A lack of direct communication with your fourth-party vendors makes tracking their security risks difficult. Thankfully, there are methods of overcoming this issue to help you remain informed of emerging fourth-party risks to help you easily track emerging fourth-party threats within your Fourth-Party Risk Management program.
To learn how UpGuard can help you track your fourth-party risk, click here to request a free trial.
What are Fourth-Party Risks?
In the context of cybersecurity, fourth-party risks involve all security risks from your fourth-party vendors that could negatively impact the security posture of your business. Numerous categories of fourth-party risks could influence your cybersecurity resilience; these include:
- Cybersecurity risks: If a fourth-party vendor experiences a data breach, it could lead to the loss of sensitive data belonging to your organization, resulting in reputational, legal, and financial consequences.
- Operational risks: A security incident affecting one of your fourth-party vendors could disrupt your operations and business continuity.
- Legal, regulatory, and compliance risks: Failure to comply with regulations like GDPR, HIPAA, and PCI-DSS can result in legal and financial penalties for your organization.
- Reputational risks: A security incident involving a fourth-party vendor could damage your organization's reputation and erode the trust of customers and partners.
- Financial risks: If a critical fourth-party vendor ceases operations due to a security incident, it could result in financial losses for your organization. Financial service entities should be particularly sensitive to this risk family in their mitigation efforts.
- Strategic risks: Fourth-party vendors may also pose strategic risks, such as compromising your organization's competitive advantage or intellectual property.
To mitigate these risks, organizations must prioritize identifying their critical fourth-party vendors and ensure their third-party vendors have a robust Vendor Risk Management program to vet and monitor them. Additionally, they must focus on concentrating risk in their supply chain and use Vendor Risk Management automation to improve vendor risk assessment speeds.
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TPRM - The Key to Managing Fourth-Party Risks
An essential prerequisite to establishing a policy for managing and tracking fourth-party risks is to have a Third-Party Risk Management program in place. A TPRM program (or Vendor Risk Management program) bridges the gap between your security posture and those of your third-party vendor, which, in turn, establishes a framework for tracking the risks of your fourth-party vendors (your vendor’s vendors).
A TPRM program helps risk management teams gain visibility into third-party attack vectors facilitating data breaches, supply chain attacks, and other information security incidents. This awareness is achieved through a combination of tools, including:
- Vendor Risk Assessments - Security questionnaires extract deep insights into a service provider’s vulnerabilities, data breach resiliency, and degree of regulatory compliance.
- Security ratings - Security ratings provide an objective and unbiased quantification of each vendor’s cyberattack resilience.
- Continuous Monitoring - The combination of security questionnaires and security ratings gives risk management teams real-time awareness of emerging vendor risks.
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The combination of risk assessments and security ratings is the best method of establishing real-time awareness of emerging third-party risks.
With a TPRM established, tracking fourth-party risks becomes a matter of slightly extending the risk management efforts of each vendor relationship to the fourth-party network.
Detecting Fourth-Party Security Risks
Before fourth-party risks can be tracked, they need to be detected, and this effort begins with discovering all of your fourth-party vendors. An attack surface monitoring solution like UpGuard can automatically detect all your fourth-party vendors. These results should then be confirmed and broadened with risk assessment.
Because your third-party vendors have contractual relationships with their vendors, they’re in an ideal position to collect data about your fourth-party vendors and their associated inherent risks. This is best achieved through risk assessments (or security questionnaires) that have been modified to include questions about the potential risks of fourth-party data processes. With a customizable questionnaire builder, these questions can very quickly be incorporated.
Learn about UpGuard’s customizable questionnaire builder >
Fourth-party risks can be detected with questionnaires such as the SSAE 18, SOC reports, and even the GDPR.
Note: Not all fourth-party risks are created equal. During the risk discovery process, fourth-party vendors should be ranked by decreasing criticality, where the most critical vendors correspond to fourth parties processing highly-sensitive data and parties that will significantly impact your business continuity if they are compromised. The same principle of third-party vendor tiering applies to fourth-party criticality ordering.
Learn more about vendor tiering >
To streamline this effort moving forward, questions about fourth-party cybersecurity risks should be incorporated into the vendor due diligence processes.
Tracking Fourth-Party Risks
With all of your critical fourth-party vendors identified and due diligence processes updated to feed fourth-party vendor discovery efforts, you’re now in a position to track all critical fourth-party vendor risks. This effort is the same as risk tracking/management across third-party relationships in a TPRM program. Fourth-party risk management is essentially a broadening of your TPRM program to include an additional dimension - your vendor's TPRM program. Each vendor keep you informed of the state of your fourth-party attack surface by tracking the risks of their own vendors.
For this symbiotic relationship to be most effective, your vendors should follow the standards of proper Vendor Risk Management for tracking security threats in business relationships. This will ensure complete coverage of risk discovery from each vendor’s perspective. If your vendors don’t have a VRM in place, UpGuard Vendor Risk is an excellent VRM solution that could use.
To ensure the most comprehensive process of fourth-party risk discovery from the perspective of your IT ecosystem, risk assessments should be augmented with automated scanning tools (such as security ratings). This will ensure your risk management teams have complete visibility into the state of your third-and fourth-party attack surface at all times, even outside of your risk assessment schedule.
If you and all of your vendors are using UpGuard Vendor Risk, this continuous attack surface monitoring strategy will extend from inside your ecosystem to your fourth-party vendor attack surface, creating a wide coverage of efficient security risk tracking.
By beginning risk management efforts at the fourth-party attack surface, you’ll establish a significant buffer between your sensitive data and any potential data breach events involving your third and fourth-party vendors. This will significantly reduce any impacts on your sensitive data should any third- and fourth-party vendors fall victim to a data breach.
Refer to this whitepaper to learn how to establish a resilient data breach prevention strategy.
How UpGuard Can Help You Track Your Fourth-Party Risks
The UpGuard platform contains a fourth-party module that gives you complete visibility into the following essential fourth-party risk metrics:
- The list of fourth parties in your network.
- The number of third-party vendors using each fourth-party product.
- Real-time security posture tracking for each fourth-party vendor.
Customers use UpGuard’s fourth-party risk module to support their fourth-party risk management program by:
- Keeping track of emerging fourth-party risks to detect third-party and subcontractor breach threats.
- Continuously monitoring fourth-party security ratings to predict changes to reputational risks.
- Grouping vendors into vendor portfolios to prioritize critical risks most likely to facilitate breaches.
