Cyber vendor risk management (Cyber VRM) is the practice of identifying, assessing, and remediating cybersecurity risks specifically related to third-party vendors. By leveraging data from data leak detection, security ratings, and security questionnaires, organizations can better understand their third-party vendor’s security posture using Cyber VRM solutions.
Nearly 74% of organizations reported data breaches resulting from compromised third parties in 2021, signifying the need for strong Cyber VRM solutions. According to a report published by IBM, the average cost of a data breach is about $4.35 million and continues to grow every year.
As cyber attacks, data breaches, and data leaks from third parties continue to rise, Cyber VRM solutions are becoming increasingly important and necessary to proactively detect and prevent exposure of sensitive data. This article will discuss why organizations need to prioritize their own cybersecurity practices and those of their third-party vendors.
Vendor Risk Management (VRM) vs. Third-Party Risk Management (TPRM) vs. Cyber VRM
Third-party risk management (TPRM) is a broader category of risk management that covers all types of risks involved with third parties, including financial, environmental, regulatory, reputational, and cyber risks. In addition, third parties can include a variety of external organizations such as vendors, suppliers, wholesalers, authorized resellers, contractors, affiliates, or business partners, among many others.
Vendor risk management (VRM) is a more nuanced area of TPRM that only deals with third parties in the supply chain, which includes vendors, suppliers, manufacturers, contractors, and service providers. VRM processes help secure and manage all related potential risks (financial, regulatory, reputational, environmental, etc.) that directly apply to third-party vendors only.
Cyber vendor risk management (Cyber VRM) focuses strictly on the cybersecurity risks of third-party vendors and suppliers, including their information security practices and the use of information technology (IT) services, products, and tools. Cyber VRM practices help secure data for third-party vendors by using cyber solutions throughout the entire lifecycle by assessing cybersecurity risk, cyber incident response plans, and mitigation and remediation processes.
Why is Cyber Vendor Risk Management Important?
As organizations transition to cloud-based servers and digital services, Cyber VRM solutions are important for businesses to focus specifically on their third-party risk management programs relating to information security practices. Current TPRM and VRM solutions are too broad and don’t focus enough on cybersecurity effectively, leading to Cyber VRM emerging as a new category of cybersecurity risk management.
As businesses begin to rely heavily on global connectivity and digital storage of sensitive data, Cyber VRM solutions are especially necessary to protect against cybercriminals. Simple solutions such as antivirus software or password protection are things of the past as cyber attacks continue to grow in sophistication and new threats continue to emerge.
Here’s why organizations should begin to look into Cyber VRM tools and services such as UpGuard Vendor Risk to secure their most important data:
1. Identify, Assess, & Monitor Potential Cybersecurity Risks from Third-Party Vendors
The main focus of Cyber VRM is to address all cybersecurity risks associated with third-party vendors by identifying all potential cyber threats and monitoring third-party attack surfaces using established security controls. Using tools like dynamic security ratings, security questionnaires, vendor risk assessments, data leak detection software, and attack surface management tools, organizations can use both quantitative and qualitative data to evaluate the security posture of their vendors.
The first step for any risk management program is to identify all the risks. Organizations can do this by monitoring their vendors in a Cyber VRM platform and begin vendor tiering based on their risk exposure (high, medium, low) and weighing the importance of the vendor risks to the business. This provides executives, managers, and stakeholders with a better way to assess them further and make better, more informed decisions on whether or not to onboard that vendor or continue doing business with them.
2. Rapid Threat Response & Active Vendor Monitoring
By integrating vendors into a Cyber VRM platform, organizations can continuously monitor vendors and their cybersecurity posture to ensure they meet regulatory compliance standards and organizational security requirements. Any immediate threats will trigger live alerts and you can notify vendors to quickly mitigate and remediate the risks. Security ratings can also be updated on-demand to get a real-time view of the risks. A huge part of data breach-related costs comes from a delayed incident response.
In the past, organizations would remediate threats once or twice a year after performing a vendor security assessment. However, this process can be inefficient and allows too much time between audits to remediate new threats or zero-day vulnerabilities. Instead, Cyber VRM solutions allow information security teams to detect and remediate threats quickly.
Active monitoring also allows businesses to quickly scale their operations by monitoring new vendors and ensuring that third parties do their due diligence during risk assessments. Vendors that don’t uphold their security posture may be flagged for failing to maintain their cybersecurity controls and processes, which allows organizations to reevaluate contractual requirements.
3. Scalable Cyber Risk Management Processes
One of the main issues with current TPRM and VRM processes is that organizations often have trouble keeping up with the rate of vendor onboarding, especially in mid-sized and enterprise-level businesses. Additionally, organizations may have trouble scaling business operations in accordance with cybersecurity needs if fourth-party monitoring is also required.
However, with a complete Cyber VRM product, organizations can automate those security processes to save significant time, money, and resources. On average, enterprise-level businesses work with up to 5800 vendors, which can be costly to monitor without an automated solution to detect potential cyber threats and data leaks.
Part of the Cyber VRM process is building a system with clear objectives that allow organizations to manage hundreds of third-party relationships and improve on their own vendor risk management maturity model (VRMMM). As the organization grows, the Cyber VRM solution scales accordingly and helps manage vendor relationships to ensure they are meeting security requirements.
4. Establish Minimum Onboarding Criteria and Risk Management Framework
As organizations adopt more vendors, Cyber VRM solutions can help establish a third-party security framework and recommended security controls for their vendor management program. These security measures can set the baseline for the minimum requirements for onboarding as well as customized scoring criteria that can be tailored by industry, vendor size, or operational importance.
Security questionnaires can also be customized and automated for faster response times and higher-quality responses, which would also assist in scaling operations. Third-party risk assessments can also be automated to cut down the time needed to perform a vendor evaluation.
Security frameworks should also include business continuity, incident response, and disaster recovery plans in the event of a cyber attack. Many TPRM programs often neglect resiliency planning during the risk management process. A 2021 Thales Data Threat Report found that almost 45% of all US companies have experienced a data breach, showing that it’s impossible to prevent a cyber attack completely. If an attack were to occur, companies must establish a resilience plan to continue operations and detail immediate response procedures to minimize damages and loss.
How UpGuard Can Help You Manage Cyber VRM
From sending security questionnaires to collecting data, due diligence can be labor intensive. To minimize the amount of time spent managing third-party relationships, consider a tool that automates the process, like UpGuard Vendor Risk.
UpGuard can help streamline the entire third-party risk management process by automatically monitoring your vendors security performance over time and benchmark them against industry leaders. Each vendor is rated against over 50+ criteria, and UpGuard can automatically send security questionnaires to vendors to help your organization gain deeper insights into your vendors, improve your coverage and scale your security team. UpGuard also continuously scans for and discovers data exposures and leak credentials related to any part of your business, preventing reputational and financial harm.