How to Manage Cybersecurity Risks in Vendor Relationships
Extend your security bubble further than your business’s front door.
Managing cybersecurity risk is an arduous task for any organization, one that becomes even more challenging when trying to extend your security to vendor relationships. However, it has never been more important. Not only are cyber threats on the rise, but the U.S. Securities and Exchange Commission (SEC) made ensuring operational resiliency and information security one of its 2021 priorities.
Thankfully, last year the agency published a report on the due diligence companies should practice when dealing with vendor relationships. Covering the monitoring of vendors, contracts, customer information policies and other issues, the guidance provides much-needed advice for these complex business partnerships. Let’s explore some of its main tips, takeaways and findings for addressing security concerns with your vendors.
Why Does Information Security and Operational Resiliency Matter?
According to the SEC’s 2021 Examination Priorities report, breaches in information security can in fact “have consequences that extend well beyond [a] firm,” adversely impacting “other market participants.” The report further explains that, due to the radical increase in remote operations in response to the COVID-19 pandemic, cybersecurity concerns have been elevated further, requiring closer scrutiny of endpoint security, data loss, remote access, use of third-party communication systems and, of course, vendor management.
Understand Your Liability
It is a common misconception that if your vendor experiences a data leak, the onus is on them. Not true. State laws typically lay responsibility at the feet of the entity that collected the customer information in the first place. They usually limit vendor requirements to informing you that a data breach or hack has occurred. To safeguard yourself and your business, ensure that your vendor contracts explicitly detail how your customers’ data needs to be handled, what to do in the event of a breach and the expected timeline for dealing with any disruptions.
Vendor Management Programs
You likely already have some experience working with vendors, as well as an understanding of how time consuming such relationships can be. Unsurprisingly, adding cybersecurity concerns into the mix creates an additional set of concerns that need to be managed. Establishing a program that addresses security concerns and expectations at the beginning of the working relationship can help. This program should cover safeguards, how to evaluate vendors, independent audits and processes for terminating and/or replacing vendors.
Understanding and Monitoring Vendor Relationships
One positive finding from the SEC is that many advisers and their personnel already demonstrate a clear understanding of privacy and cybersecurity contract terms. Furthermore, these advisers display an awareness of the risks inherent to outsourcing work to vendors and best practices for limiting such risks. One way that companies accomplish this is through continuous monitoring of vendor relationships, making sure to stay apprised of any changes in the vendor’s services or personnel.
Despite this good news, firms cannot simply assume that their data protection policies are fully up to snuff or even rest on their laurels. Instead, they must treat vendor security as an ongoing, habitual process.
As the SEC noted, designing a vendor management program is a great place to start. Then, be sure to implement it. Build security requirements into your initial vendor contracts and make them as specific as possible. Run regular security audits, using questionnaires if necessary to rigorously evaluate your vendor’s security practices. You can also demand system and organization controls (SOC) for any vendor you choose to work with, requiring them to conduct a SOC for cybersecurity audit on an annual basis. Lastly, you and your company should be performing access and security reviews daily, always staying vigilant for unusual activity.
The hard truth is that, in our digital-first world, we all must work a bit harder to stay safe online and protect the integrity of our customers’ data. But by doing so, you will have a more resilient organization and satisfied client base.