks that you need to be aware of. We'll also provide tips for mitigating these risks.
Keep in mind that third-party risk management is an essential part of doing business today, so don't neglect this important aspect of your operation.
When you work with a third party, you're sharing your data and systems with other organizations. Third-party vendors are often the targets of hackers and cybercriminals. In fact, a recent study found that 43 percent of data breaches occur as a result of attacks on them.
This on the other hand, makes your business vulnerable to cyberattacks which can result in the loss of data or even a breach.
Assessing the cybersecurity risks posed by third-party vendors is essential. You need to know what kind of data they have access to, as well as their security measures and response in the event of a contravention.
A system failure can occur when a third-party vendor's system goes down, or when your own system is unable to communicate with theirs. This can result in an interruption of service, data loss, and even business downtime.
One way to mitigate the risk of a system failure is by having a solid backup plan in place. You should also require your vendors to have a plan B that meets your standards.
In addition, you should regularly test your alternative plan to ensure that it works as intended.
When a third-party vendor is involved in an incident, it can damage your business's reputation. This is especially true if the incident is high-profile or if it results in customer data being compromised.
You can protect your business's reputation by doing your due diligence when selecting vendors. You should also have a plan in place for how you will handle incidents if they occur.
If a vendor is non compliant, it could put your business at risk. For example, if they are not compliant with the Payment Card Industry Data Security Standard (PCI DSS), then you could be fined for any breaches that occur as a result of their negligence.
You should ensure that your vendors comply with all relevant regulations and standards, and that they have implemented appropriate practices to protect your data.
Strategic risks arise when the third-party makes business decisions that don't align with your own objectives. This can result in financial losses, reputational damage, or even legal action.
To mitigate the risk of strategic misalignment, you need to have a clear understanding of your objectives and expectations. You should also keep communication channels open so that you can quickly resolve any issues that may come.
Third-party vendor's inability to meet the obligations that they have agreed to can put your business at financial risk. This can be missed payments, late fees, and even bankruptcy.
You can mitigate this risk by having a solid contract in place that outlines the expectations of both parties. You should also conduct regular reviews of your vendors' financial stability to ensure that they are still able to meet their obligations.
Third-party risks can have a serious impact on your business. By taking the time to understand and mitigate these risks, you can protect your organization from potential harm.