© 2020 Content Security Pty Ltd.
© 2020 Content Security Pty Ltd.
Third Party Risk Management (TPRM) refers to the processes and strategies businesses implement to identify, assess, and mitigate risks associated with engaging third-party vendors, suppliers, contractors, or service providers. For Australian businesses, TPRM is essential to ensure that third-party relationships do not compromise their operations, compliance, or reputation.
Effective TPRM involves ongoing monitoring and the implementation of policies, procedures, and controls throughout the lifecycle of third-party engagements.
This includes regularly assessing third-party performance and risk factors related to data security, regulatory compliance, and operational resilience.
Implementing robust TPRM practices allows businesses to minimise exposure to risks and maintain an enterprise-wide risk management strategy that ensures third-party interactions contribute to their overall strength rather than becoming liabilities.
Third-party Risk Management is a part of our Governance, Risk & Compliance services. To know more about other services, click here.
Third Party Risk is a significant concern for businesses because third-party vendors, suppliers, contractors, and service providers can introduce various types of risks that may impact the organisation’s operations, financial stability, reputation, and regulatory compliance. These risks arise from the inherent dependence on external entities, over which a business has limited control.
Below are the third party related risks every Australian business and enterprise should be concerned about
The sharing of sensitive data with third parties increases the risk of data breaches and cyber-attacks. An example of this is when a vendor system is compromised, leading to the exposure of sensitive company and customer data.
If a key supplier faces disruptions, such as bankruptcy or natural disasters, it can halt the production line or service delivery, impacting the business's ability to operate effectively.
Engaging with third parties who do not adhere to legal and regulatory requirements can result in fines, legal penalties, and reputational damage for the business.
Financial instability of a third-party vendor can disrupt business operations and add unexpected costs.
Suffered a major data breach after a cyberattack on a major vendor used by the company. This breach 290,000 out of the 14 million overall customer records stolen . Total damage costs are estimated around $50 million
The Australian privacy commissioner has highlighted third-party suppliers as a significant vulnerability for customer privacy, following a data breach that exposed the personal information of over 1 million Australians.
Data breach that saw the personal information of 1.2 million customers posted on the dark web. Dymocks are blaming their third party loyalty provider as source of unauthorised access to their client data.
A hacker used a Deakin University staff member’s username and password to steal student information through one of the university’s third-party providers, obtaining the personal data of more than 45,000 people. Soon after this happened, 10,000 of these students received an SMS scam message.
MasterCard Report 2024
Investing in Third-Party Risk Management (TPRM) is crucial for companies for several reasons. Here are some key points explaining why it’s important:
Managing third-party risks ensures financial stability by mitigating risks such as fraud and bankruptcy of vendors. It also ensures operational continuity by vetting the reliability and stability of third parties to prevent disruptions in the supply chain.
TPRM helps companies adhere to regulatory requirements, thus avoiding hefty fines and legal consequences. Ensuring that third parties comply with applicable laws and regulations protects the organisation from legal issues.
By ensuring that third parties implement robust security measures, TPRM helps protect sensitive company data from breaches and cyberattacks. This is crucial in maintaining data privacy and security standards.
Effective TPRM minimises the risk of reputational damage caused by third-party actions. Ongoing monitoring and assessment build stronger, more transparent relationships with third parties, fostering trust and collaboration.
Proactive risk management prevents costly incidents, leading to significant cost savings in the long run. Companies that manage third-party risks effectively gain a competitive edge, being perceived as more reliable and secure by customers and business partners.
Third-Party Risk Management (TPRM) and Governance, Risk, and Compliance (GRC) are closely interconnected frameworks that help businesses manage risks, ensure compliance, and maintain robust governance practices. This relationship is particularly relevant for Australian businesses facing regulatory scrutiny, complex supply chains, and increasing cyber threats
Integrating TPRM into GRC frameworks ensures that third-party relationships align with both strategic objectives and regulatory requirements. For Australian businesses, this approach not only strengthens governance and oversight but also ensures compliance with key regulations like the Australian Privacy Principles (APPs) and GDPR. This integration mitigates legal risks while maintaining the company’s strategic direction.
