By Kaarthick Subramanian – VP, Security & Privacy
In today’s tech-driven marketplace, third-party vendors play a critical role in business ecosystems. They boost efficiency, productivity, and competitive edge. While the benefits of working with third-party vendors are enormous, they can expose your organization to cybersecurity threats.
According to a recent survey by MasterCard and Cyentia Institute, TPRM professionals believe that 31% of vendors pose a material risk. In December 2020, FireEye disclosed that hackers had breached its system after a supply chain attack on SolarWinds. FireEye is a security vendor for governments and tech companies, such as Microsoft, Intel, Nvidia, and Cisco. The cyber-attack allowed hackers to breach several government and enterprise networks globally. As a CCO, CISO, or Risk Management Director, your third-party risk management program is your company’s first line of defense against vendor-related cyber risks. A robust vendor governance framework is crucial now more than ever.
What is Vendor Governance Framework?
A vendor governance framework is a system for developing vendor management programs. It provides recommendations and defines the processes and procedures for assessing, monitoring and mitigating third-party risk. Chief Compliance Officers and Risk Management Directors use these frameworks to develop and optimize existing vendor risk management programs.
At its core, a vendor management framework ensures appropriate supervision of service providers with consistent oversight and control requirements. It is the cornerstone of vendor risk assessment, management, and monitoring. In this cyber risk landscape, companies working with third parties need a robust framework.
Why is Vendor Governance Framework Important?
The ultimate goal of implementing TPRM programs is to identify and mitigate third-party risks. Here are five reasons why your organization needs a comprehensive governance framework.
1. The rise of cybersecurity threats
Organizations are shifting to remote and work-from-home models. They rely heavily on third parties to adapt to the new normal. However, organizations’ exposure to cybersecurity risks increases with the expansion of third-party networks. To mitigate these risks, build a robust framework.
2. More third parties interact with corporate data.
Nowadays, organizations delegate entire departments or functions to third-party vendors. As their third-party connections expand, more vendors interact with corporate data. The broader the network, the higher the risk. With comprehensive vendor governance, you have control over third-party relationships and extensive visibility of all data touchpoints. It can help your organization derive value from vendors with minimal risk.
3. The high cost of vendor-related breaches.
Third-party vendors contributed to some of the costliest data breaches in history. Currently, the average cost of a data breach is $3.86 million. The most recent victims of vendor breaches include Marriott, Instagram, and General Electric. No organization is immune or safe from cybercriminals. Vendor governance is a must-have now more than ever.
4. Vendors are prime targets
Reputable vendors cater to thousands of companies. Now, cybercriminals can kill thousands of birds with one stone. They focus on breaching a single vendor instead of individual companies. In a recent study, RiskRecon found that financial losses of multiparty cyber-incidents are 13 times greater than single-party events. To protect your organization from vendor-related cyber-attacks, you need efficient vendor risk assessments. And it all boils down to your governance tools.
5. The rise of regulations.
With the rise of IaaS, PaaS, and SaaS cloud offerings, data is scattered more than ever. To stay on top of your data, build regulations into your framework. Regulation-driven TPRM programs can help secure internal networks and third-party ecosystems. Organizations can also use rules-based solutions like ComplyScore to ensure compliance with internal and industry standards.
Vendor Governance and Cybersecurity Best Practices
When it comes to vendor risk management, there is no one-fits-all approach. You should develop a customized governance framework that works best for your organization. But what should you prioritize? Here are five vendor governance and cybersecurity best practices:
Understand your Vendors
First, establish the objective of using each vendor. Second, map your vendors’ criticality and associated risks. These two steps enhance the understanding of vendors. With these insights, you can develop a framework that supports the application of relevant regulations.
Leverage Existing Frameworks
Most organizations use pre-built TPRM frameworks and models as a starting point. You can use NIST Cybersecurity Framework, which outlines the standards and guidelines for defining controls to manage cybersecurity risk. It also highlights best practices for managing cybersecurity risks across third-party relationships.
Consistency is essential for successful vendor risk assessment and management. For company-wide vendor governance frameworks, ensure you include procurement, risk, compliance, and relevant business functions. Approval requirements and cybersecurity risk monitoring should be applied consistently and continuously throughout the contract. A VRM solution like ComplyScore that automates the entire vendor management life cycle can implement your policies consistently.
Fulfill Compliance Requirements
Whether you operate in healthcare, banking, insurance, or IT, you should factor compliance into your framework. Sectors like healthcare are subject to strict cybersecurity risk management regulations. As a Chief Compliance Officer, you can implement your policies with a solution like ComplyScore to ensure compliance with relevant regulations.
Adopt an Iterative Approach
Third-party relationships are dynamic and evolve constantly. Your vendor cyber risk management framework should be flexible. Build adaptable vendor governance policies and processes for your framework to allow iterative third-party risk assessment and monitoring. Use data-driven methodologies to attain flexible vendor due diligence.
To avoid errors and omissions, create a vendor risk management checklist with all the policies, procedures, and controls to build into your governance framework. For example, your policy checklist should include compliance, information security, operations, and general policies.
Considerations when choosing a Vendor Governance Solution
Vendor governance solutions tie together all your TPRM efforts to create a robust program. Your vendor risk management solution can make or break your organization’s TPRM program. So, you should invest more time when choosing vendor governance solutions.
Automation. From assessments to assignments, tasks, and contract terms, your VRM solution should automate these processes for you. A configurable vendor governance solution can streamline your workflow and reduce the risk of non-compliance.
Full life-cycle management. Switching between software and traditional spreadsheets is a recipe for disaster. The ideal governance solution should provide end-to-end vendor risk management. Look for a VRM solution like ComplyScore that provides full life cycle management, from vendor request to intake and approval.
Align with your needs. The best solution should be flexible enough to accommodate your organization’s evolving needs. It should align with your mission and long-term objectives. If you have a small TPRM department, choose a vendor risk management solution with an all-in-one managed service.
Customization. Businesses have unique needs. Look for a VRM solution provider that customizes offerings to meet the organization’s specific needs. For example, an expanding financial institution turned to ComplyScore for vendor governance. ComplyScore customized its Vendor Governance Enterprise solution to the organization’s unique needs. With the customized solution, the company absorbed new vendors more efficiently from acquired entities.
Scalable. Organizations’ TPRM needs to evolve constantly. The last thing you need is a solution that cannot handle all your vendor risk assessments. Choose a scalable vendor governance system that allows you to manage more vendors as your organization’s third-party ecosystem expands. Look for a cloud-based vendor risk assessment solution.
The best vendor governance solution for your organization should tick all five requirements and offer a user-friendly dashboard and easy-to-use features. ComplyScore meets all these requirements.
Whether you’re a CCO, CISO, or Risk Management Director, you need a comprehensive vendor governance framework to develop efficient third-party risk management programs. It is the cornerstone of vendor risk management and can help you protect your organization at all times. With the rise in regulations, cybersecurity risks, and expanding ecosystems, building a robust governance framework is crucial now more than ever. But there is no one-fits-all framework. Develop a custom framework for your organization based on VRM best practices and use the best governance solution to implement it. You can rely on ComplyScore to enforce your vendor risk assessments, management, and monitoring.
At ComplyScore, we manage every aspect of vendor risk management. Our scalable cloud-based solution provides automated vendor risk assessments for the entire vendor life cycle. You can rely on ComplyScore and our team of risk managers and cybersecurity experts to streamline your TPRM processes. To strengthen your vendor governance framework, contact us today!