In today’s modern business environment, nearly every organization partners with at least one third-party vendor or external service provider. Third-party service providers (web-hosting platforms, software-as-a-service companies, and other businesses that provide technology or services as part of a contract) allow organizations to focus on their primary business processes while reducing operational costs. And while these third parties are beneficial, they also present significant vulnerabilities and security risks, increasing the likelihood of severe data breaches.
Third-party risk management (TPRM) is the optimal solution for navigating the risk-reward of third-party partnerships. The TPRM lifecycle includes several phases and processes that prime an organization to mitigate third-party security risks and safely pursue partnerships with service providers.
This article outlines scalable workflows your organization can implement for each phase of the third-party risk management lifecycle. Keep reading to learn how your organization can use TPRM strategies and processes to bolster its third-party cyber resilience and how the UpGuard platform makes implementing a TPRM program efficient and hassle-free.
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What is the TPRM lifecycle?
The third-party risk management lifecycle includes six main phases, each comprising various strategies and processes to mitigate third-party security risks:
- Phase 1: Due diligence
- Phase 2: Third-party vendor selection
- Phase 3: Third-party risk assessment
- Phase 4: Third-party risk management
- Phase 5: Continuous third-party risk monitoring
- Phase 6: Secure offboarding
These six phases help organizations form safe partnerships with vendors and third-party service providers by identifying, assessing, and controlling risks during different stages of the third-party lifecycle, including procurement and off-boarding. While “third-party risk management” is more common, “third-party lifecycle” better articulates the need for ongoing third-party security controls and systems that ensure compliance and diffuse external security risks.
For an illustration of how to track vendor regulatory compliance with a TPRM program, refer to this Third-Party Risk Management example.
Due diligence workflow
The first stage of the TPRM lifecycle is due diligence (sometimes referred to as vendor or third-party due diligence). This phase of the third-party risk management process is extremely important, as it informs every other phase and lays the foundation for cybersecurity risk assessments and other critical TPRM strategies.
While due diligence isn’t the same as a formal risk assessment, it does involve gathering information to reveal the security posture and inherent risks associated with doing business with a potential third-party vendor or service provider. Vendors who meet an organization’s desired risk tolerance criteria move on to onboarding and official risk assessment protocols.
Your organization can gather vendor security information and implement a robust due diligence workflow in many ways. Two of the most popular are scouring trust pages and utilizing an external third-party risk management software. Trust pages work well for scrutinizing the security posture of low-risk vendors, as a vendor’s trust and security page will likely include the following information:
- Specific security control strategies
- Sensitive data protections
- Alignment with industry standards
- Alignment with cybersecurity frameworks
- Compliance certifications
However, if your organization is considering high-risk vendors or wants to scale its due diligence workflow, consider utilizing an automated TPRM solution like UpGuard Vendor Risk. Leveraging such technology will improve the speed of your third-party onboarding process, help you scale your information-gathering workflows, and provide comprehensive security scans throughout the vendor lifecycle.
UpGuard’s Security Ratings also provide a real-time quantification of a vendor’s security posture based on multiple attack vectors and risk categories, including network security, email security, questionnaire risks, etc. Tracking changes in a vendor’s security rating is an excellent way to develop a baseline for how a vendor’s security posture changes over time and the trajectory of their cyber resilience and overall cybersecurity awareness.
Vendor selection workflow
The next phase in the third-party risk management lifecycle is vendor selection. This phase uses information gathered during vendor onboarding to compare and contrast vendors based on their criticality, risk likelihood, and security posture. It involves using security ratings, risk profiles, and relationship questionnaires.
When selecting vendors from a shortlist of potential partnerships, your organization should first compare vendors’ security posture side-by-side. Not all vendors and third-party service providers are created equal. Some will present additional security risks, and some will provide more extensive benefits. To select vendors efficiently and make informed business decisions, your organization needs to know what impact each vendor will have on the business.
UpGuard’s Vendor Comparison feature lets users compare up to four vendors side-by-side. This feature empowers your organization to visualize which vendor represents the lowest security risk and efficiently communicate the security posture of new vendors to stakeholders who may not have security expertise.
After comparing vendors and selecting a few to evaluate further, your organization should send preliminary security questionnaires. These questionnaires expedite the vendor shortlisting process by enabling your team to collect specific security information related to industry practices, regulations, or business objectives.
UpGuard’s Security Questionnaire features eliminate the manual hassle of information gathering by utilizing AI and pre-composed templates. Users can easily access security questionnaire templates from UpGuard’s industry-leading questionnaire library and customize templates based on their needs or metrics specific to a vendor.