Embedding TPRM within the broader GRC strategy enables Australian businesses to achieve a comprehensive view of all potential risks, including those stemming from third parties. This synergy between TPRM and risk management is crucial for addressing challenges such as supply chain disruptions and cyber threats. By considering both internal and external risks together, companies can bolster their overall risk resilience.
TPRM plays a vital role in enhancing operational resilience by ensuring the reliability and stability of third-party vendors. For Australian businesses, particularly those dependent on global supply chains, this is key to maintaining uninterrupted operations. Moreover, integrating TPRM into GRC frameworks helps protect the company’s reputation by ensuring that third-party actions do not lead to reputational harm, preserving the company’s standing in a competitive market.
Third-Party Risk Management (TPRM) is crucial for businesses to manage the risks associated with outsourcing to external vendors or service providers. Here are the key objectives of TPRM:
TPRM aims to thoroughly identify and assess risks associated with third-party relationships, including financial, environmental, reputational, and security risks. This involves tailored risk assessments that align with the organisation's specific needs and compliance requirements, ensuring a proactive approach to risk management.
TPRM focuses on mitigating cyber risks by securing data shared with third parties and managing access controls effectively. Given that third parties often have access to sensitive information, this objective is critical in preventing data breaches and unauthorised access, thus protecting the organisation's digital assets and reputation
Ensuring third-party vendors comply with relevant regulations and standards is a key objective of TPRM. For Australian businesses, this includes adherence to the Australian Privacy Principles (APPs), GDPR, and other industry-specific regulations. By integrating compliance checks into the TPRM process, organisations can safeguard themselves from legal repercussions and maintain regulatory alignment.
TPRM ensures that third-party disruptions do not negatively impact the organisation's operations. This involves assessing the third party's ability to deliver consistent services and planning for continuity in the event of a disruption. Additionally, TPRM includes ongoing monitoring and evaluation of vendor performance to ensure that service levels and standards are met, maintaining quality and accountability throughout the vendor lifecycle.
Conduct thorough risk assessments for all third-party engagements. This involves identifying potential risks such as financial instability, cybersecurity vulnerabilities, regulatory compliance issues, and reputational harm.
Action Steps:
Implement a stringent due diligence process before onboarding third parties. This helps ensure that prospective vendors meet your organisation’s risk management standards and compliance requirements.
Action Steps:
Establish continuous monitoring and periodic auditing to ensure that third parties maintain compliance and performance standards throughout the relationship.
Action Steps:
Maintain transparent and consistent communication with third parties and internal stakeholders regarding risk management policies, procedures, and expectations.
Action Steps:
Create and implement a comprehensive incident response plan to manage and mitigate risks arising from third-party failures or security breaches effectively.
Action Steps:
MasterCard Report 2024
Our Third-Party Risk Assessment approach involves creating a tailored questionnaire for suppliers and evaluating their responses for potential risks. We base our framework on industry standards like ISO 27001 and the Australian Privacy Act 1988, along with your specific regulatory and contractual needs. The assessment includes:
Identifying third-party accessible information
Developing and distributing a customised questionnaire
Evaluating supplier responses and potential risks
Results are provided in a business-oriented report to guide your third-party management.
A Third-Party Risk Assessment (also known as a supplier or vendor risk assessment) is a systematic process used to evaluate the potential risks associated with engaging third-party vendors and suppliers. This assessment is essential for identifying, analysing, and mitigating risks that third parties might pose to an organisation.
Third-party risk assessment helps organisations understand and manage various risks in their supply chain and service provider network. These risks can be categorised into different types, including financial, operational, compliance, reputational, and security risks. By conducting such assessments, organisations aim to ensure that third parties comply with regulatory requirements, maintain proper security measures, and do not expose the organisation to undue harm.
Discover your organisation’s cybersecurity risk profile now.
This complimentary report offers a snapshot of your current security risk rating, powered by RiskRecon’s advanced Third-Party Security Risk Monitoring technology.
If you need support aligning your security strategy, protecting your digital assets or managing your defenses, Content Security can help. Schedule a time with one of our Cybersecurity Experts today.
