Organizations, both large and small, are increasingly relying on third-party vendors and service providers to enhance their business operations and deliver value to customers. However, these partnerships can introduce significant cybersecurity risks, such as devastating data breaches, if third-party vendors have access to sensitive data and critical systems.

Implementing a comprehensive third-party risk management (TPRM) lifecycle tailored for cybersecurity is essential to safeguard against cyber threats. A robust third-party lifecycle helps organizations build resilient partnerships that protect data, comply with regulatory requirements, and maintain robust cybersecurity postures across their supply chain.

This article explores the six critical phases of a TPRM lifecycle, outlining key activities involved in each phase and illustrating how they collectively help organizations mitigate and manage cybersecurity risks associated with third-party providers.

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What is the TPRM lifecycle?

The third-party risk management (TPRM) lifecycle is a structured process designed to identify, assess, manage, and mitigate the risks of engaging third-party vendors and partners. A TPRM lifecycle tailored to cybersecurity includes strategies mapped to the six primary phases of a third-party service provider relationship.

This lifecycle ensures that third-party relationships do not compromise an organization’s cybersecurity, data integrity, or regulatory compliance. The TPRM lifecycle typically consists of six key phases:

  • 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

Phase 1: Due diligence

Due diligence involves scoping prospective third-party vendors to determine their risk level before onboarding. This process is based on a risk-based evaluation and analysis of a potential third-party vendor’s cybersecurity posture and overall risk profile. Effective due diligence mitigates risks by preventing partnerships with vendors who may pose significant security threats or have a history of poor data protection.

Due diligence includes gathering information about a third party, including:

  • Security policies
  • Security practices
  • Operational risk (potential for business disruptions)
  • Historical security incidents, including cyber attacks
  • Compliance with industry standards
  • Overall reputation in the market

Due diligence often involves sending a relationship questionnaire during procurement. This questionnaire covers the above information and helps organizations understand the inherent risks and residual risks associated with engaging a third-party vendor.

UpGuard offers a free vendor risk management questionnaire template you can customize for your organization.

Due diligence helps identify potential red flags and ensures that organizations only consider partnering with vendors with a robust security posture and commitment to compliance. During this phase, compare prospective vendors to your current list to confirm new services are necessary. This step helps your organization maintain a minimal attack surface, which reduces vulnerability points in your vendor ecosystem.

Due diligence ultimately sets the stage for informed decision-making, ensuring that organizations can confidently move forward to the next phase with a clear understanding of the risks involved.

Phase 2: Third-party vendor selection

The third-party vendor selection phase involves choosing the most suitable third-party vendor based on the insights gathered during due diligence and ensuring candidates meet your risk appetite requirements. By carefully evaluating vendors, organizations can ensure that they choose partners who meet their security standards and demonstrate a commitment to continuous improvement and risk management.

This phase requires a detailed evaluation process, considering the vendor’s ability to meet security requirements, their alignment with the organization’s goals, and the potential risks identified during due diligence. Security ratings provide an efficient and objective way of gauging security postures quickly and can be used for comparison purposes against different vendors providing the same services.

For example, UpGuard uses a proprietary security ratings system that aggregates risk from six different categories to calculate an organization’s overall security posture.

Proper vendor selection helps reduce third-party risk by narrowing choices to vendors with the lowest risk profile and highest security compliance. The selection phase also involves negotiating contracts clearly defining security expectations, responsibilities, and compliance requirements, further strengthening the partnership's security foundation.

Phase 3: Third-party risk assessment

The third-party risk assessment phase involves conducting a detailed analysis of the potential risks the selected vendor poses. This analysis includes evaluating the vendor’s cybersecurity controls, conducting penetration tests, reviewing security certifications, and assessing their ability to protect sensitive data.

Risk assessments are critical for identifying specific vulnerabilities and potential criticality associated with a third party. This phase provides a comprehensive understanding of how well the vendor can defend against cyber threats and protect organizational data. The evidence gathered in this phase also sets the framework for your third-party risk management strategy in the next phase.

By pinpointing weaknesses and areas for improvement, organizations can proactively address risks before they materialize. This identification enhances a vendor’s information security and effectively closes security gaps, reducing the likelihood of security incidents and data breaches.

Phase 4: Third-party risk management

Third-party risk management involves implementing strategies and controls to manage and mitigate the risks identified during the risk assessment phase. By actively managing risks, organizations can prevent potential security incidents, protect sensitive data, and ensure compliance with regulatory requirements.

