How do you quantify the financial risk of a vendor relationship?
Vendor risk via cybersecurity exposure remains one of the largest concerns with Vendor Management program executives, even in most cases, exceeding the concern for meeting Regulatory Compliance.
Why? Because regulatory compliance exceptions are for the most part internal organization revelations and events, yet cybersecurity risk brings direct exposure to every client of the organization, eroding the public trust. And this is a trust that often cannot be recaptured; google “security breach” and you’ll find a number of retailers and organizations that know this challenge first-hand.
Vendor management is historically reactive vs. proactive
Vendor Management has historically been based upon a periodic and prescriptive methodology. Periodic in the sense that vendors were placed under the risk analysis microscope at the time they were on-boarded, contracts renewed or on a frequency-based upon a risk categorization. The movement from only a prescriptive methodology has been the rallying call of the regulatory community, touted under the banner of ‘”continuous monitoring,” which has been accelerated further by the risks exposed by COVID-19. But even with continuous monitoring, the revelation and actions to a vendor incident are reactionary.
Cybersecurity risk monitoring delivers a solution
Cybersecurity risk monitoring has moved from reactionary to predictive with the application of the Fair Institute Value at Risk (VaR) framework. This framework allows the development of a model risk analysis of financial exposure to a vendor relationship based upon the characteristics of the data in the vendor’s possession, and the measurement of the cybersecurity technical posture of the vendor’s publicly exposed presence to the web.
The difficulty with many risk models, such as the VaR framework, is the data necessary to perform an adequate evaluation. This is where emerging cybersecurity solutions have conquered the challenge of enormous data sets to provide succinct results.
Key features to look for in a cyber risk management solution
When evaluating cybersecurity risk management solutions, there are a few key features to be aware of. To ensure the most risk coverage and regulatory adherence, look for these elements in any solution:
- Analysis based upon volumes of publicly available data
- Analytics based upon accepted industry standards and measures
- Allowance for the client to adjust modeling to meet unique or specific organizational needs
- Worldwide risk unit standards
- Volume adjusted for data exposure
- Adjusted for cybersecurity technical fortification as measured by defined and defensible industry adopted measures
- Simply and adequately presented
- Ability to share with your vendor identified concern and their actions required to resolve an exposure before it becomes an incident
- Allows predictive action your organization might take to reduce risk exposure
- Allows the option to seek to ensure specified vendor risk exposure in quantified dollars
To help you build these foundational elements for successful compliance adherence, companies are turning to state-of-the-art software solutions to cost-effectively mitigate these potential risks.
Vendor Risk Management
Enterprise Risk Management
Compliance & Obligations Management
A compliance and obligations management solution, like Mitratech’s CMO offering, uses a simple, intuitive interface to let employees and auditors be proactive in incident and audit management, including Volcker Rule obligations, controls, investigations, and non-conformance reporting. Easily report incidents, understand your obligations, and continuously improve your compliance performance.