Navigating the Regulatory Landscape for Third-Party Risk Management
Understanding the Regulatory Requirements and Guidelines for TPRM Implementation
As businesses continue to rely on third-party vendors for essential services, the risks associated with these partnerships are becoming more apparent. Organizations need to have a solid understanding of their vendors’ security posture and potential impact to their business when assessing their third-party risk.
This is where third-party risk management (TPRM) comes into play, providing businesses with a framework that enables them to monitor, assess and manage their third-party risk effectively. However, as organizations adopt TPRM practices, navigating the regulatory landscape can be challenging. This blog post will explore the regulatory requirements and guidelines organizations must navigate when implementing a TPRM program.
Compliance Regulations and Standards
The regulatory landscape surrounding TPRM is complex, with several compliance regulations and standards that organizations must consider when designing their TPRM program. For instance, for companies in the healthcare industry, the Health Insurance Portability and Accountability Act (HIPAA) mandates that healthcare providers have a comprehensive risk management program in place that addresses their third-party vendors’ cybersecurity. HIPAA also specifies that business associates of healthcare providers must comply with the same security standards as covered entities.
Another compliance regulation that organizations must consider is the General Data Protection Regulation (GDPR), which focuses on protecting the personal data of citizens of the European Union. GDPR mandates that organizations implement appropriate safeguards to protect personal data, including that of third-party vendors who access their systems. Failure to comply with GDPR can result in severe fines of up to 4% of the company’s annual revenue.
Organizations must also consider the Payment Card Industry Data Security Standard (PCI DSS), which enforces data security standards for all merchants and service providers that handle credit card payments. PCI DSS requires organizations to assess their third-party vendors’ compliance with its security standards and implement appropriate measures to protect payment card data.
Frameworks and Guidelines
In addition to compliance regulations, several frameworks and industry guidelines guide organizations in implementing TPRM practices. One such framework is the National Institute of Standards and Technology (NIST) Cybersecurity Framework, which provides a set of guidelines for organizations to manage cybersecurity risk. NIST highlights the importance of assessing third-party risk as part of its guidelines.
Another framework is the ISO/IEC 27001 standard, which provides a framework for managing information security risks. ISO/IEC 27001 requires organizations to identify and mitigate risks posed by third-party vendors to their information security.
The Shared Assessment Program (SAP) is another noteworthy framework. SAP provides a standardized methodology for assessing vendors’ information security, privacy, and business resiliency. SAP also provides guidance on how to conduct assessments and continuous monitoring activities.
Third-party Audits and Assessments
Besides complying with regulations and frameworks, organizations can conduct third-party audits and assessments to manage vendor risk. These audits seek to identify and address potential third-party vulnerabilities that may affect the organization’s ability to protect its sensitive data effectively.
Audits and assessments also enable organizations to continuously assess their vendors’ security safeguards and evaluate their risks. However, before conducting third-party audits, organizations must obtain their vendors’ written consent to allow access to their systems and networks.
The ever-increasing reliance on third-party vendors means businesses must have robust TPRM programs. These programs must align with the regulatory landscape to ensure the organization meets the highest security standards while safeguarding sensitive data. To achieve this, businesses must navigate the complex regulatory environment by complying with compliance regulations, using frameworks and guidelines, and conducting third-party audits and assessments. Businesses must also continually assess their vendors’ security posture, as vendor risks can change over time.
Effectively managing third-party risk is like running a successful business; it is an ongoing process that requires constant review and improvement to stay ahead of evolving threats.
Schedule a meeting with our cybersecurity experts for additional help with TPRM: https://www.ncxgroup.com/make-your-appointment-today/.