Should You Have Security Concerns When Partnering With a Third Party?
When it comes to business operations, it would be nice if we could house everything neatly under one roof. But unless you have the financial muscle of a global corporation like Ford or Amazon, it’s not always possible. As such, we may find ourselves leaning on a third party to help us, from logistics and maintenance to marketing or legal matters.
There is nothing wrong with needing this type of help, and in some ways, it’s more effective than hiring a full-time staff member, especially if you just need occasional work. Furthermore, a third party is sometimes required because what they offer is completely outside of the scope of your business.
In modern business, one of the most common ways companies work with third parties is through software-as-a-service (SaaS), with an estimated 14 billion SaaS customers worldwide. But while useful, are there any reasons not to use another business’s services? Let’s address whether companies should have any security concerns when partnering with a third party.
What is a Third-Party Service?
Simply put, using a third-party service is the act of granting another company to do work on your behalf or complement your existing working practices. When it comes to online activity, this can include major services such as Google or Zoom, but there are also more niche areas where a third-party service or an outside organization adds value to your company.
Today, businesses commonly use third parties for marketing, PR or communications but also integrate accounting software or file storage into project management systems.
Furthermore, third-party services can be offered in-house by other businesses or as an integrated and collaborative effort through cloud-based operations. From data storage to payroll, many modern businesses rely on third-party services to run efficiently and cost effectively.
How Does a Third Party Pose a Risk to Security?
A third-party company or service isn’t inherently dangerous to its clients, but there is a degree of uncertainty when partnering with one or multiple new services. While you have a great understanding of your own organization’s cybersecurity measures, it’s difficult to know how seriously another company takes theirs.
It is, therefore, a significant concern for any business partnering with a third party that the integrity of their data is upheld and adequate protections put in place. You may be entrusting a third-party service with login details or granting them the same editing power over your digital communications as your company leadership group.
Third parties may put the following at risk:
- Cybersecurity
- Business operations
- Reputation
- Finances
- Strategy and intellectual property
- Compliance and legal obligations
A failure to manage the associated risks of a third-party relationship can leave companies vulnerable to cyberattacks, and in the fallout of said attacks, legal and regulatory repercussions, reputational damage and financial suffering. Reputational damage can be devastating following a hack or data breach, and you may find yourself struggling to attract customers either because your website is being penalized or from bad reviews that can take months to counteract.
Protective Measures to Implement
Companies frequently deal with sensitive information, whether that data is for clients, employees or critical to business operations. A 2020 study discovered that if breached, 31% of organizations could face significant damage.
Given that almost one in three businesses would be impacted by a third-party breach, it’s important to make sure that you put a system in place to ensure any outside companies you partner with can be trusted with your sensitive data. Here are some fundamentals to help reduce the risk of your third-party relationship resulting in a data breach.
Do Your Due Diligence
Even if the company you have partnered with comes with a great reputation for data safety, you must hold them to the same standards as your own company. Do your research on any company you partner with, from background checks on their data safety history to asking what their security policies are.
You are well within your rights to seek assurances from any third party about their data protection measures, and any that oppose sharing that information with you may best be avoided.
What Data Regulations do They Comply With?
Companies in different countries or regions around the world must comply with different regulations, so it’s important to understand this before teaming up.
For example, in the European Union, companies must comply with the General Data Protection Regulation (GDPR), but even within Europe, some countries such as Croatia or Albania do not have to force their companies to comply. It is therefore important to ensure that if using a service from another country, they comply with the same regulations that your company follows and is held to.
Engage in Regular Security Audits
When you first partner with a third party, it is a useful endeavor to complete a security audit to give yourself the peace of mind that they will protect your company data.
We know that cybersecurity threats don’t stay the same and they continue to evolve so it’s important to also do regular security audits of your third-party services to ensure they adapt to the changing times. With hackers now using ChatGPT to help write phishing emails, companies must be more vigilant than ever regarding their security practices.
Good Password Management
Sharing your passwords with a third party may be an unavoidable consequence of using their service, but you can improve your cybersecurity defenses considerably through good password management. This means regularly changing your password, using a variety of characters, letters and numbers and including multifactor authentication to maximize security.
VPN and Data Encryption
Companies are working online more and more, with staff often based remotely and venturing into the office less often. This is great from a productivity and work-life balance point of view, but it can also pose a security problem for businesses.
When we all worked in one office, we were connected to a server locally and protected within a corporate perimeter, but now we need to connect remotely to share our work and progress.
VPNs can help to reduce the risks of security breaches, particularly when needing to share data with a third party. We can add another layer of security by using data encryption services that offer end-to-end protection, which keeps communication and information secure from one device to another.
