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Why You Should Tier Your Vendors

Security teams are struggling to contend with the expanding third-party attack surface which is fueled by the pernicious cycle of poor vendor risk management.

Because supply chain attacks are on a steep upward trend, security teams are too preoccupied with this critical threat to devote sufficient attention to the potential security risks of new vendors

As a result, onboarding is rushed which introduces additional third-party vulnerabilities, generating the continued proliferation of supply chain attacks

The solution to this critical cybersecurity issue is a more efficient distribution of remediation efforts so that sufficient bandwidth is available for a secure onboarding program.

The call for more efficient cybersecurity management is also critical for the future of Vendor Risk Management (VRM). Security teams struggling to contend with a rapidly multiplying threat landscape are at a high risk of overlooking critical exposures that could facilitate data breaches.

This workload will only increase as organizations lean further into digital transformation.

The future of Third-Party Risk Management (TPRM) rests on a reformation of modern vendor risk management programs in favor of a more efficient risk management workflow.

Such an outcome is possible with the support of vendor tiering.

In this post, we discuss the top 5 reasons why vendor tiering is such an invaluable feature of current and future Vendor Risk Management (VRM) programs.

What is Vendor Tiering?

Before the benefits of Vendor Tiering can be appreciated, the framework of this third-party risk strategy needs to be grasped.

Vendor tiering is the practice of splitting vendors into groups representing different levels of security risk. As a minimum, a 3 tier system is used with high-risk vendors grouped into one tier and lower-risk vendors into subsequent tiers.

Vendor Tiering on the UpGuard platform
Vendor Tiering on the UpGuard platform

This system ensures high-risk vendors are readily identified so that they can be managed with greater focus; while at the same time keeping lower-risk vendors within the monitoring radar.

Think of vendor tiering as the compression of your entire vendor network with the objective of separating critical vendors and the specific regulatory requirements of all vendors.

5 Reasons Why You Should Tier Your Vendors

Vendor tiering sets the foundation for the more efficient risk management lifecycle required of the continued success of Third-Party Risk Management (TPRM).

To justify its implementation, the 5 primary cybersecurity benefits of vendor tiering are listed below:

1. Streamlines Vendor Risk Assessments

With manual tiering, security teams have the flexibility of adopting a tiering strategy that aligns with their unique business objectives.

Each tier could categorize third-party vendors by their assessment requirements, level of inherent risk, or residual risk.

For example, organizations with highly regulated vendors (such as those in the healthcare industry or impacted by GDPR regulations) could tier vendors based on their regulatory requirements.

Vendor Tiering could group vendors by their specific regulatory obligations.
Vendor Tiering could group vendors by their specific regulatory obligations.

This would streamline the risk assessment process allowing security questionnaires to be sent to each vendor tier rather than manually tracking the assessment requirement of each vendor.

Critical vendors with a very specific set of assessment requirements could also be grouped in the top-tier to simplify the assessment due diligence of high-risk partnerships.

2. Supports Business Continuity

To maintain economic resilience amongst a growing cyber threat landscape, governments are placing greater expectations on businesses to retain business continuity in the event of a cyber incident.

An example of this is the Digital Operational Resilience Act (DORA) which is expected to come into effect in 2022.

Vendor tiering support such a security objective by separating vendors that have the highest potential of facilitating a third-party breach.

When used in conjunction with a Risk Remediation Planner, security teams also refer to security ratings to identity, not only the most critical service providers but also the associated vulnerabilities that will have the highest impact on an ecosystem's security posture.

This collective intelligence will support remediation efforts that address vulnerabilities before they're discovered by cybercriminals - signifincaly increasing the chances of maintaining business continuity in the event of a cyber incident.

Stakeholders will also be impressed by such preemptive security initiatives.

3. Facilitates Advanced Security Metrics

Because Vendor Tiering allows each level of risk to be managed with greater focus, security responses can be tracked with higher accuracy. This creates a more advanced Vendor Risk Management (VRM) process in preparation for the more tumultuous third-party risk landscape of the future.

4. Creates an Avenue for Third-Party Risk Automation

Because vendor tiering creates a more efficient vendor risk management workflow, this framework could potentially be integrated with automation controls to further mitigate manual processes.

According to the 2021 Cost of a Data Breach report by IBM and the Ponemon Institute, automation controls could reduce data breach costs by 80%.

In light of this, future Vendor Risk Management (VRM) programs are likely to have a greater dependency on automation controls, either through digital solutions, or managed services.

automation controls reduce data breach costs

5. Secures the Supply Chain

Besides offering advanced identification of digital vulnerabilities in the supply chain landscape, vendor tiering also strengthen another commonly overlooked exposure in outsourcing partnership - procurement contracts.

The additional bandwidth availability facilitated by vendor tiering allows security teams to dedicate more time to the specific clauses of each new vendor contract. Ideally, the stipulations of each contract should be adjusted to each new vendor's unique risk profile.

The most crucial vendors for maintaining supply chain continuity could be grouped into a vendor tier and then further separated by specific risk, such as the risk of natural disasters, risk of customer data exposure, etc.

Procurement contracts could be adjusted in light of the specific tier group each prospective vendor would be grouped into.

UpGuard Can Tier Your Vendors

The UpGuard platform includes a manual vendor tiering feature to give security teams the freedom to choose a tiering system that makes sense with their unique security objectives.

When used alongside UpGuard's Remediation planner, organizations can lift the efficiencies of their Vendor Risk Management (VRM) programs up to an industry-leading standard - setting a firm foundation for an inevitable future with an increased emphasis on vendor network security.

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