3 min read

Third-Party Vendor Risk Management for Banks & Credit Unions

Third-Party Vendor Risk Management for Banks & Credit Unions

The two largest industries affected by cybercrimes in the United States are information and finance. Of the two, the financial industry incurs the largest losses in terms of annual costs. In fact, the banking industry suffers losses on average of 18.37 million dollars annually in the U.S. alone. As a result, things like data risk assessments, IT audits, and third-party vendor risk management should be top of mind for banks and credit unions to protect data and sensitive information.

Companies working in the financial industry require vast third-party networks to do business. With that in mind, in this post, we’ll cover the best practices for your third-party vendor risk management program.

 

What is a Third-Party Risk Management Program?

A third-party risk management program, also referred to as a TPRM program, is the process of assessing, identifying, and controlling the risks that are presented throughout the relationship or lifecycle of working with third parties. This risk management process typically runs the entire course of the relationship with said third-parties from procurement to the conclusion of the offboarding process.

The reason it’s so important to assess the risks of working with third-parties is that even if a security/data breach occurs on their end, your company could be held liable for any breaches simply because you are working with them. Furthermore, as Info Security Magazine explained, “Cyber-criminals will often target suppliers and partners in order to exploit their connections to larger and more valuable targets.” 

That’s why you have to make sure that the vendors and third-parties you are working with are just as security conscious as you are.

 

Elements of an Effective TPRM Program

 

Ability to monitor third-party risk continuously

A data security breach can occur at any time. As a result, random check-ins aren’t going to cut it.

Perhaps Info Security Magazine said it best when they said, “Considering how rapidly cyber threats can emerge and evolve, the intelligence from one of these reports can become outdated in a matter of days. The implementation of new software or discovery of a new zero-day vulnerability means that a company previously rated as secure can quickly become a security liability.”

The better way is to monitor third-party vendor security at all times so that you can catch and correct issues as soon as they present themselves.

 

Regulatory Compliance is Only the Beginning

When regulatory compliance policies are implemented, banks and credit unions aren’t the only ones to learn about them. Cybercriminals are becoming more sophisticated in that they are keeping their ear to the ground for new regulatory compliance policies as well. 

They know some of the lazier companies are going to maintain the bare minimums in terms of security, so they will adapt to the new safety measures, and then work diligently to find new vulnerabilities and gaps in systems and networks to exploit.

The better way is to consistently be proactive about security. Constant testing and looking for weaknesses can help financial institutions mitigate risk more effectively.

After all, as the FDIC explained, “The board of directors and senior management of an institution are responsible for ensuring that the system of internal control operates effectively. Their responsibility cannot be delegated to others within the institution or to outside parties.”

In other words, you can outsource your services to a third-party vendor, but you cannot outsource responsibility.

 

All Vendors Should be As Security Conscious as You

It’s not enough to rely on automated vulnerability scanning or random security audits from the IT department of a third-party vendor. When a financial institution is initially seeking vendors, they should be certain that those vendors care about security just as much if not more than they do.

The better way is to vet your vendors ahead of time. Ask them about their security protocols. Find out if they are training their employees in cybersecurity and data management. If their culture doesn’t appear to be focused on locking down all aspects of their sensitive information, what makes you think they will go out of their way to protect that of your financial institution?

An additional step your institution should take if your company decides to work with a vendor is to implement a formal onboarding process as part of your third-party vendor risk management program.

As Info Security Magazine reported, “Establishing a formal onboarding process helps teams to decide whether the organization should be doing business with a third party, based on how they expose the organization to risk.”

If during the onboarding process it becomes clear that they do not have security top of mind, then it’s time to move onto another vendor.

A formal onboarding process can also help an institution have a plan for bringing additional vendors on board. For example, if you have a vetting questionnaire at the ready, you can assess whether or not working with new vendors is a good idea that much faster.

 

Don’t Risk Your Financial Institution’s Reputation or Income by Relying on Third-Party Vendor Security Practices 

The Rivial Platform provides an integrated, streamlined, and well-thought-out systematic process to assess the cybersecurity of your vendors.  To conduct an evaluation, the Rivial Platform will walk you through the list of controls and you will mark it as in place or not in place and audited or not audited. Alternatively, you can evaluate your vendors at the control category level with fully in place or not in place and fully audited or not audited. You can then view the control overview, set your risk ratings and run a report on that vendor or all your vendors.

To see the Rivial Platform live in action, watch our video demo today.

NIST CSF 2.0: Breakdown and Key Updates for Financial Institutions

NIST CSF 2.0: Breakdown and Key Updates for Financial Institutions

Originally launched in 2014 and updated in 2018. NIST CSF 2.0 (released in February 2024) builds on ten years of cybersecurity progress. It expands...

Read More
Unlocking Budget With Quantitative Risk Assessments

Unlocking Budget With Quantitative Risk Assessments

Year after year, the responsibilities of security leaders seem to grow. They must develop and implement security policies, train their organization...

Read More
ASSESSING CYBER INSURANCE FOR BANKS AND CREDIT UNIONS

ASSESSING CYBER INSURANCE FOR BANKS AND CREDIT UNIONS

Cyber insurance can't fully shield your organization from cybercrime, but it can help keep your business operations going if there's a major security...

Read More