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Building a Vendor IT Risk Management Program: Understanding Vendor IT Risk

By Mike Rothman

Outsourcing is nothing new. Industries have been embracing service providers for functions they either couldn’t or didn’t want to perform for years. This necessarily involved integrating business systems and providing these third-party vendors with access to corporate networks and computer systems. The risk was generally deemed manageable and rationalized by the business need for those integrated processes. Until it wasn’t.

The post-mortem on a recent very high-profile data breach indicated the adversary got into the retailer’s network, not through their own systems, but instead through a trusted connection with a third-party vendor. Basically the attacker owned a small service provider, and used that connection to gain a foothold within the real target’s environment. The path of least resistance into your environment may no longer be through your front door. It might be through a back door (or window) you left open for a trading partner.

Business will continue to take place, and you will need to provide access to third parties. Saying ‘no’ is not an option. But you can no longer just ignore the risks vendors present. They dramatically expand your attack surface, which now includes the environments of all the third parties with access to your systems. Ugh.

This could be thousands of different vendors. No, we aren’t forgetting that most of you don’t have the skills or resources to stay on top of your own technology infrastructure – not to mention critical data moving to cloud resources. Now you also need to worry about all those other organizations you can neither control nor effectively influence. Horrifying.

This is when you expect Tom Cruise to show up, because this sounds like the plot to the latest Mission: Impossible sequel. But unfortunately this is your lot in life. Yet there is hope, because threat intelligence services can now evaluate the IT risk posed by your trading partners, without needing access to their networks.

Our new Building a Vendor Risk Management Program series we will go into why you can no longer ignore vendor risk, and how these services can actually pinpoint malicious activity on your vendors’ networks. But just having that information is (no surprise) not enough. To efficiently and effectively manage vendor risk you need a systematic program to evaluate dangers to your organization and objectively mitigate them.

We would like to thank our friends at BitSight Technologies, who have agreed to potentially license the content in this series upon completion. As always, we will write the series using our Totally Transparent Research methodology in a totally objective and balanced way.

Regulation

You know something has been a problem for a while when regulators establish guidance to address the problem. Back in 2013 the regulators overseeing financial institutions in the US seemed to get religion about the need to assess and monitor vendor risk, and IT risk was a subset of the guidance they produced. Of course, as with most regulation, enforcement has been spotty and didn’t really offer a prescriptive description of what a ‘program’ consists of. It’s not like the 12 (relatively) detailed requirements you get with the PCI-DSS.

In general, the guidance covers some pretty straightforward concepts. First you should actually write down your risk management program, and then perform proper due diligence in selecting a third party. I guess you figure out what ‘proper’ means when the assessor shows up and lets you know that your approach was improper. Next you need to monitor vendors on an ongoing basis, and have contingency plans in case one screws up and you need to get out of the deal. Finally you need program oversight and documentation, so you can know your program is operational and effective. Not brain surgery, but also not very specific.

The most detail we have found comes from the OCC (Office of the Comptroller of the Currency), which recommends an assessment of each vendor’s security program in its Risk Management Guidance.

Information Security

Assess the third party’s information security program. Determine whether the third party has sufficient experience in identifying, assessing, and mitigating known and emerging threats and vulnerabilities. When technology is necessary to support service delivery, assess the third party’s infrastructure and application security programs, including the software development life cycle and results of vulnerability and penetration tests. Evaluate the third party’s ability to implement effective and sustainable corrective actions to address deficiencies discovered during testing.

No problem, right? Especially for those of you with hundreds (or even thousands) of vendors within the scope of assessment.

We’ll add our standard disclaimer here, that compliance doesn’t make you secure. It cannot make your vendors secure either. But it does give you a reason to allocate some funding to assessing your vendors and making sure you understand how they affect your attack surface and exploitability.

The Need for a Third-Party Risk Program

Our long-time readers won’t be surprised that we prescribe a program to address a security need. Managing vendor IT risk is no different. In order to achieve consistent results, and be able to answer your audit committee about vendor risk, you need a systematic approach to plan the work, and then work the plan.

Here are the key areas of the program we will dig into in this series:

  • Structuring the V(IT)RM Program: First we’ll sketch out a vendor risk management program, starting with executive sponsorship, and defining governance and policies that make sense for each type of vendor you are dealing with. In this step you will also define risk categories and establish guidelines for assigning vendors to each category.
  • Evaluating Vendor Risk: When assessing vendors you have limited information about their IT environments. This post will dig into how to balance the limitations of what vendors self-report against external information you can glean regarding their security posture and malicious activity.
  • Ongoing V(IT)R Monitoring and Communication: Once you have identified the vendors presenting the greatest risk, and taken initial action, how do you communicate your findings to vendors and internal management? This is especially important for vendor which present significant risk to your environment. Then you need to operationalize the program to systematically keep those evaluations current. Given the rapid pace of IT (and security) change, you cannot simply assume a vendor will stay at the same risk level for an extended period of time.
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