In today’s global business environment, reliance on third-party vendors and service providers is essential for operational efficiency and organizational advancements, especially in a diverse and rapidly evolving market like India. However, this dependence introduces significant third-party risks to businesses.
Indian companies increasingly face complex challenges in managing third-party risks, including data breaches, regulatory compliance issues, and operational disruptions. Robust third-party risk management (TPRM) strategies are critical for a comprehensive cybersecurity framework.
This blog explores essential TPRM strategies tailored for the Indian market, addressing common challenges with TPRM-focused solutions within India’s unique regulatory landscape.
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Understanding third-party risks
Third-party risks are potential threats and vulnerabilities that arise from relying on external entities, like suppliers and service providers. While leveraging third-party services can enhance efficiency and expertise, it introduces risks that must be managed to protect the organization's assets and reputation.
Understanding the different types of third-party risks is crucial for developing a comprehensive risk management strategy. These risks can be broadly categorized into five main areas:
- Financial risks: Risks with a potential economic impact on an organization due to the financial instability or failure of a third party
- Operational risk: Risks that stem from disruptions in business operations caused by third-party failures or inefficiencies
- Reputational risk: Risks that arise when the actions or failures of a third party negatively impact the organization’s public image and stakeholder trust
- Compliance risk: Risks that involve the potential for regulatory or legal violations due to the actions or inactions of a third party
- Cyber risk: Risks associated with the potential for cyberattacks, data breaches, or other cybersecurity incidents involving third parties
For an illustration of how to track vendor regulatory compliance with a TPRM program, refer to this Third-Party Risk Management example.
Third-party cyber incidents in India
Several significant third-party cyber incidents have occurred in India, underscoring the importance of strong third-party risk management strategies. Here are some examples:
- Aadhaar data breach (2018): Sensitive data from India’s national ID database, Aadhaar, was exposed due to a third-party vendor’s poor security practices, resulting in the potential exposure of over a billion names, addresses, and Aadhaar numbers.
- Mobikwik data leak (2021): Indian payment processing provider Mobikwik faced a massive data leak of approximately 100 million users’ sensitive information due to vulnerabilities in a third-party service provider’s system.
- BigBasket data breach (2020): BigBasket, the largest online grocery store in India, experienced a data breach due to a vulnerability in a third-party database, which exposed the personal data of approximately 20 million users.
- Haldiram ransomware attack (2020): Haldiram's, a major Indian snack manufacturer, experienced a ransomware attack that disrupted its operations. The attack vector was traced back to a compromised third-party vendor.
- Juspay data leak (2020): Payment processor Juspay suffered a data leak where sensitive data of around 35 million users (masked car numbers, email IDs, phone numbers) was exposed due to a third-party compromise.
These incidents demonstrate the significant risks posed by third-party relationships and the critical need for comprehensive TPRM programs to protect sensitive data and ensure the security of third-party systems and services.
India’s Cybersecurity Regulatory Landscape
India's cybersecurity regulatory landscape is marked by stringent laws and guidelines designed to protect data and ensure compliance. In the context of third-party risk management, these regulations mandate rigorous oversight, continuous monitoring, and robust compliance measures for organizations and their third-party vendors to safeguard against cyber threats and data breaches.
Information Technology Act
The Information Technology Act of 2000 (IT Act) is crucial legislation in India that addresses electronic commerce and cybersecurity issues, establishing legal standards for electronic transactions, data protection, and cybersecurity. The Act provided a legal framework for electronic governance, including provisions to prevent cybercrime and ensure data protection. Hacking and data breaches result in swift penalties for responsible parties. The Act was amended in 2008 with updated security practices to enhance legal measures against cyber threats.
The IT Act significantly shapes TPRM strategies by mandating robust security practices and procedures for businesses and their third-party vendors, ensuring compliance to safeguard sensitive data, and mitigating legal and operational risks. Non-compliance by third parties can result in severe penalties and reputational damage for the primary organization, making the IT Act essential for effective TPRM in India.
The Digital Personal Data Protection Act of 2023 (DPDP)
The Digital Data Protection Act of 2023 (DPDP) is a comprehensive legislative framework designed to protect personal data in India. The DPDP establishes the legal principles for data processing, emphasizing the protection of individual privacy and the responsible handling of personal information.
Key provisions of the Act include the requirement for explicit consent from individuals before data collection, stringent guidelines for data storage and processing, and the establishment of a Data Protection Board to oversee compliance and address grievances. The Act also introduces significant penalties for data breaches and non-compliance, aiming to create a robust data protection regime that aligns with global standards.
The DPDP imposes critical responsibilities on organizations to ensure their third-party vendors and service providers adhere to the same stringent data protection standards. Companies must conduct thorough due diligence to verify that third parties comply with the Act’s requirements, such as obtaining proper consent for data processing and implementing robust data security measures. Continuous monitoring and regular audits are necessary to ensure ongoing compliance and mitigate the risks of data breaches arising from third-party actions.
