1. Establish a Third-Party Risk Board Committee
Board committees are responsible for communicating specific areas of business operations to the board. A Third-Party Risk Management (TPRM) oversight committee creates a communication funnel between your risk management teams and the board. One of the main benefits of such a committee is that it consolidates the responsibilities of compiling risk management reports and answering TPRM questions to a specific group of individuals, relieving the C-suite team from the stress of answering the board’s unexpected TPRM inquiries.
A third-party risk committee would need to be structured. as a Standing Committee since this group will continuously support the board. For guidance on how to form a new committee, refer to this helpful resource by the American Society of Association Executives (ASAE).
Without a third-party risk committee, much of the responsibilities of communicating third-party risk management efforts will fall on the CISO.
2. Establish a Clear TPRM Communication Process
With a TPRM communication body established, whether it’s a third-party risk standing committee or your CISO, your organization’s third-party risk management processes are now in a position to be relayed to the board. To ensure your initiatives of reducing vendor-related risks are well received, the TPRM communication process should be broken down into two primary stages.
Stage 1: Provide an Overview of the Third-Party Risk Landscape
Your third-party risk landscape is a summary of all the third-party risks that are unique to your business. Although TPRM has evolved to have an increased emphasis on mitigating cybersecurity risks, it could also involve other categories of inherent risks, including:
- Financial risks.
- Reputational risks.
- Regulatory and compliance risks.
- Supply chain and service provider disruption risks.
- Business continuity risks.
- Data breach risks.
- Operational risks.
- Third-party vendor risks.
- Information security risks.
However, when the board of directors or board members enquire about third-party risks, usually the emphasis is on vendor-related security risks. To ensure only relevant information is communicated during these inquiries, third-party risks committees should primarily focus on Vendor Risk Management.
The easiest way to create an overview of your third-party risk profile (in the cybersecurity category) is by referencing the data used to calculate your third-party risk appetite. Third-party risk appetite is a function of your security risks, measured with vendor risk assessments and compliance requirements. Combining this data creates a picture of your third-party risks exposure influencing your risk threshold.
With a Vendor Risk Management platform, such as UpGuard, this data can be easily obtained by referencing completed security questionnaires. UpGuard further streamlines this workflow by mapping the responses of questionnaires to popular regulations to highlight deficiencies in essential regulatory requirements.
Security ratings are a great metric for simplifying third-party risk exposure so that it can be easily communicated and understood by stakeholders and senior management. Security ratings are quantitative representations of an organization’s security posture based on advanced calculations considering multiple attack vector categories.
This measurement system supports the ongoing monitoring of an organization’s risk exposure by mapping its deviations in real-time. Providing a graphical presentation of security rating changes over time will help the board quickly understand the organization’s evolving risk exposure. If your risk management team is doing a good job, this trajectory should be on an upward trend.
With board members becoming more aware of the importance of securing third-party relationships, you might be asked to demonstrate the efficacy of your Vendor Risk Management efforts by proving vendor security ratings are also improving over time. With a VRM platform like UpGuard Vendor Risk, vendor security rating deviations over time can easily be pulled into a cybersecurity executive report for such requests by the board.
Stage 2: Provide an Overview of your Vendor Risk Management Lifecycle
With a thorough understanding of your third-party risk landscape, the board will want to learn about the details of your Vendor Risk Management efforts. To prevent overcomplicating this process, divide your VRM program into its three main phases and then provide an overview of the efforts in each phase.
It’s important to remember that board members are rarely interested in the finer technical details of your cybersecurity efforts. They’re primarily concerned with larger moving pieces and their impact on business objectives. To keep board meetings focused on meaningful information, always default to high-level explanations but be prepared to provide greater technical details when they’re requested.
Always start with high-level explanations to ensure your third-party risk efforts are communicated clearly and efficiently to the board. Delve into greater detail only when it's requested.
At a high level, a VRM program can be broken down into three stages - onboarding, risk remediation, and ongoing monitoring.
Here are some details that will help the board understand the efforts of each stage of your VRM program. When providing this supporting information, the objective shouldn’t be to prove that your VRM teams have been busy but rather to demonstrate that the healthy return of VRM investments - which, from a risk mitigation perspective, is measured by the decreased likelihood of data breaches following a cyber attack targeting a third-party (third-party breach).
- Onboarding - What due diligence efforts are utilized to ensure risk appetite alignment? These details should include TPRM clauses in vendor contracts and procurement agreements with all outsourcing relationships.
- Remediation - What is the process of third-party risk evaluation (risk assessments), and how are discovered vulnerabilities managed? To impress the board, explain the details of any notification protocols for ensuring third-party risks aren’t overlooked and how high-risk vendors are prioritized in remediation efforts.
- Ongoing Monitoring - Explain the mechanism for ongoing monitoring of emerging third-party risks. This is an essential requirement as the board will want to know whether you have systems for adapting your VRM program against the evolving challenges of third-party risk management.
3. Develop a System for Keeping the Board Continuously Informed of Your TPRM Efforts
By addressing the first two teams in this list, you’re very likely to increase the board’s confidence in your third-party risk mitigation efforts. However, since board members are now more aware of the importance of preventing data breaches, they will likely request periodic updates about the efficacy of your VRM program.
The most efficient system for such ongoing awareness is through cybersecurity reports. Regarding reporting, cybersecurity professionals must suppress their inclination to use technical jargon.
Remember, you’re communicating to board members that aren’t exposed to cybersecurity esoterics daily. Be concise and to the point, preferencing quality over quantity.
Use quantitative metrics like security ratings to quickly communicate your first and third-party risk performance. If more detail is required, a risk measurement model that offers more detail without compromising the quantitative aspects that make third-party risks easier to communicate is the Factor Analysis of Information Risk model (the FAIR model).
The FAIR model combines the best aspects of quantitative and qualitative analysis to produce an accurate measurement of third-party risks that’s both informative and concise.
The FAIR model is among the most popular risk measurement models for calculating risk appetite.
To remain consistent with this post’s theme of streamlining communication workflows, cybersecurity reports should be generated through a cybersecurity solution rather than laboriously designed manually.
To use the UpGuard platform as an example, risk management teams can instantly generate third-party risk cybersecurity reports from various reporting styles. Offering different reporting designs is essential as it allows users to choose a communication style that meets the unique reporting requirements board requirements.
Once generated, a board summary report can be instantly exported into editable PowerPoint presentation slides, significantly reducing board meeting preparation time (and stress).
The benefit of using a platform such as UpGuard, which also includes a Vendor Risk Management component, is that all relevant third-party risk data is available on the same platform and can instantly be pulled into a report. This removes the need for complex integration across multiple solutions, unnecessarily expanding your attack surface.