TPCRM stands for Third-Party Cyber Risk Management.
It derives from TPRM (Third-Party Risk Management), which involves assessing and controlling risks from doing business with third-party vendors. The risks in TPRM may cover the following areas:
- cyber
- financial
- operational
- regulatory
TPCRM focuses on cyber risks. Participating in due diligence concerning third-party risk helps organisations to diminish the likelihood of data breaches.
Third-party security aims to check and ascertain that third parties, including vendors, suppliers, and business associates, implement acceptable cybersecurity standards.
TPCRM requires organisations to have a strategy that incorporates the following:
- creation of comprehensive third-party policies and procedures; and
- continuous monitoring to expose cyber gaps during the business relationship
The third-party security practices and procedures include assessing third parties against the policies before onboarding.
- The Origins of Third-Party Security
Cloud and analytics providers continue to multiply in today’s business environment. They may have data on your customers without your consent, and such oversight may further increase your exposure.
A third-party-enabled data breach can have lethal reverberating effects on every organisation the third party has a connection to. This type of breach is increasingly common and is growing in effectiveness by the day. No industry is immune to third-party security attacks, and the size of a company is not a mitigating factor. Government agencies have also seen compromise due to third-party vendor attacks.
Vendor cyber risk management is a growing concern for organisations, but these are the more obvious reasons:
- Modern attacks are more sophisticated. The frequency and volume of cyber threats are rising by the day. Each week, there are reports of massive data breaches. Many are not apparent until several months after the criminals have acted.
Also, cybercriminals are constantly evolving their methods for accessing personal and business data. They target third parties with links to the company because, too often, they prove to be the weakest link in the chain.
IT systems or integrations provide common connection points between businesses. These may be third parties or SaaS providers who hold and manage sensitive data. Third parties may not maintain a robust cyber defence as their customers expect, making them an easy target for hacker exploitation.
- A growing number of third parties. Modern companies have to do business with more third parties. More third-party firms share sensitive and confidential data from organisations.
- Greater regulation. Data breaches are not merely about the data at risk. There is a public relations component, along with the massive loss of consumer loyalty and confidence. There are hefty penalties for violating data privacy regulations.
Non-compliance with the European Union’s GDPR (General Data Privacy Regulation) will cost a company up to €20 million or 4 per cent of revenue, depending on which is greater. On the other hand, HIPAA will cost businesses up to $1.5 million each year for each violation category.
These are viable reasons why third-party cyber risk management matters for companies. TPRCM needs to be efficient, reliable, and robust.
- How Difficult is It to Do TPCRM?
The three major issues implementing TPCRM that enterprise risk managers highlight are:
- the difficulty of third-party risk, even when the organisation has extensive resources;
- the issue of “nth-party” risk, meaning the third party also relies on other third parties; and
- the difficulty of configuration details.
Expectations for third-party risk management needs to be realistic. They should focus on identifying and measuring potential risk areas and raising awareness accordingly. Critical questions to ask include:
- Does the company know their third parties?
- Does the company know the type of data their third parties can access?
- Does the company know the enterprise practices their third parties are using?
- Does the company know their third parties’ third parties that enable them to provide certain services?
The aim of TPCRM is not to eliminate emerging technology risks. Instead, it is to identify such issues and mitigate their possible impact on the company. Third-party risk is increasingly important, considering that the modern enterprise exists in a more interconnected world. Organisations need to be aware and strategic in managing resources to address the most pressing of these risks, which continuously change.
A common third-party cyber risk is the absence of patching processes. Companies may disclose critical vulnerabilities in their software that require immediate updates while others release regular patches for their products. However, beyond the fact that the vulnerability exists, it is crucial to know which third-party vendors are using a service and if they have a thorough patching process to resolve the vulnerability.
In the “nth party” risk variant, your vendor’s third parties still present a reasonable risk to your enterprise. Rich data repositories and a comprehensive understanding of how your third-party associates conduct business are essential to beat risks. Awareness and action respective to the information are vital to remaining safe and secure. The most effective measure for a third-party risk manager is to ensure vendors using the software are aware and have taken steps to deal with the vulnerability. Such preventive measures are always less expensive than the unpredictable outcomes of corporate data breaches. They go a long way to give clarity, transparency, and reassurance in challenging circumstances.
- What TPCRM is Not
Third-party cyber risk management is not an attempt to do code review on vendors or cross-checking every configuration a company’s data may encounter.
It only means having a complete understanding of the risks of maintaining certain relationships with your vendors. It should inevitably lead to the strategic deployment of data and automation to maximise elements of your human resources.
There is no silver bullet for third-party cyber risk issues in the face of evolving business needs, technology stacks, and vendor lists. It is advisable to invest in a rigorous, well-structured TPCRM program that enables a company to swiftly and easily identify the most significant risk areas. It allows the team to clarify the remediation process, even if they have to verify specific vendors’ patching culture. TPCRM is a valuable means for mitigating cyber risk.