Reserve Bank of India Act 2018
The Reserve Bank of India Act provides the legal framework for the establishment and operation of the Reserve Bank of India (RBI), the country's central bank. The Act defines the RBI's powers and responsibilities, including regulating currency issuance, managing monetary policy, and ensuring financial system stability.
Over time, the Act has been amended to address the changing needs of the financial sector, incorporating provisions related to banking regulation, financial inclusion, and systemic risk management. Under this Act, the RBI plays a crucial role in overseeing the banking sector and ensuring sound and efficient sound and efficient operation.
The Reserve Bank of India Act also has significant implications for financial institutions that utilize third-party service providers. The RBI requires banks and financial institutions to implement strong risk management practices when working with third parties, including conducting thorough due diligence, ensuring that third parties comply with data security and privacy standards, and maintaining effective oversight mechanisms. The Act empowers the RBI to conduct inspections and audits to ensure compliance, thereby minimizing the risks associated with third-party dependencies.
Common TPRM challenges and solutions for the Indian market
Managing third-party risks in the Indian market presents unique challenges. However, effective solutions and TPRM strategies help significantly mitigate these challenges. Organizations can enhance their third-party risk management frameworks and strengthen their cybersecurity posture by adopting these TPRM strategies into their risk management programs or utilizing them as guidelines for a new TPRM program.
Challenge: Complex regulatory and compliance environments
Organizations managing third-party risk must navigate India's complex regulatory and compliance environment. With many regulations, businesses must ensure that they and their third-party vendors adhere to stringent legal requirements. This complexity is compounded by frequent regulatory updates and varying standards across different industries, making it difficult for companies to maintain consistent compliance and manage the associated risks effectively.
Solution: Risk assessments and compliance management
Organizations should conduct thorough risk assessments and implement strong compliance management strategies to address complex regulatory and compliance challenges. By leveraging technology and automated tools, businesses can streamline monitoring and reporting processes to ensure real-time compliance with evolving regulations.
Establishing a centralized compliance management framework allows for consistent oversight and enforcement of regulatory requirements across third-party interactions, mitigating legal and operational risks and fostering a culture of accountability and transparency.
UpGuard Vendor Risk features a streamlined approach to vendor assessments in our all-in-one platform, which provides fast and accurate risk assessments tailored to your vendor relationships.
Prioritize risk assessments based on a vendor’s risk exposure to your organization. Conduct initial assessments with our data-driven security ratings—or explore our library of industry-standard security questionnaires. Vendor Risk provides one place to assess, remediate, or waive vendor risks to create an ongoing record of your vendor’s security posture.
Learn more about how UpGuard Vendor Risk streamlines vendor assessments >
Challenge: Infrastructure and resource constraints
Indian companies face significant challenges in implementing effective TPRM programs due to infrastructure and resource constraints. Many organizations, especially small and medium-sized enterprises (SMEs), struggle with limited budgets and insufficient IT infrastructure to support comprehensive risk management initiatives.
This lack of resources can lead to inadequate onboarding risk assessments, monitoring, and oversight of third-party vendors, ultimately increasing the organization’s vulnerability to cyber threats, regulatory non-compliance, and operational disruptions. Additionally, manual processes and the absence of dedicated personnel further exacerbate these challenges, making it difficult to maintain a robust TPRM framework.
Solution: Automated TPRM tools
Automated TPRM tools provide an effective solution to address infrastructure and resource limitations encountered by Indian companies. These tools utilize advanced technology to streamline the processes of risk assessment, monitoring, and compliance throughout a vendor’s lifecycle, reducing the need for extensive manual efforts and specialized personnel.
Automated TPRM solutions seamlessly integrate with existing IT systems, offering real-time insights and alerts about third-party risks. These tools enhance risk management activities' efficiency and accuracy, enabling organizations to allocate resources more effectively. Automation allows companies to scale effectively while operating with smaller IT teams and limited budgets or resources.
Accelerate your assessment of third-party vendor compliance by using UpGuard Vendor Risk’s powerful and flexible built-in security questionnaires. Our questionnaire library lets you get deeper insights into your vendor’s security by selecting questionnaires based on specific regulations or best practices.
Our security questionnaires make it easy to audit and check compliance across various regulations and cybersecurity frameworks, including ISO 27001, HECVAT, HIPAA, and more. Vendors are provided due dates and reminders to complete the questionnaire, and risks are automatically identified and surfaced based on vendor responses so you can request remediation or waivers.
Learn more about UpGuard’s security questionnaires here >
Challenge: Diverse vendor landscape
The diverse vendor landscape in India presents a significant challenge for organizations in effectively managing third-party risks. Maintaining consistent risk management practices becomes complex when an organization works with vendors varying in size, geographic location, and cybersecurity maturity.
