Jon Siegler, co-founder and chief product officer of LogicGate, has over a decade of experience in designing customer-centric enterprise risk and compliance systems.
Many cybersecurity professionals, if not all, have experienced that “after the breach” feeling — the moment you realize you’ll have to tell your customers their personal information may have been compromised because one of your vendors had a data breach.
Such situations also involve spending significant amounts of time and resources fixing a problem caused by a third party. No matter how well you clean things up, the reputational hit to your organization will continue to cost you in lost business down the road.
The fact is, the consequences of failing to properly manage third-party risk are far too costly to ignore.
The cost of neglecting cyber risk
Ransomware attacks, data breaches and widespread IT outages ranked this year as the most significant risk concerns for companies worldwide. More than seven in ten organizations fear third parties have too much control over customer data, including needlessly broad permissions and authorization. Of the 44% of organizations that reported a data breach last year, 75% said the breach stemmed from a third party’s excessive privileged access.
While managing third-party cyber risk is essential to maintaining customer trust, it’s also increasingly important for organizations looking to purchase cyber insurance policies. All it takes is an accidental email containing personal information sent to the wrong customer, and the basic standards for a data breach have been met. Add the various state and federal data laws and costs associated with remediation, and it becomes clear why every organization could benefit from cyber insurance.
As more contracts between businesses contain cyber insurance clauses, it’s important to consider the impact security standards have on obtaining a policy. To put it plainly, the better your security standards are, the better your rates, especially at a time when cyber insurance premiums are soaring.
Cyber insurance providers want to see that you have high standards of security before they issue a policy, so effective third-party risk management could mean the difference between potential insurers offering you a good rate or deeming you ineligible for coverage.
How to manage third-party risk
An organization’s ability to handle third-party cyber risk proactively depends on its risk management strategies. According to Forrester, 70% of enterprise decision-makers agree that third-party risk is a business priority, but about 69% use manual processes in their third-party risk programs.