3 TPRM Challenges and Solutions in India’s Financial Sector

In India’s evolving financial sector, third-party risk management (TPRM) remains a cybersecurity necessity to ensure operational stability, data security, and regulatory compliance. Financial institutions across India continue to increase their reliance on external vendors and service providers for critical business functions, further solidifying the need for comprehensive TPRM programs. However, robust TPRM can pose significant challenges for financial institutions, especially when security teams are bootstraped by monetary and staffing limitations. 

This article identifies three significant TPRM challenges financial institutions face and presents actionable solutions to overcome these hurdles. From growing attack surfaces to strict regulatory compliance demands, each challenge underscores the complex relationship between financial institutions and their third-party partners. By understanding these challenges and solutions, India’s financial sector can fortify its cybersecurity defenses and safely partner with vendors and service providers. 

Discover the #1 TPRM solution for financial institutions: UpGuard Vendor Risk

Why is TPRM important for India’s financial sector

Third-party risk management is essential for India’s financial sector because failure to assess third-party risks exposes an institution to supply chain attacks, data breaches, and reputational damage. While using third-party vendors and services allows financial institutions to streamline operations, improve efficiency, and reduce costs, these partnerships also introduce new cybersecurity risks and expose the institution to a complicated array of cyber threats. Here’s how robust TPRM can help financial institutions navigate these hurdles: 

• Enhances security posture by identifying and addressing third-party vulnerabilities
• Evaluates operational risks associated with third-party vendors and service providers
• Ensures compliance with regulatory standards across the institution’s third-party ecosystem
• Protects sensitive financial data and customer information from unauthorized access
• Streamlines vendor procurement, onboarding, and ongoing vendor management processes
• Fosters trust and confidence among stakeholders, including customers and investors
• Promotes an internal culture of risk awareness and proactive risk management
• Reduces the likelihood of third-party data breaches

Across the board, comprehensive TPRM is the best way for financial institutions to protect themselves against third-party cybersecurity threats. However, establishing a robust TPRM program that comprehensively addresses all the major cybersecurity threats India’s financial sector faces is complicated. There are three main challenges financial institutions must overcome. 

Challenge 1: External attack surfaces are expanding

Over the last few years, India’s financial sector has undergone a digital transformation and increased its reliance on third-party relationships, expanding the external attack surface of many financial institutions. Most institutions within the Indian finance industry now rely on cloud service providers, digital supply chains, and large third-party ecosystems to carry out operations. 

If this sounds like your institution, your sensitive data and information is at risk. Any one of these third-party relationships could fall victim to a data breach and expose you to crippling financial, legal, and reputational consequences. 

According to the Ponemon Institute, 53% of organizations experienced a third-party data breach in 2023. This startling statistic further underscores the importance of TPRM and external attack surface management, but how can your financial institution defend itself? 

Solution: Map vendor ecosystem and calibrate risk monitoring

One of the leading principles of TPRM is you can’t defend what you don’t understand. To mitigate all third-party risks across your external attack surface, your organization must create a complete map of its vendor ecosystem. This map should include an up-to-date inventory of all third-party vendors the organization currently partners with and notable fourth parties that work alongside these third-party vendors. 

Here are the steps your organization should take to map its vendor ecosystem: 

1. Inventory vendors and share information across all internal departments.
2. Organize vendors based on service category. 
3. Evaluate the security posture of vendors.
4. Assess what level of access each vendor has to sensitive data.
5. Develop additional procedures to assess high-risk vendors.
6. Evaluate the operational criticality of each vendor.
7. Tier vendors based on their criticality, data access, and security posture.

After your organization has mapped its vendor ecosystem, it may encounter new vendors, potential risks, or vulnerabilities it previously wasn’t aware of. Your organization should recalibrate its risk assessment and continuous security monitoring programs to ensure it monitors these vendors and new risks throughout the vendor lifecycle. 

How can UpGuard help?

Vendor mapping and tiering can be time-consuming and difficult for financial institutions without the help of UpGuard’s comprehensive cybersecurity solutions that combine external attack surface management and TPRM to improve security posture and mitigate third-party threats holistically. 

UpGuard Vendor Risk and UpGuard Breach Risk simplify vendor mapping, tiering, and continuous monitoring. Here’s how:

• Vendor mapping: UpGuard’s built-in vendor inventory helps users find, track, and monitor vendors' security posture instantly. Users can easily categorize vendors, compare them against industry frameworks, and track changes to their security posture. UpGuard users can also sort vendors by tier, service category, security score, and custom labels. 

