As we’ve seen in recent events such as the SolarWinds hack, third-party risk poses a serious threat to business continuity. What the incident also demonstrated is that fourth party risk, or the risk posed by a contracted vendor’s third parties, can equally threaten data security and operations.
Your organisation may have integrated a robust third party risk management program (TPRM) – but what if keeping an eye on your third parties alone isn’t enough?
Downstream vendors are typically overlooked in a traditional third-party risk management program, making the risk they pose invisible to the organisation. A recent podcast from ProcessUnity and Crowe discussed why organisations are placing increasing importance on this type of vendor risk: as the vendor population grows, so does the potential for fourth party risk, creating exponential opportunities for business disruption that need to be addressed.
Identifying Risk in Fourth-Party Vendors
You may wonder how fourth-party vendors can pose a threat to your organisation without a contractual relationship. However, an organisation’s third parties can be used as a back door to access customer data or breach the organisation’s network. Attackers need only one back door to access an integrated network and jumpstart a cascading disruption throughout the supply chain.
TPRM professionals can begin to mitigate risk throughout the extended enterprise by building fourth-party controls into the core of their TPRM program.
Fourth party risk management begins with a comprehensive TPRM system. During vendor onboarding, pre-contract due diligence should scope a vendor’s third-party risk management processes. Transparency around a potential third party’s key vendors should be established so their supply chain can be wholly understood from the start. Ongoing review of subcontractors should be an integral part of any intelligent vendor assessment, particularly if those services are critical. Overall, an organisation’s risk is vastly reduced when their vendors also practice proper risk management.
Focus on Critical Vendors
According to a Ponemon study, companies share confidential and sensitive information with an average of 583 third parties. If each of these third parties has 583 vendors themselves, managing all the possible avenues for risk can seem impossible.
Fortunately, you don’t have to focus equal attention on your vendor population. Consider potential fourth party risk as a factor during vendor classification to determine the most critical vendors. Leverage inherent risk scoring during vendor onboarding to classify which parties in your supply chain to focus resources on. Ranking vendors by risk criticality with fourth party risk in mind will help your organisation sort through the noise and prepare for issues as they arise.
Using Vendor Risk Management Centralisation to Address Fourth Party Risk
Fourth party risk can directly impact the organisation’s brand and reputation within the market, making fourth-party risk the organisation’s risk. Organisations can automate their vendor management processes to address a broad web of risks throughout their fourth parties. Leveraging a centralised technology platform is essential to govern your entire supply chain with cross-functional integration between departments.
You’re Only As Strong As Your Weakest Link
There’s never been a more vital time to ensure the resilience of your organisation and the supply chain you rely on.
DVV Solutions and ProcessUnity are here to help with Vendor Risk Management automation and services that offers the agility and efficiency to adequately mitigate disruption throughout the extended enterprise – including even the most distant vendors and suppliers.
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