IN BRIEF:
• Shifting from traditional Third-Party Risk Management (TPRM) to agile, real-time methodologies is crucial due to the intricate interdependencies and evolving cyber threats in IT operations.
• Proactive TPRM, powered by AI, enables organizations to predict and respond to third-party risks swiftly, ensuring continuous IT security.
• Embracing transparency and strategic collaboration with vendors fortifies TPRM, equipping organizations to handle emerging challenges and maintain robust IT systems.
In an era where technology is deeply integrated into business operations, managing third-party risk has become a critical concern for organizations worldwide. The traditional methods of Third-Party Risk Management (TPRM) are being challenged by the fast-paced and complex nature of modern IT environments, where external vendors play a pivotal role in day-to-day operations. As the reliance on third parties grows, so does the potential for risk, making it imperative for TPRM strategies to keep pace with the dynamic landscape of IT risks.
This article seeks to explore the transformative approaches necessary for managing third-party risks effectively, ensuring that organizations can maintain robust IT operations amid the ever-present threat of external vulnerabilities.
THE EVOLUTION OF TPRM IN IT OPERATIONS
The complexity and interconnectivity of modern IT operations demand a more agile and continuous approach to managing third-party risks. This necessity is underscored by the escalating frequency and sophistication of cyber threats, which can significantly impact IT operations.
As businesses become more reliant on third-party vendors for essential services, the potential for risk exposure grows, highlighting the need for TPRM strategies that can adapt to new threats as they emerge. The evolving landscape of TPRM in IT operations requires a strategic shift from static, periodic assessments to a dynamic, real-time risk management model that is capable of identifying and mitigating risks promptly.
ADAPTING TO REAL-TIME THREATS
The transition from a traditionally reactive TPRM approach, characterized by annual assessments, to a more proactive and dynamic model marks a significant shift in risk management practices. This shift necessitates the continuous monitoring of third-party activities to swiftly identify and address potential risks.
As an example, a global organization implemented continuous real-time monitoring tools to proactively assess third-party risks. By leveraging advanced analytics and real-time data, they were able to swiftly detect and mitigate potential vulnerabilities introduced by external vendors, enhancing their overall security posture. Continuous threat intelligence and monitoring solutions allowed the organization to detect and respond to third-party risks in real time, minimizing the window of exposure to potential threats.
Integrating cyber threat intelligence (CTI) into this proactive TPRM framework offers a strategic advantage, transforming reactive security measures into a forward-thinking, intelligence-driven approach.
By enabling real-time monitoring of potential vulnerabilities and emerging threats, CTI enhances the ability to share tactical intelligence with industry peers and conduct comprehensive risk assessments, thus strengthening the overall security posture of the extended enterprise. The importance of this approach was starkly highlighted by incidents such as the CrowdStrike incident, which exposed vulnerabilities in third-party risk management and had profound implications for critical IT infrastructure.
Incidents such as these serve as wake-up calls, prompting organizations to reevaluate their TPRM practices. The evolution of TPRM practices post-incident, focusing on lessons learned and the implementation of strategies to prevent similar issues, is essential for safeguarding IT operations against the ubiquitous risk of third-party threats.
INTERDEPENDENCIES BETWEEN TPRM AND IT OPERATIONS
The interdependencies between TPRM and IT operations are becoming increasingly apparent as third-party failures, such as cybersecurity breaches or service outages, directly impact IT operations. These incidents can have cascading effects across an organization, affecting everything from data security to business continuity.
For example, an organization that experienced a service disruption due to issues with a third-party provider strengthened its incident response and disaster recovery plans by implementing redundancy measures and conducting regular recovery drills. This integration of TPRM and IT operations ensured that the organization could swiftly recover and maintain operational stability during future vendor-related disruptions.
The integration of TPRM with IT disaster recovery and incident response planning is crucial for building resilience. Organizations must employ redundancy, backup systems, and other measures to mitigate the impact of third-party risks on IT operations. Understanding these interdependencies is vital for developing robust TPRM strategies that can withstand the ripple effects of third-party issues and maintain operational stability.
NAVIGATING UNFORESEEN CHANGES AND UNVETTED UPDATES FROM VENDORS
The challenge of navigating unforeseen changes and unvetted updates from vendors is becoming increasingly relevant. Vendors’ software or service updates are often released without comprehensive testing, and these can introduce significant vulnerabilities or compatibility issues. Organizations must develop adaptive response mechanisms to quickly adjust to these changes.
For instance, one organization faced unexpected compatibility issues when a vendor released a critical software update without thorough testing. In response, they established an automated testing environment to assess vendor updates before deployment, allowing for seamless integration with existing systems and minimizing operational disruptions.
This includes maintaining robust patch management processes, utilizing automated testing environments, and employing rapid deployment frameworks to ensure the continuity and security of IT operations. By adopting such strategies, organizations can better manage the risks associated with unpredictable vendor changes and maintain the integrity of their IT infrastructure.
FUTURE-PROOFING TPRM
Future-proofing TPRM strategies with advanced technologies and collaboration is essential for staying ahead of potential third-party risks. Leveraging AI and machine learning can provide predictive insights into third-party risks based on patterns and trends, enabling organizations to anticipate IT disruptions before they occur.
For example, a logistics company used AI-driven predictive analytics to identify potential disruptions from third-party providers, such as delays due to external factors. This allowed them to adjust operations proactively, minimizing risks and maintaining service continuity.
Enhancing vendor collaboration and transparency ensures that all parties are aligned on updates, vulnerabilities, and risks. Additionally, the continuous integration of feedback from IT incidents, risk assessments and cyber threat intelligence into the TPRM framework drives ongoing improvements, ensuring that TPRM strategies remain effective and aligned with the evolving IT landscape, providing organizations with actionable intelligence, facilitating informed decision-making, and fostering a proactive security posture.
EVOLVING TOGETHER — THE FUTURE OF TPRM IN IT-DRIVEN ENVIRONMENTS
As IT operations continue to evolve at a rapid pace, the need for an evolving, dynamic approach to TPRM becomes increasingly apparent. Organizations must view TPRM as an integral component of their IT strategy and resilience planning, rather than as a mere compliance requirement.
Managing third-party risk in an IT-centric world requires a forward-thinking approach that embraces advanced technologies, collaboration, and continuous improvement. By adopting dynamic TPRM strategies and viewing them as integral to IT strategy, organizations can confidently and effectively navigate the challenges of an IT-driven environment and secure their operations for the future.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the authors and do not necessarily represent the views of SGV & Co.
Joseph Ian M. Canlas is a risk consulting partner and ASEAN core consulting quality leader, and Christiane Joymiel C. Say-Mendoza is a risk consulting partner, both of SGV & Co.
