The Business Case for Risk Quantification for Third Parties

With so many technologies out there, companies need to be smart with how they invest. When it comes to cyber security, if you’re not investing in it, you’re risking your own success. Cyber security requires monetary investment and attention to implementation due to the new data privacy regulations, ballooning risk registers, and an increased frequency of security breaches. Although the field of cyber security is saturated with risks, businesses are often forced to make difficult choices when it comes to security. Quantification of risk can help assess the value of a project using statistical modelling of risk and expected loss. This common framework ranks all prioritised decisions based on their financial value, making risk management more manageable. Here we make the business case for risk quantification for third parties.

The Business Case for Risk Quantification for Third Parties_Elasticito

Why are Cyber Security Breaches so Damaging?

It’s a harsh reality – cyber attacks are a real threat to small businesses. Even after recovering from the attack, the cost of data recovery, fines, and lawsuits can be too much for some organisations. Cyber attacks can force a business to file for bankruptcy.

Cyber security attacks are one of the top three fears for board members and executives everywhere. According to the 10th Allianz Risk Barometer, they were also the biggest threat to organisations in 2021. The combination of digital engagement, cloud migration, and remote work has elevated cyber risks from a technology problem to an organisation-wide obstacle. To add to this already complex issue, managing third party risks can be difficult, time-consuming, and resource-intensive. Without the right budget and efficient use of resources, it can’t be done effectively.

The Emergence of Third Party Security

Data breaches are a major threat to the brands and companies with which a third party is connected. Such breaches are on the rise, with no sign of slowing down. They can take place across any industry. Here are a few notable examples:

1. CAM4 data breach 2020

Video streaming website CAM4 had its Elasticsearch server breached in March 2020 exposing over 10 billion records.

2. Yahoo data breach 2017

In 2013, Yahoo was hacked to the tune of 1 billion accounts. The hackers had access to the data in these accounts, including security questions and answers. This made it much easier to steal user’s identity. Yahoo made users change their passwords and re-enter any previously unencrypted security questions, but in 2017 they reported that 3 billion accounts had been hacked. This remains one of the largest data breaches of its type in history.

3. Aadhaar data breach

In March of 2018, it was made public that a data leak on the world’s largest biometric database exposed more than a billion Indian citizens’ private information. This massive data hack was the result of a data leak on a government-owned utility company’s system, known as Aadhaar. The hack allowed access to citizens’ private information such as names, unique 12-digit identity numbers, and bank details. It also exposed the photographs, thumbprints, retina scans and other identifying details of nearly every Indian citizen.

Why Third Parties Present Security Risks

As the above examples illustrate, it’s not enough to only defend the front door of a company. Third parties are a concern for more than one reason. Not only do they complicate your security considerations, but they also impact your brand’s reputation. Third party risks are inevitable in the modern era. Almost every business relies on third parties to operate. It’s nearly impossible for a business to handle every phase of its operations internally, so every business is faced with some level of third-party risk.

Third party vendors can be tricky. They don’t follow your rules, and they’re sometimes not as transparent as you might want them to be. You may have high security standards and good risk management practices in place at your company, but you can still become vulnerable if a third party does something wrong.

Every third party in your network is an opportunity for hackers to gain entry into your network. For example, if there is a security flaw in your network’s third party tech component, it can be used as an entry point for every business with that specific component.

The Bottom Line

Cyber criminals are exploiting the weakest entry point: the third parties that are connected to the company. These third parties may not have as strong of a cyber defense as their customers. To keep their data safe, companies must monitor their third party relationships and take preventative steps to ensure that the third party has a strong cyber defense. According to Gartner:

By 2023, 30% of a CISO’s effectiveness will be directly measured on the ability to create value for the business.

A third party vendor software platform is vital for many organisations, especially those with a lot of, or complicated, third party relationships. Third party risk management means the assessment and control of risks from third parties. If a company contracts with a third party, they need to do due diligence to make sure there are no financial, operational, regulatory, or cyber risks. Risk management minimises the likelihood of an operational failure, data breach, or vendor bankruptcy.

Elasticito Third Party Cyber Risk Management Service is the Solution

Elasticito simplifies the process of risk quantification and third party vendor risk management. Elasticito combines automated software and dynamic security questionnaires with external attack surface assessments and business context for a quicker, more accurate view of any vendor before you do business with them.

In this new era, your organisation can’t afford to take cyber security lightly. Elasticito believes there is a viable business case for risk quantification for third parties. Ensuring that your suppliers and vendors are secure is an important step in defending against breaches. To schedule a demo of our third party cyber risk management services, click here.