After selecting a vendor to proceed with, your organization can complete an internal vendor relationship questionnaire to determine the appropriate level of depth required to assess a vendor throughout the third-party lifecycle. The internal business owner responsible for conducting business with a specific vendor should complete this internal questionnaire. Completing this internal questionnaire allows your organization’s security team to appropriately determine the security measures required to safely conduct business with the vendor based on its access to internal systems, personally identifiable information, or sensitive data.
Risk assessment workflow
Security teams periodically use risk assessments to appraise the security posture of new and existing third-party vendors and service providers throughout their lifecycle. When an organization first signs a service-level agreement and onboards a vendor, the evidence-gathering phases of the TPRM process inform the initial risk assessment.
Security teams can map the security questionnaires used in this preliminary risk assessment to a particular framework or industry regulation, which may build upon the preliminary questionnaires sent during the later stages of vendor selection.
A comprehensive TPRM solution, like UpGuard Vendor Risk, enables organizations to use a library of editable questionnaire templates that map to popular regulations and a custom questionnaire builder to map questionnaires to specific risks and business concerns.
The UpGuard platform also helps organizations scale their risk assessment workflow to the needs of complex vendor ecosystems and eliminate time-consuming manual processes. Trust Exchange is a free security questionnaire tool that utilizes AI technology and a database of previously completed questionnaires to streamline questionnaire completion and management. Trust Exchange also helps organizations build a shared profile they can share with other organizations and vendors.
Third-party risk management workflow
The best TPRM programs prioritize risk identification and management throughout the third-party lifecycle, not just during vendor onboarding. An organization must manage all risks detected throughout the risk assessment process. Security teams should start with the most critical risks and work down the line to efficiently utilize resources and time.
Your organization can simplify its risk identification and remediation workflows through automation and automatic attack surface scanning. The UpGuard platform empowers users to streamline these processes by compiling all identified risks in a single dashboard. This interface also provides an overview of each risk and allows users to pursue remediation or waive the risk based on whether it applies to their current TPRM goals and standards.
After a user requests remediation from a vendor, the UpGuard platform automatically tracks the progress of the remediation, providing advanced visibility and improving communication.
Continuous third-party risk monitoring workflow
Continuous third-party risk monitoring is another critical pillar of TPRM. An organization’s third-party risk management program must systematically manage risks from diverse sources and vendors throughout the vendor lifecycle. This program must also effectively appraise new and existing vendors, especially when the organization’s vendor ecosystem expands and suddenly contracts to meet business needs and objectives.
UpGuard’s automated features simplify continuous monitoring and make robust risk monitoring available to security teams of all sizes. From automatic risk scanning and on-demand cyber risk notifications to flexible risk assessments and questionnaire workflows, UpGuard provides security teams with the tools to improve their risk intelligence and identify, manage, and remediate all vendor risks directly through the platform.
Vendor offboarding workflow
The third-party offboarding process exposes organizations to various security risks. Security teams must identify and manage these risks to ensure their organization safely ends its partnership with a third-party vendor.
The most common security risks associated with vendor offboarding are:
- Residual access
- Shared credentials
- Physical security
- Data retention
- Poor data encryption
- Unreturned assets
- Embedded systems
- Malicious intent
Offboarding third-party vendors and service providers is essential in the third-party lifecycle. In addition to presenting cyber and operational risks, offboarding can also carry compliance risks, especially when regulatory frameworks, like NIST, and data privacy laws, like the GDPR, hold organizations accountable for the security practices of their third-party relationships. However, safe offboarding practices can quickly become time-consuming and tedious for security teams and IT managers. A comprehensive third-party risk management platform like UpGuard can eliminate the manual hassle of this offboarding process.
UpGuard users can quickly identify regions of their digital footprint where offboarded vendors are still in place and pursue data removal and access revocation, all while submitting evidence and communicating with the vendor directly through the UpGuard platform.
Related Reading: Vendor Offboarding: Best Practices for Ensuring Security
Streamline your TPRM workflows with UpGuard
UpGuard is committed to easing the burden of manual TPRM processes for security teams through its automated security scans, robust risk assessment, mitigation, and remediation workflows, flexible security questionnaires, integrations, and other powerful features. High-level customers use the UpGuard platform across multiple industries, including technology, healthcare, higher education, financial services, and more. Organizations looking to scale their TPRM workflows can take advantage of these innovative TPRM solutions or utilize UpGuard’s expert-led Managed Vendor Assessments service.
Managed Vendor Assessments is a revolutionary service that uses valuable customer feedback and the UpGuard team’s extensive vendor risk management experience to handle the vendor risk assessment process entirely. This process goes beyond questionnaires, integrating existing documents and AI analysis for more profound insight. Our process is twice as fast, blending expert analysis with findings from integrated scans, questionnaire responses, and additional evidence. We are aligned with industry best practices by adhering to the latest ISO standards for risk categorization.