• Vendor tiering: UpGuard enables users to classify vendors based on the inherent risk they pose to their organization and adjust the level of risk assessment they complete on each vendor based on these tiers. Users can also customize real-time notifications based on a specific tier of vendors and automatically assign vendors to a risk tier based on their answers to security questionnaires. 
• Continuous security monitoring (CSM): The UpGuard platform includes CSM. Users can see the domains and IPs associated with a particular vendor, assess corresponding risks, and discover vulnerabilities cybercriminals can exploit in a vendor’s software. 

By leveraging UpGuard's robust cybersecurity solutions, financial institutions can seamlessly integrate their external attack surface management and TPRM strategies, enhancing security posture and mitigating third-party threats comprehensively. However, expanding attack surfaces is just one of the TPRM challenges facing India’s financial sector. 

Challenge 2: Compliance regulations are multiplying

In addition to defending their external attack surface, financial institutions must ensure compliance with various regulatory requirements across their third-party ecosystem. The number of compliance regulations in India’s financial sector has multiplied in recent years. The primary regulations financial institutions must comply with now include: 

• RBI’s cybersecurity framework
• Information Technology Act
• Information Technology Rules, 2020
• Digital Personal Data Protection Act (DPDP) 

This diversity of regulations has complicated compliance management for many institutions in India’s financial sector. It’s important to remember that to achieve comprehensive compliance, financial institutions must ensure all of their third-party vendors also meet the requirements of each framework and regulation. 

Non-compliance with an industry regulation can result in severe penalties and reputational damage. For example, monetary penalties for breaching the DPDP can range from INR 10,000 (approximately USD 120) to INR 250 Crores (approximately USD 30 million). Financial institutions must use security questionnaires to evaluate vendor compliance and develop compliance reporting systems to avoid these penalties and other repercussions. 

Solution: Security questionnaires and compliance reporting

 In today’s dense regulatory environment, compliance management is one of the most critical aspects of TPRM. Your institution must utilize security questionnaires and compliance reporting to mitigate compliance risk across its third-party ecosystem. Together, these TPRM initiatives will help your organization demonstrate comprehensive compliance with key industry regulations.

Here are the steps your organization should take to elevate its compliance management: 

1. Send security questionnaires to appraise vendors against each regulation.
2. Assess vendor answers and request remediation or additional evidence.
3. Collect relevant documentation and evidence to support compliance reporting. 
4. Organize and store compliance documentation in a centralized location. 
5. Prepare comprehensive reports summarizing vendor compliance across regulations. 
6. Review reports for accuracy and completeness. 
7. Obtain stakeholder feedback and approval. 
8. Monitor vendor compliance continuously.
9. Implement corrective actions and assessments as needed. 

Compliance management is an ongoing process, and even after completing compliance reports for each vendor, your organization must continue to monitor compliance across its third-party ecosystem. It’s also important to update your compliance reporting and security questionnaire regimen as regulations change or new industry frameworks arise. 

How can UpGuard help?

UpGuard empowers financial institutions to streamline their compliance risk management program by utilizing an industry-leading questionnaire library and several compliance reporting tools. From deploying security questionnaires to multiple vendors to tracking answers and developing reports across all industry regulations, UpGuard Vendor Risk simplifies compliance management and reporting. Here’s how: 

• Security questionnaires: Using UpGuard’s industry-leading questionnaire library or building custom questionnaires from scratch, financial institutions can gain deep insights into a vendor’s security posture and compliance status. Users can choose from more than 20 industry-standard questionnaires, select multiple vendors to send the same questionnaire simultaneously, set deadlines, send reminders, and track the status of each questionnaire, all with a sophisticated audit log and messaging built in. 
• Compliance reporting: UpGuard’s compliance reporting feature enables customers to view their vendor’s risk details mapped against recognized security standards or compliance frameworks like NIST CSF or ISO 27001. Users can easily view which sections of the compliance framework a vendor does or does not comply with and understand the risks detected in each section of the framework or regulation. 
• Custom report templates: UpGuard’s custom report templates allow compliance management teams to ensure consistency and standardization across all reports by saving a custom template and reusing it repeatedly. Users can streamline compliance reporting by adding custom commentary and creating templates for other departments and team members. 

By utilizing UpGuard’s security questionnaires and compliance reporting features, financial institutions can decrease the time and energy spent on compliance management, freeing up resources and personnel to tackle additional TPRM tasks, like ensuring data privacy. 