This phase includes the following steps:

  • Risk identification
  • Risk assessment
  • Risk prioritization
  • Risk response planning
  • Flagging critical risks
  • Risk remediation
  • Risk monitoring and review

Effective risk management processes ensure that security teams address identified risks promptly and that the vendor’s security posture is continuously improved. A comprehensive initial assessment can improve your TPRM program when implemented properly

This phase is essential for maintaining a strong security relationship with the vendor and ensuring they adhere to agreed-upon security standards. Continuous collaboration and communication with the vendor during this phase help maintain a proactive approach to risk mitigation.

Phase 5: Continuous third-party risk monitoring

Continuous third-party risk monitoring involves the ongoing surveillance and evaluation of the vendor’s cybersecurity practices and risk profile. This phase helps organizations stay informed about vendor risk profile changes and respond promptly to threats that could impact their security posture. Continuous third-party risk monitoring includes:

  • Regular audits
  • Performance reviews, including service level agreements (SLAs)
  • Real-time monitoring of security activities
  • Incident notification and response

For the best results, an organization’s ongoing monitoring strategy should be augmented with point-in-time assessments. Integrating these two methods allows for a comprehensive approach, merging in-depth insights from risk assessments with real-time security posture tracking from security ratings to maintain continuous awareness of the attack surface.

Point-in-time assessments alone fail to detect emerging risks between scheduled assessments.
Point-in-time risk assessments combined with security ratings produce real-time attack surface awareness.

Continuous monitoring ensures the vendor maintains a strong security posture throughout the partnership. In this phase, organizations can create cybersecurity reports to help keep stakeholders informed of their security metrics and TPRM efforts. UpGuard’s Reporting and Dashboards feature helps organizations gain visibility into their organization's security posture and third-party vendors with easily customizable reporting.

By maintaining constant vigilance, organizations can quickly detect and mitigate new risks, reducing the likelihood of security breaches and protecting sensitive data.

Phase 6: Secure offboarding

Secure offboarding involves safely terminating the relationship with a third-party vendor. By managing the offboarding process securely, organizations can protect their data, maintain compliance with regulatory requirements, and gain insights to enhance their overall TPRM lifecycle. Secure offboarding includes:

  • Return or destruction of sensitive data
  • Revoking access to systems
  • Conducting exit interviews to gather insights for future vendor relationships

Offboarding should be a collaborative effort with compliance teams to ensure the vendor doesn’t violate data privacy regulations during the offboarding process. Secure offboarding is crucial for ensuring that the termination of the vendor relationship does not expose the organization to security risks.

Follow TPRM best practices with UpGuard

UpGuard Vendor Risk is a third-party risk management platform that aims to automate and streamline an organization’s program for managing risks associated with third-party vendors. UpGuard Vendor Risk helps organizations efficiently assess, monitor, and mitigate risks associated with their vendors and suppliers by using technology to simplify the often complex and time-consuming task of evaluating vendor risks.

UpGuard Vendor Risk offers several features that support TPRM best practices, including:

  • Vendor risk assessments: Streamline your vendor security assessment process to get a comprehensive view of your vendors’ security posture
  • Continuous monitoring: Vendor Risk monitors vendors’ cybersecurity postures and alerts users to changes or emerging vulnerabilities. Real-time visibility into vendor risks helps organizations respond swiftly to potential threats before they become incidents.
  • Security ratings: Instantly understand your vendors’ security posture with our data-driven, objective, and dynamic security ratings. Our security ratings are generated by analyzing trusted commercial, open-source, and proprietary threat intelligence feeds and non-intrusive data collection methods.
  • Security questionnaires: Accelerate your questionnaire exchange process using UpGuard’s powerful and flexible security questionnaire tools. UpGuard’s meticulously designed questionnaire library means you no longer have to create questionnaires from scratch.
  • Risk mitigation and remediation tracking: Use built-in workflows to remediate risks identified in security questionnaires and by the UpGuard platform. See the potential improvement in security ratings from remediating a risk or set of risks instead of knowing the impact after the fact.
  • Vendor risk management dashboard: Get real-time insight into your vendors’ security performance, misconfigurations, and risk profile. Track their performance over time and get started in minutes, not weeks, with our fully integrated solution and API.
  • Compliance management: UpGuard’s compliance reporting feature enables customers to view their own or their vendor’s risk details (including web risks) mapped against recognized security standards or compliance frameworks like NIST CSF or ISO 27001.
  • Automated workflows: Simplify and accelerate how you request remediation of cybersecurity risks from your third-party vendors. Use our real-time data to provide context to your vendors, rely on our workflows to track progress, and get notified when issues are fixed.
  • Reporting and analytics: UpGuard’s Reports Library makes it easier and faster for you to access tailor-made reports for different stakeholders, all in one centralized location. Effectively report on your third-party risk management program, including to the Board, C-suite, and other interested parties.

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