Data Breaches and Third Parties: 5 Questions to Ask Now

Featured article by Greg Dickinson, CEO, Hiperos

It seems we cannot get through a week without another report of a cyber-attack on a business enterprise. Take, for example, AT&T, Lowes, Target and Home Depot: four major brands with one thing in common. Each of these company’s revenues has recently been directly affected because of a data breach. In every case, the culprit was one of the company’s third parties: an HVAC supplier, a contract manufacturer, and a consultant who, because of lack of visibility and appropriate controls, ultimately cost the company millions of dollars.

There is a direct economic impact for these events. Without company-wide processes and procedures to ensure that all third parties are systematically screened to verify whether or not they will have access to a company’s networks, IT systems or data, third parties can put the organization at risk of reputational impact, regulatory exposure and revenue loss. Kaspersky Lab’s “IT Security Risks Survey 2014” estimates that the average economic impact of a single data security incident was $720,000 in damages, and “one successful targeted attack could cost a company as much as $2.54 million.” But beyond these direct costs to plug IT security holes, re-issue credit cards, and reimburse consumers for fraudulent charges – these companies incurred damage to their reputations and brands that could have an ongoing financial effect for years.

The specter of hackers infiltrating major brands via some “low risk”, low spend, non-IT third party, as well as increased regulations and regulatory enforcement, has elevated the topic of third party risk to the boardrooms of all corporations. But IT pros should take solace. This problem does not fall solely on your shoulders; it is a much broader issue than IT alone. For starters, here are five questions that should be asked – not just by IT – but by colleagues across the organization:

1. Do you know which third parties you are doing business with (all third parties, not just IT vendors)?

2. Do you know which of your IT and non-IT vendors and third parties have access to your systems, networks or data?

3. If the answer is yes, do you know why?

4. How do you assess the risk – not just InfoSec – associated with these vendors and third parties?

5. Are you confident that you, and your third party have the correct controls in place to mitigate these risks?

Bottom line, unless you are aware of the risk, unless you know that a third party is being given access to your company’s data or needs to get behind your firewall, it’s almost impossible to manage the risk appropriately. It would also be helpful to understand the business rationale for giving them this level of access.

Despite the complexities involved, understanding these risks and preparing for them is achievable. Here are four ways to identify and mitigate potential IT risks across your disparate third parties:

1. Know Your Third Parties: While it’s easy to outsource work to third parties, it’s not so easy to know who you’re actually doing business with and who is delivering the goods or services. Companies often default to only completing due diligence and managing a limited number of “high-risk” or high spend third parties – or assuming that only traditional “IT vendors” pose an IT risk. Review whether your policies and technology allow you to identify, assess and manage all of your third parties for IT risk (as well as other risks of course).

2. Know Their Business: It is not enough to hire third parties to help your company – you also have to know what business they are doing on your behalf. Ask yourself this question: If today you had to pull a list of which of your vendors or business partners have access to employee or customer personally identifiable information (PII), or to your IT systems, how long would it take? If you had to contact those companies for additional information, do you have accurate contact details?

Did you know that the majority of companies lack accurate (or any) contact information for the majority (north of 75 percent) of their third parties? This means that you may have incomplete, inaccurate or outdated information about the work that your vendors and third parties are doing and where and why they are doing it. Not knowing this information increases the chances of exposing your enterprise to risks and breaches.

3. Know Their Risk: Less than half of companies regularly conduct due diligence on their third parties. While all third parties pose some level of risk, the risk and the level of seriousness differs dependent on the role of the third party. For example, third parties that deal with payroll or taxes usually pose a higher risk of security to your company’s data than the cleaning crew that comes in at night. Managing your third parties based on the risks that they pose requires knowing the risks in the first place and then having policies and procedures to control those risks throughout the life the contract.

4. Know Their Access: Not knowing that a third party had access to system passwords is not a valid excuse when your client’s records are stolen. Understanding what each party has access to – and why – will ensure that you have control over their access and can limit or deny access to sensitive information as appropriate.

Third party risk management is critical. A company’s revenues today depend on hundreds, thousands or hundreds of thousands of suppliers, contract manufacturers, brokers, distributors, resellers, channel partners and others. Organizations should not be lulled into a false sense of security regarding their third party risk because they do not manage these factors in an objective and consistent way.