Challenge 3: Data security in the age of proliferation

Data security poses a formidable TPRM challenge for financial institutions, primarily due to the sheer volume of data they handle and the large third-party ecosystems they support. Storing vast amounts of personal and financial information, including customer account details and transaction records, makes financial institutions an attractive target for cybercriminals, further compounding the challenge of data security. 

Institutions in India’s financial sector also face additional data security challenges, given the stringent requirements the DPDP places on customer data and sensitive financial information. The complexity of modern infrastructure further exacerbates these challenges by exposing institutions to an endless array of data security risks across their digital supply chains and third-party ecosystems. 

The average cost of a data breach in the finance industry is INR 49.3 Crores (approximately USD 5.9 million), making data security a significant operational concern and legal priority. Financial institutions must employ strict risk assessments and develop holistic incident response plans to protect sensitive data and prevent catastrophic breaches.  

Solution: Risk assessments and incident response planning

Risk assessments and incident response are pivotal TPRM procedures financial institutions should use to safeguard data security across their third-party ecosystem. Risk assessments allow security teams to systematically identify, evaluate, and manage vendor risks. Incident response complements this process by establishing a calibrated framework to mitigate and de-escalate security incidents when they occur. 

Here’s how your organization can use risk assessments to improve data security: 

• Identify and classify data assets and determine data value.
• Identify potential third-party threats and vulnerabilities.
• Assess the likelihood and impact of each potential threat.
• Deploy risk assessments to evaluate vendor security posture. 
• Compare risk assessments with due diligence to assess security changes.
• Work alongside vendors to patch and remediate known issues.
• Develop an ongoing vendor risk assessment cadence.
• Document findings and communicate with relevant stakeholders. 

To calibrate its incident response effectively, your organization should use risk assessment data to inform its plan, mechanisms, and criteria. Paring risk assessments and incident response together will enable your organization to strengthen its security measures and enhance its operational resilience. 

Here’s how your organization can use incident response to improve data security: 

1. Establish a multidisciplinary incident response team.
2. Create a detailed incident response plan accounting for likely security incidents.
3. Develop incident detection mechanisms and ongoing monitoring workflows.
4. Establish clear communication channels for incident response and reporting. 
5. Conduct ongoing incident response training using data from vendor assessments.
6. Implement incident containment and eradication measures.
7. Perform comprehensive post-incident analysis to identify causes and improvements.  

When coordinated, risk assessments and incident response form the foundation of continual third-party data security, enabling organizations to proactively identify and carry out risk mitigation across their vendor ecosystem while efficiently responding to security incidents to safeguard sensitive information and maintain business continuity.

How can UpGuard help?

UpGuard grants financial institutions a comprehensive view of their vendors’ security posture through holistic vendor risk assessments. Security teams can use UpGuard’s Vendor Risk Assessments to eliminate manual, spreadsheet-based assessments, reduce resources spent, and assess, waive, and remediate vendor risks in one easy-to-use interface.

Here’s more on UpGuard’s Vendor Risk Assessments product: 

• Fast: UpGuard’s Vendor Risk Assessments are fast and accurate and reduce the time it takes to assess new and existing vendors by half.
• Customizable: Users can customize risk assessments based on a vendor’s specific risk exposure and easily incorporate security evidence to inform remediation requests. 
• Intuitive: UpGuard’s Vendor Risk Assessments product simplifies risk identification and management using a comprehensive risk dashboard. This dashboard lets users view, assess, waive, and remediate risks in one interface. 

Using UpGuard’s Vendor Risk Assessments and UpGuard’s reporting features, security teams can quickly document their findings, develop incident response reports, and send them to various stakeholders throughout their internal and external systems. UpGuard helps financial institutions comprehensively improve their third-party data security, from risk assessments to incident response. 

Develop your comprehensive TPRM program with UpGuard today

Given the ever-changing nature of India’s financial sector, third-party risk management is paramount for financial institutions, especially those supporting large vendor ecosystems and interacting with large amounts of sensitive data. UpGuard simplifies TPRM by offering security teams robust, effective, powerful, and easy-to-use cybersecurity solutions.  

Financial services organizations worldwide trust UpGuard’s comprehensive third-party and vendor risk management solutions. In Winter 2024, UpGuard earned the title of  #1 Third-Party & Supplier Risk Management Software from G2. G2 is the world’s most trusted peer-to-peer review site for SaaS software, and it has recognized UpGuard as a market leader in TPRM software across the Americas, APAC, and EMEA for six consecutive quarters.