Many businesses need third-party companies, such as suppliers and contractors, to stay operational. Since the pandemic, business use of third-party companies grew dramatically. If left unchecked, these third-party vendors can create huge risks for your company. According to Forbes, 80% of data breaches now originate with a third party. Also, 29% of companies have no visibility into the security of their third-party partners. Therefore, organizations must improve their third-party risk management.
Security risks from third-party companies come in many forms. Outside contractors may have access to customer data, business software, or personal employee information. Also, they can negatively affect the reputation of your company. For instance, a third-party contractor you are considering may not be proactive in password hygiene, which can lead to a data breach. Another example is hiring a third-party company to process credit card transactions for your organization’s fundraising event. If this third party does not have proper data protection or the latest security tools, hackers may exploit this vulnerability and steal your donors’ information. As a result, your company can suffer from financial losses and a damaged reputation.
If your company suffers a cybersecurity breach due to a third party, it can take much longer to detect and contain the breach. According to IBM’s 2022 Cost of a Data Breach Report, it can take an average of 26 days longer to contain third-party breaches compared to the global average for other kinds of breaches. These security breaches cost $4.46M on average, which is 2.5% higher than the average cost of a regular breach. Therefore, it is more important now than ever for business leaders to identify weak links in their current third-party contracts so they can protect customers and employees.
As if protecting your business reputation and data were not enough, you also have legal and regulatory issues to worry about with a third party. If your third-party vendor does not follow labor laws or have their regulations up to code, your company can be legally liable.
There is one clear solution to this problem. Third-party risk management sets up standardized processes for interviewing third-party candidates, training current employees on the risks of a third party, and keeping you in compliance with industry standards. This solution not only tests incoming third parties but also reviews their performance and security measures continuously. To get more knowledge and visibility into the integrity of outside contractors, third-party risk management is necessary.