Comprehensive Vendor Risk Management (VRM): How to Conduct a Cyber Security Risk Assessment

Blog post Zachary Jarvinen 2021-02-26

Third-party vendors play a crucial role in keeping businesses competitive and profitable, so much so that modern-day companies cannot survive without partnerships with vendors. For a productive collaboration, vendors are given access to the company’s network, data, and other digital assets. That means your vendors are directly connected to your business.

While third-parties help keep your organization efficient and operational, they expose it to security risks. Malicious actors are always on the lookout to target your organization. They may capitalize on your vendors' security loopholes and vulnerabilities to get access to your networks and critical data. And when a breach occurs, your company has to bear the brunt on all frontiers - reputational, regulatory, financial, legal, and business continuity.

Case in point: The Massive SolarWinds Hack

The good news is that Vendor Risk Management (VRM) can help you reduce third-party security risks. VRM deals with the monitoring and managing of risks associated with your vendors and IT products and service providers.

Comprehensive VRM programs identify and mitigate the risks of potential data breaches, security threats, and cyber-attacks that could disrupt your business operations.

But where do you get the key inputs for your VRM plan? This is where a cyber security risk assessment enters the scene. It provides the crucial inputs for building a comprehensive and robust VRM plan.

Importance of Cyber Security Risk Assessments

A cybersecurity risk assessment involves identifying, evaluating, and treating security risks and organizational vulnerabilities and weaknesses. Risk assessment helps protect your business from possible cyberattacks, besides lifting the security levels for your critical data.

Risk assessments also create awareness among your employees, so they can take cybersecurity seriously. It educates them about the threats your business may face, how and where those threats may emanate, and what they can do to prevent or reduce the risks.

How to Conduct a Cyber Security Risk Assessment: Step-by-Step Guide

Before starting a cybersecurity risk assessment, you must know what data you have, where it is located, and how crucial it is for your company. You must also know the IT infrastructure and digital assets your organization relies on.

Second, you would want to set the framework and specifications for your assessment. That means you have to know the reason for the evaluation, define its scope, prioritize data, identify constraints, and know the risk model currently being used by the company.

Here’s the approach you can take to undertake a cyber security risk assessment:

Step 1: Ascertain the Value of Data

Risk assessment ideally starts with separating the crucial data from the less important one. That’s because the evaluation itself will not come cheap. The risk assessment has to cover your critical and most valuable data.

The importance of a piece of information can only be ascertained in light of its asset value and legal standing. Some questions that you can ask to define the value of the information include:

  1. Do competing businesses value this information?
  2. If the data is leaked, could it result in reputational damage?
  3. What impact could a breach of this information have on the business’s overall profitability, including day-to-day operations?
  4. What were the costs associated with creating this information? Can it be done again?

After identifying the most critical data and information, you can go to the next step in the assessment process.

Step 2: Identify, Evaluate, and Prioritize Assets

Without knowing your assets, you can’t evaluate and set the assessment’s extent. You wouldn’t want to assess each piece of an asset because not every asset is critical for cybersecurity.

You have to first identify and create a list of the crucial assets, such as software, hardware, data, interface, support personnel, security policies, IT architecture, and more. What assets are valuable to a particular business depends on the type of information they store.

Step 3: Determine Cyber Security Risks

This is where you determine the potential cyber threats your business may face. These threats exist in the form of vulnerabilities and loopholes in your IT infrastructure, systems, software, and technologies that cybercriminals can exploit to steal your data or harm your business.

Hacking, password theft, DDoS attacks, traffic interception, malware, and SQL injection are the most common risks out there. But there are others, such as human error, that often go ignored.

You never know when an unsuspecting employee may accidentally click on a malware link and expose their device and your organization to a threat. Or they could fall victim to a phishing scam.

While your employees' devices need to have strong security controls, it is equally important to educate them about such threats. By being aware, they will be more cautious.

System failures also pose a severe risk. Unless your systems are running on high-quality equipment, they are exposed to threats.

Next, you have to determine the security risks presented by your third-party vendors. There is no telling when a vendor or supplier may misuse your critical data or when malicious actors would use your vendors to steal your data or launch attacks.

Step 4: Identify Weaknesses and Loopholes

After identifying the threats, you have to determine your organizational vulnerabilities. Knowing your weaknesses and security loopholes will help you predict what sort of breach could happen. You can find these vulnerabilities through audits, vulnerability analysis, and software security analysis.

Step 5: Inspect Existing Controls and Execute New Controls

Analyze the current controls to determine whether they’re robust enough to prevent potential breaches. If the controls are not strong enough, you could implement new technical controls, such as encryption, two-factor authentication, patching, and auto-updates. You can also execute non-technical control like new security policies.

Step 6: Determine the Possibility and Impact of Attacks

In this step, you have to determine the likelihood of cyber attacks and their repercussions. What would be the economic effects of a specific data breach? Regulatory penalties? Legal impact and cost? Reputational damage? Business downtime?

Assign each of these possible damages monetary values and use the input to determine a budget to mitigate each of the identified threats.

Step 7: Define Actions

Depending on the risk levels and priorities, define specific actions for the responsible employees to prevent the threats. High-level threats require quick actions, whereas, for medium-level risks, you could set a timeline to execute security measures. And when it comes to low-level risks, you could leave it to the responsible individual to use their best judgment to accept or mitigate the threat.

Why use CENTRL’s Vendor and Cyber Security Risk Assessment Platform?

Doing manual risk assessments can be labor-intensive, time-consuming, costly, and less effective. CENTRL’s vendor risk assessment and management software (Vendor360) allows you to automate the process of risk identification, examination, and mitigation.

Our modern, cloud-based platform streamlines cybersecurity risk assessments. You can use it to develop an assessment template for repeatable use with a complete customization option.

Schedule a LIVE DEMO with one of our experts or learn more about Vendor360.

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