The Third-Party Cybersecurity Problem for Financial Organizations

Today’s financial institutions are undergoing a transformation to modernize their organizations, increasingly relying on outsourcing operational tasks to third parties to increase efficiency. Many large financial organizations have extensive third-party networks that consist of numerous suppliers and vendors. In fact, Gartner found that 60% of organizations work with over 1,000 third parties, and that number will only grow as businesses become more complex.

As financial organizations continue to lean on third parties, the significance of maintaining a strong risk management plan cannot be emphasized enough to manage risks more effectively and ensure regulatory compliance. Through this approach, financial organizations can obtain a better understanding of their vulnerabilities to cyberattacks and focus remediation efforts accordingly, saving valuable resources by accurately identifying the most impactful threats.

The risk of third-party networks

Although third-party partnerships help simplify essential business functions, they also raise the stakes for financial institutions in terms of cyber risk. This can become especially complicated with so many entities and services to secure and monitor, as well as third-party organizations likely being connected to additional entities that could also be the source of cybersecurity risk. The catalog of potential security issues from third parties can be catastrophic, threatening sensitive information of both employees and customers, financial data, as well as operations within the organization's supply chain and other external entities having access to privileged systems. A report by the Ponemon Institute found that 51% of businesses have suffered a data breach caused by a third party.

To protect systems and sensitive data from third-party risks, many financial service organizations invest in assurance processes, which to varying degrees require an independent assessment of third-party cyber compliance through penetration tests or SOC 2 Type 2 certification. While this approach is practical, this type of assessment is costly, has visibility gaps, and still only represents an approximation of risk at a single point in time.

A new approach to managing third-party risk

The growing complexity of third-party networks has made gaining visibility into impact caused by vulnerabilities especially challenging, particularly for larger organizations. Financial organizations need a modern approach to cybersecurity, one that can identify, measure, prioritize and manage all risks. To create a risk-focused approach capable of combatting third-party risks, financial organizations should consider implementing a few critical strategies:

• Risk Scoring: Cyber risk scoring provides an objective framework for evaluating security posture that considers a wide range of risk factors from inside and outside an organization. By converting these evaluations into an easy-to-grasp representation of quantitative cyber risk, organizations can better understand how safe their assets are and where they need to improve.
• Vulnerability Prioritization: This strategy automatically considers threat intelligence, asset context, and attack path analysis. Organizations with complex environments and limited resources can target their effort where it matters by prioritizing and mitigating vulnerabilities that pose the most significant risk.
• Exposure Analysis: Exposure analysis identifies exploitable vulnerabilities and correlates data with an organization’s network configurations and security controls to determine if a system is vulnerable to cyberattacks. This strategy determines which attack vectors or network paths could be used to access vulnerable systems.  It also enables more granular options when a third-party poses unacceptable risk by identifying their network access points and providing a “kill switch” option to take the partner offline without affecting any other partners.

Effective cybersecurity strategies need to provide continuous assurance of third-party risks and vulnerabilities. A modern, risk-based approach to cybersecurity enables attack simulation, compliance and visibility that allow organizations to see all entry and access points and perform path and exposure analysis. By implementing a risk-based approach to cybersecurity, financial organizations can truly mitigate third-party cybersecurity risks.