Are you sitting on a cyber security time bomb?

With so many security breaches now being recorded, the utmost diligence must be adhered to when securing your company data.

However many companies still don’t see cyber security as a necessity.

And that is to their detriment, (but is a boon to the cyber security entrepreneur) especially if they are entrusting their data and confidential IP to their service providers.

In fact, allowing service providers to access or hold sensitive or confidential data means companies could be sitting on a cyber-security time bomb.

Ewan Ferguson is an IT governance expert from global consulting firm, Protiviti. Ferguson says, “Today, most if not all businesses outsource some of their functions – whether to a cloud technology provider, telemarketer, call centre or payment processor. And doing this involves giving some data or systems access to those third parties.

“Unfortunately, few companies fully appreciate that their service providers can be a weak link in their own data security, and routinely fail to take adequate steps to prevent their data from being compromised via an attack on their providers.

Target is one of the best known examples of a security breach with multi-million dollar ramifications.

The Target breach resulted in the theft of personal information including credit card details of 70 million customers and which cost the company upwards of US$200 million.

The attack on the retail giant was said to originate from an email phishing attack on the company’s air conditioning contractor.

“Contractors are an obvious vulnerability because they are often smaller firms with weaker security. Even some large service providers have relatively immature information security controls and practices,” Ferguson says.

“Companies often don’t monitor their partners’ or contractors’ access privileges and security processes as well as they do within their own boundaries. Add to that, the fact that outsiders often bring their own hardware and software which may be ‘contaminated’ through use on other non-secure networks – and you have a clear security exposure.

“Yet, despite these risks, companies generally aren’t focused on managing them effectively. Vendor selection is still overwhelmingly directed at cost, quality and delivery. ‘Risk’ is only a minor after-thought.

“You can outsource your business functions but you cannot outsource your legal obligations to protect sensitive corporate and customer data. The only way to manage this is by exercising better control over your service provider relationships”.

The problem is every business has third party arrangements, so how do you manage them to ensure your security?

“It is best practice to establish a centralised function to manage third party relationship risks,” Ferguson says.

“This is generally the best way to get complete visibility of everyone the company deals with and to prevent individual teams from establishing relationships that fall under the radar. The office should take stock of all existing partners, associates and suppliers and gain an understanding of who has access to what data. There should also be a process to ‘red flag’ and manage parties requiring closer oversight based on criteria such as the sensitivity of the data they hold and the strength of their IT security and controls”.

Third party control is an ongoing process and risk management processes should be front of mind – with exit strategies included.

The message is to build a watertight contract.

“The contract might require your third parties to have appropriate data security controls, agree to periodic auditing and oblige them to notify you when they have suffered a breach. And to prevent your data from being sent offshore without your knowledge which can create data sovereignty issues, you should specify that your data must be held in Australia or a specific location that you agree to and understand the risks inherent in that location,” Ferguson says.

“Naturally, throughout the life of the relationship there should also be ongoing monitoring, reporting and follow-up of any security concerns that arise. And when it’s finally time for the parties to go their separate ways, there should be a termination process to govern how the function is discontinued, potentially transitioned to another provider, and how any residual data is to be dealt with.”

A Protiviti Survey of Executive Perspectives on Top Risks for 2015 found that cyber-security ranked among the top three business risks for senior executives and board members.

“Companies are well-aware of the magnitude of the cyber risk problem and understand that no business today is immune. In this climate, we are seeing that service providers who can demonstrate they have good data security have a clear competitive advantage when pitching for new work.

“What’s more, with the federal government poised to introduce new legislation making it mandatory for companies which have suffered a serious data breach to notify the Privacy Commissioner and all affected individuals of the breach, it’s more important than ever to select service providers with strong data security and breach identification processes since the notification obligation applies regardless of whether the company suffers the breach directly or via a third party.”

Ferguson says cyber-security defences are only as strong as the weakest link in the supplier chain. So it’s down to you to take a proactive approach to your security.

Protiviti’s Tips for good third party risk management

• Know your third parties, what they are doing with your data and where they are processing or storing it
• Keep a central inventory of all your third parties
• Triage your suppliers to make sure you devote the most effort and scrutiny to those with the highest risks
• Review existing contracts with a view to reducing your cyber-security risks
• Renegotiate contract terms if necessary to boost safeguards and enhance your rights and remedies against a breach
• Remember that third-party risk management is an ongoing process requiring periodic monitoring over the life of the relationship
• A proactive risk assessment of the third-party before you engage their services and then periodically throughout the relationship is ideal practice.