Differences in technology adoption, security protocols, and compliance standards among vendors can lead to fragmented risk profiles and increased vulnerabilities. This diversity complicates uniformly assessing, monitoring, and enforcing security and compliance measures across all third-party partnerships, making it difficult to ensure a cohesive and secure supply chain.
Solution: Vendor management and communication tools
Implementing robust vendor management and communication tools is crucial to standardize interactions with vendors of all sizes and locations. Risk management software centralizes vendor information, performance metrics, and compliance statuses, providing a comprehensive view of an organization’s third-party ecosystem.
Enhanced communication features facilitate regular updates, security briefings, and collaborative problem-solving, ensuring vendor alignment with risk management policies. Automated assessments and continuous monitoring provide real-time insights into vendor performance and potential risks, fostering stronger, transparent vendor relationships and enhancing overall security posture.
UpGuard offers managed vendor risk assessment services, partnering your organization with an UpGuard analyst to utilize vendor assessment automation.
Deeply experienced in cyber risk, your UpGuard analyst brings a wealth of knowledge to your assessments, bolstering your team’s analytical prowess. UpGuard’s actionable reports lead the industry in quality, reliability, and ease of use, bringing a new level of precision to your vendor assessments. UpGuard analysts manage every aspect of vendor communication and analysis, ensuring you get insights—and can take action—sooner.
Learn more about UpGuard’s managed vendor risk assessment services here >
Challenge: Business continuity after security incidents
Indian companies must ensure business continuity after security incidents, especially when third-party vendors are involved. Cyber attacks, data breaches, or operational failures at a third party can significantly disrupt an organization's operations, leading to financial losses, reputational damage, and regulatory penalties.
Today's global business environment means that a security incident at one vendor can quickly cascade and affect multiple areas of the organization. Without a robust strategy to manage and recover from such incidents, companies will struggle to maintain their operations and protect their stakeholders inter without a robust strategy to manage and recover from such incidentsests.
Solution: Continuous monitoring and incident response plans
Organizations can utilize continuous monitoring and strong incident response plans to prioritize risk mitigation and ensure business continuity. Ongoing monitoring tools provide real-time visibility into third-party activities and security postures, allowing early threat detection. When integrated with automated alerts, companies can swiftly address vulnerabilities with remediation requests and proper workflows
Organizations should also develop incident response plans tailored to their needs, providing clear incident management protocols. Take advantage of regular incident drills to prepare teams and vendors to respond effectively, minimizing disruption and ensuring a rapid return to normal operations.
UpGuard Vendor Risk helps prevent security incidents using automated remediation workflows and industry-leading vulnerability detection tools.
Simplify and accelerate how you request remediation of cybersecurity risks from your third-party vendors—before they become security incidents. Our built-in workflows and remediation planners provide real-time data, progress tracking, and notifications when issues are fixed.
UpGuard Vendor Risk also lists vulnerabilities identified through information exposed in your vendor’s HTTP headers, website content, and open ports. Our free Risks and Vulnerabilities blog category focuses on specific risk findings and vulnerabilities, including how to resolve and mitigate common issues facing your organization.
Learn more about UpGuard Vendor Risk’s remediation workflows >
Take control of your organization’s third-party risk management with UpGuard
UpGuard Vendor Risk is a TPRM platform designed to automate and streamline an organization’s third-party risk management program. By leveraging technology to simplify the often complex and time-consuming task of evaluating vendor risks, UpGuard Vendor Risk helps organizations efficiently assess, monitor, and mitigate risks associated with their vendors and suppliers.
Additional Vendor Risk features include:
- Customizable templates: UpGuard provides customizable questionnaire templates that users can tailor to meet specific industry standards, regulatory requirements, and organizational risk profiles.
- Bulk distribution and tracking: Vendor Risk enables the distribution of questionnaires to multiple vendors simultaneously and tracks the progress of each questionnaire, sending reminders and updates as necessary.
- Centralized vendor information: UpGuard centralizes all vendor information, including questionnaire responses, in a single platform, making it easier for organizations to access, review, and analyze vendor data.
- Automated risk scoring: UpGuard automatically scores vendors based on their questionnaire responses and other relevant data, which helps organizations quickly assess vendor risk levels and prioritize follow-up actions.
- 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.
- Compliance management: UpGuard Vendor Risk helps vendors reach regulatory compliance with relevant regulations and standards (like GDPR, HIPAA, and SOC 2), tracking vendors’ certification statuses and identifying gaps or issues that need addressing.
- Collaborative features: Vendor Risk facilitates collaboration between internal teams and vendors, enabling seamless communication and efficiently resolving identified issues or risks.
- Comprehensive reporting: UpGuard provides detailed reports and dashboards that offer insights into the organization’s overall vendor risk landscape, which can be used for internal risk management purposes and to demonstrate compliance to stakeholders, auditors, and regulators.
