From marketing consultants and supply chain partners to accountants and IT service providers, organizations today depend on all kinds of third parties for virtually every conceivable business function.
According to recent Ponemon Institute research, the unintended consequence of third-party dependencies is that 61% of organizations in the U.S. have experienced a data breach caused by a third party or vendor. Fifty-seven percent of businesses can’t determine whether their vendors’ security policies and defenses can adequately prevent a breach, and fewer than half evaluate the security and privacy practices of vendors before initiating a business agreement that requires the sharing of sensitive or confidential information.
It’s not surprising, therefore, that according to the same research only 16 percent of respondents rated their companies as “highly effective” in mitigating third-party risk. In fact, those prioritizing the management of their outsourcing risks are in the minority.
The best time to start reducing third-party risk is at the very beginning of the relationship — before entering into an agreement. That’s when you need to ask critical questions to identify the possible exposure you’re taking on, and how to best avoid a compromise. Vendors with strong security practices are usually willing to talk about them, while those that avoid such discussions might have something they’re hiding. With that in mind, here are five questions — one internally and four for serious candidates — that you should ask when considering a third party:
What data and systems will the third party possess or access? Many third parties won’t have access to sensitive data or systems, so if they experience a breach, the threat to you is minimal. A landscaping vendor, for example, has little access to data or systems, and likely none to the interior of any facility. Perhaps the only computerized network it might access is an irrigation system, which more than likely would be isolated from internal corporate systems. Therefore, any potential breach of this hypothetical landscape vendor would be expected to have little to no impact.
An HR provider, finance system or vendor, by contrast, would be very different. For example, if you hired a consultant to develop customer analytics in support of the marketing or business strategy, that entity might have access to company data spanning customer credit card numbers and home addresses, or corporate financials. This type of consultant should be carefully vetted.
What kind of logging and monitoring does the third party do? Logging and monitoring are the primary ways that an organization records and responds to activity within its environment. But system and network activity logs are verbose. And in today’s modern computing environments, which are composed of multiple diverse systems and high bandwidth networks, the volume of log events quickly becomes overwhelming for a human to manage. To properly monitor security events, tools must be deployed to store and triage these events. By knowing the vendor’s personnel and tool choices, you will understand how seriously it takes security. After all, people + tools = money = resources = priorities. Look for partners that prioritize and invest in security.
How does the third party manage both physical and technical access controls? Access controls are one way to reduce vulnerability, and therefore risk. They take two primary forms: physical and technical. In our hyper-connected world, it’s easy to forget the importance of physical controls. You need to identity the physical locations where the third party stores, processes, and transmits data, as well as the level of physical security at those locations. If your data is to be stored on mobile devices, it’s important to understand the security controls associated with those devices, since they might not always be in a static physical location.
Technical access controls are also important for the assessment of systems and networks. Ask how many individuals will have access to your data, and for what purpose. Understand how the third party uses multi-factor authentication, how often users in the administrator group are reviewed, how often system permissions are reviewed, and how departing employees’ access is removed. In addition, learn how network segmentation practices and tools are used. For example, what controls are in place to isolate production systems from other environments like the internet? How does the third party segment its internal network?
Many times good physical access controls can compensate for weak technical controls, and vice versa. But best practice is to limit physical and technical access to data and systems to those individuals needed to provide the service. Lax access controls open up the attack surface and increase your risk.
What approaches does the third party take to patching systems? While unknown or undisclosed vulnerabilities are dramatic and get lots of attention, they are rare. Organizations are more at risk to known than unknown vulnerabilities. As a result, third parties must have robust programs in place to fix known vulnerabilities, by quickly applying security patches that update flaws and remove the underlying vulnerable software.
Major software vendors release updates on a regular cadence. In your review of third parties, you need to be convinced that the systems that process, store and transmit your data will receive regular and timely updates, and that expedited processes exist for immediate and critical vulnerabilities.
Does the third party undergo independent audits or testing? What security certifications has it earned? Audits keep organizations accountable. Third parties should self-audit by completing and keeping current standardized security questionnaires such as the SIG Lite or CSA CAIQ. Beyond self-assessments, independent audits give you peace of mind that the third party is following its policies and procedures. Independent audits might include penetration tests or SOC 2. Some industries have their own certifications like HITRUST in healthcare, PCI for payment processors, and FedRAMP in the U.S. federal government. In all cases, independent audits are important, and show a commitment to maintaining a validated, formal information security program.
Taken collectively, discussions around these key areas will give you a sense of a vendor’s security posture. If the vendor’s answers are transparent and indicate strategic priority and proactive diligence, you can move forward more confidently. If the vendor’s security posture is immature, then you must either accept the risk, or consider other mitigations to control it.
Don’t let data security be an afterthought. Make it an integral part of product and services discussions. In today’s environment of voluminous and intricate attacks, cybersecurity is a business matter. You must do your due diligence to understand your risk.