Next-Level Strategies for an Efficient Third-Party Due Diligence Process

4 minute read

January 2023

by Julia Winer

How to Optimize Third-Party Due Diligence for Cybersecurity 

According to IBM’s Cost of a Data Breach Report, the average data breach cost the targeted organization $4.35 million in 2022. With so many breaches originating from an organization’s business partners – third parties, vendors, suppliers and service partners – it’s never been more important to implement strong pre- and post-contract due diligence that focuses on cybersecurity. 

In this post, we’ll walk you through advanced due diligence scoping strategies that you can leverage to mature your third-party risk management (TPRM) program and protect against cyber threats to the vendor ecosystem. These next-level strategies will create an effective, efficient process to onboard vendors and assess them on a periodic basis. 

1. Understand Your Internal Cybersecurity Controls

Third-party cybersecurity is an extension of your organization’s internal cyber posture, meaning you can only have a strong grasp on your third-party risk if you understand how it aligns with your internal controls. It’s important that TPRM professionals maintain regular communication with internal cybersecurity personnel, so both units understand the others’ vulnerabilities and take action to guard against them.  

Analyzing your internal cybersecurity posture is a useful way to determine which controls your organization should evaluate in your vendor ecosystem. In third-party cybersecurity, your internal controls act as a checklist when assessing your vendors and suppliers. 

2. Scope Third-Party Questionnaires Based on Cybersecurity Controls

By working with the cybersecurity team on external control requirements, you are primed to achieve greater scope efficiency, meaning you know which questions will provide direct insight into your organization’s risk. The next step is to scope your assessments to ensure both rigorous vendor screening and operational efficiency. 

When building vendor assessment questionnaires, one key consideration is a vendor’s data and/or systems access. A vendor that doesn’t have access to company networks or data doesn’t demand the same precision as one who does. Building assessments for vendors at multiple levels of access will reduce vendor fatigue and make it easier to standardize risk scores across vendors. 

You should also customize your assessments to include domain-specific regulatory guidelines. For example, an overseas third-party supplier might require ABAC and ESG compliance, where a healthcare vendor must be HIPAAcompliant.  

Finally, it is important to consider your internal controls when scoping assessments. By aligning your questions to the regulations and standards included in your control library, like NIST CSF, SOC II, PCI, GDPR, you can ensure that each question asked is meaningfully related to your organization’s risk posture. 

 Some common cybersecurity controls to consider when conducting due diligence are: 

  • Two-factor authentication  
  • Password protection 
  • Cloud storage security 
  • Development, security, and operations practices

When you scope your third-party questionnaires based on your controls, you prioritize across the full cyber landscape. Additionally, you enhance your visibility into internal and external control effectiveness. 

3. Relate Third-Party Responses to Your Control Maturity and Effectiveness

If you’re seeking to optimize your third-party risk management program, it is imperative that you pass your external control effectiveness data to the cybersecurity team, who will incorporate those scores into your organization’s overall control effectiveness metrics. 

For example, if you are evaluating your payment processing provider, you will need to validate their controls based on the access level they have. The regulatory guidelines used for data access control can be found in the GOV-01 – Security & Privacy Governance Program, which is provided by the United States federal government. For vetting a potential vendor, it suggests you ascertain risk exposure by asking: 

Does the organization staff a function to centrally-govern cybersecurity and privacy controls?
5 – Continuously Improving
4 – Quantitatively Controlled
3 – Well-Defined
2 – Planned & Tracked
1 – No 

The external control effectiveness rating can then be assigned based on the vendor’s response. 

Once you have a total risk score calculated, vendors can be sorted into tiers based on overall risk criticality. This provides a seamless way to assess vendors and mitigate risk by priority, directing your resources where they’ll be most effective. Additionally, your vendors’ control effectiveness ratings impact your organization’s overall control effectiveness. If your vendors’ aggregated rating is lower than your organization’s score for a particular control, then your score is reduced as well, meaning external control analysis is essential to understanding your organization’s security posture. 

Winning the Game of Cybersecurity 

The due diligence strategies above are a must-have in any cybersecurity and third-party risk toolbox. By properly scoping each project vendor, supplier and third-party to assess their controls, you gain a holistic sense of your cybersecurity effectiveness. However, implementing these strategies can be difficult in manual processes. 

Fortunately, automation is here to help. ProcessUnity Vendor Risk Management automatically builds and scopes vendor risk assessments, allowing you to focus on higher-level due diligence practices. Click here to see the platform live. 

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About Us

ProcessUnity is the Third-Party Risk Management (TPRM) company. Our software platforms and data services protect customers from cybersecurity threats, breaches, and outages that originate from their ever-growing ecosystem of business partners. By combining the world’s largest third-party risk data exchange, the leading TPRM workflow platform, and powerful artificial intelligence, ProcessUnity extends third-party risk, procurement, and cybersecurity teams so they can cover their entire vendor portfolio. With ProcessUnity, organizations of all sizes reduce assessment work while improving quality, securing intellectual property and customer data so business operations continue to operate uninterrupted.