In-House vs Outsourced Third-Party Risk Management
Today’s cybersecurity landscape is teeming with third-party threats: supply chain risks, regulatory compliance requirements, third-party security flaws, malicious insiders, and more. Whether your organization’s risk appetite craves conservative or aggressive third-party relationships, these risks make third-party risk management (TPRM) necessary.
While crafting its TPRM program, your organization will make several important decisions, including whether it has the resources to deploy critical TPRM strategies in-house. This article will compare the benefits and disadvantages of in-house and outsourced TPRM and provide the tools to evaluate your organization’s internal ability to manage the operational risks presented by its third-party service providers.
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The Importance of TPRM
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An effective TPRM program manages third-party risks throughout the vendor lifecycle and includes constructed workflows for vendor onboarding, due diligence, risk mitigation, and mapping fourth-party risks.
Given that vendor risks and third-party data breaches can cause significant damage to an organization’s financial stability and reputation, most TPRM frameworks also include strategies for business continuity and incident response. These strategies allow an organization to remain resilient even when the TPRM program fails to intercept a threat from its third-party vendor ecosystem.
In-House vs. Outsourced TPRM
Your organization should decide between in-house and outsourced TPRM based on a thorough analysis of various organization-specific factors. Here are several factors your organization should consider when planning its TPRM program:
- Industry: Does your organization work in an industry that requires complex vendor relationships (manufacturing, financial services, healthcare, technology, etc.)? If so, it may prove advantageous to outsource your TPRM program, as complex vendor relationships can be challenging to manage.
- Size: What is the size of your organization and its vendor network? Smaller organizations may need more resources to properly manage an internal TPRM program, while large organizations may support an extensive vendor network that poses management challenges and can exhaust internal resources.
- Expertise: Does your organization have trained TPRM personnel? An in-house TPRM program can only be effective if qualified, knowledgeable risk personnel manage it, and organizations without trained personnel should explore their outsourcing options.
- Longevity: Will your vendor network grow over the next few years? If so, will your organization also have the internal resources to expand its TPRM program to manage these vendors?
While weighing these factors, your organization should also run a cost-benefit analysis and thoroughly assess its risk profile to see if in-house TPRM is viable and effective.
Benefits of In-House TPRM
Organizations choose to handle TPRM in-house for various reasons, depending on their specific needs and cybersecurity priorities. Here are some expected benefits of in-house TPRM:
- Customization: In-house TPRM gives organizations greater control over the entire risk management process, and they can customize risk assessments and other features to meet their current needs and goals.
- Industry knowledge: Some organizations choose to handle TPRM in-house to take advantage of their specialized knowledge.
- Cost control: In-house TPRM is often less expensive than outsourced TPRM, and organizations can often better control their costs by establishing an in-house program.
- Security: Organizations choose in-house TPRM to maintain greater control over sensitive data, proprietary or confidential information, and reduce the risk of a data breach.
Benefits of Outsourced TPRM
Outsourcing TPRM can offer many advantages to organizations. By outsourcing TPRM, companies can leverage the expertise of specialized service providers with the skills and resources to manage the risks effectively. The benefits of outsourced services include:
- TPRM expertise: Service providers bring specialized risk management knowledge, skills, and experience and are well-versed in cybersecurity best practices, compliance requirements, and vendor assessment.
- Efficiency: External TPRM providers have established workflows, methodology, processes, and tools for risk assessments, vendor due diligence, and other critical risk management practices. This efficiency can improve an organization’s resiliency and speed up its incident response.
- Compliance management: TPRM providers possess extensive knowledge of industry compliance regulations (ISO, NIST, HIPAA), ESG strategies, and ongoing certification requirements. Outsourcing TPRM can help organizations ensure their third-party relationships comply with all industry benchmarks.
- Access to data & technology: TPRM service providers continually invest in advanced technologies and tools to elevate their risk assessment, monitoring, and reporting methods. Organizations that outsource TPRM can benefit from access to these solutions without a substantial upfront investment.
Selecting a TPRM or Vendor Risk Management Solution
Organizations committed to in-house TPRM or ones still weighing the benefits of outsourced services can utilize a vendor risk management (VRM) solution to understand their risk profile and security posture better.
By utilizing a comprehensive TPRM solution, like UpGuard Vendor Risk, organizations can streamline every step of the TPRM process, including vendor procurement, due diligence, risk monitoring, risk assessment, and remediation and mitigation procedures.
The best TPRM solutions will provide organizations access to the following features:
Security Questionnaires
Vendor security questionnaires are a set of technical questions organizations can use to assess the security posture of a third-party vendor. Most security questionnaires target information about a particular framework, regulation, or vulnerability. For example, a financial institution may send a NIST CSF questionnaire to one of its high-risk vendors to ensure it adheres to industry best practices.
UpGuard streamlines the vendor security questionnaire process by providing organizations with flexible questionnaire templates and an industry-leading questionnaire library.
Risk Assessments
Third-party risk assessments evaluate a vendor’s security posture by identifying risks and assessing the impact these risks could have on the organization. Some organizations deploy manual, spreadsheet-based assessments that are error-prone, time-consuming, and hard to manage across stakeholders.
UpGuard Vendor Risk grants users access to custom risk assessments that speed up the assessment process and use objective security ratings and automated scanning strategies to provide a comprehensive view of their vendor’s security posture.
Continuous Monitoring
Continuous security monitoring (CSM) is a threat intelligence strategy that uses automation to monitor information security controls, vulnerabilities, and other third-party cyber threats around the clock. Organizations install continuous monitoring to support TPRM-based decision-making and jumpstart their mitigation and remediation workflows when necessary.
UpGuard’s continuous security monitoring solution automatically scans and identifies all digital assets across an organization’s attack surface. In addition to asset discovery, UpGuard also helps users secure open ports, hijacked domains, domain name system security extensions (DNSSE), vulnerabilities, and other security risks.
Mitigation & Remediation Workflows
The most comprehensive TPRM solutions will include risk mitigation and remediation workflows organizations can follow to improve security posture and reduce risk exposure. In other words, mitigation and remediation workflows are a plan of action constructed to reduce vulnerabilities or eliminate cyber threats.
UpGuard’s cybersecurity solutions include inbuilt workflows that help organizations remediate risks identified in security questionnaires and by UpGuard’s continuous monitoring program.
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How Can UpGuard Help Your Third-Party Risk Management Program
UpGuard Vendor Risk is a comprehensive TPRM and VRM solution. The all-in-one tool allows organizations to identify third-party security risks, assess the security posture of their third-party vendors, and ensure their vendor ecosystem meets the demands of ongoing regulatory requirements.
The UpGuard Vendor Risk toolkit includes the following features:
- Vendor Risk Assessments: Fast, accurate, and provide a comprehensive view of your vendors’ security posture
- Third-Party Security Ratings: An objective, data-driven, and dynamic measurement of an organization’s cyber hygiene
- Vendor Security Questionnaires: Flexible questionnaires that accelerate the assessment process and provide deep insights into a vendor’s security
- Stakeholder Reports Library: Tailor-made templates allow personnel to communicate security initiatives and performance to stakeholders easily
- Remediation and Mitigation Workflows: Comprehensive workflows to streamline risk management processes and improve security posture
- Integrations: Easily integrate UpGuard with over 4,000 apps using Zapier
- 24/7 Continuous Monitoring: Real-time notifications and around-the-clock risk updates using accurate supplier data
- Intuitive Design: Easy-to-use first-party dashboards
- World-Class Customer Service: Professional cybersecurity personnel are standing by to help you get the most out of UpGuard and improve your security posture