The Cyber Security Risks Of Outsourcing

IT outsourcing (ITO) is a major contributor to cyber security risk exposure. When organisations outsource IT needs and/or their cyber security functions, they explicitly or implicitly assume that ITO providers bear the responsibility for cyber security risk. 

In reality, ITO clients’ risk profile changes and becomes a combination of their risks and a subset of their ITO provider risks. 

Outsourcing has become an ubiquitous business process where organisations relinquish lower-value functions such as payroll or even parts of the value chain that are more central to their business processes. Whether the goal is to reduce costs, simplify operations, or enhance customer service, outsourcing can do wonders for a company. Unfortunately, it also comes with a degree of risk. 

Problems with a third-party service can cause extreme damage to an organisation’s reputation. This is particularly true when a data breach is involved.

With the main motive to outsourcing being cost reduction and specialised expertise at lower-value or peripheral functions, there is an increased risk that an enterprise’s capabilities might be exceeded by one or more of its providers in a data and intelligence driven world. 

It is increasingly hard for companies to disassociate themselves from their digitised supply chain. 

What might have started as business effective and efficient arrangement could turn into an unhealthy dependency threatening competitive advantages and strategic plans on the business level and far more critical on the cyber security level to extend to personal data loss, financial loss, compromise of product integrity or safety, or even threat to life. 

The US National Institute of Standards (NIST) considers that cyber risks associated with the loss of visibility and control over the supply chain can be significant. 

These range from the inability to define the primary source of a piece of hardware embedded in an organisation’s physical infrastructure, or the provenance and risks associated with a piece of software in the digital infrastructure, to the problem of contractors and consultants having access to its critical data and trade secrets. When outsourcing services to another company, the primary organisation will lose some control. This is the nature of outsourcing, but it becomes a problem when the third party is later found to be unreliable in some way.  Even if the third-party organisation is reputable, mistakes and failures can still occur.

Considering that outsourcing is so popular, it’s possible that the third party an organisation is using is also outsourcing. If this is the case, it’s possible that data is not only accessible to the third party but also by other parties they outsource to. This creates an even greater degree of vulnerability.

Outsourcing Risks Management

Negotiate the Right Contract:   Organisations can do a lot to reduce the risks. Setting up contractual agreement that allows for the sharing of less data is a good start. A third party doesn’t necessarily need to access an organisation’s entire database to do their job. Still, many of these vendors are often given full access to an organisation’s servers and administrative processes. Taking the time to negotiate a great contract will go a long way.

Create a Plan for Risk Management:   Cyber security will be an ongoing issue, so it’s important for organisations to have a plan in place. The plan must cover what data the third-party group can access, how to track that access, and what will happen if a breach does take place.

Inexperienced Staff:   One of the risks of outsourcing IT services is risking having inexperienced staff managing your IT. When you hire an in-house IT team, you have the benefit of interviewing and getting references for every individual on the team, however, this is only effective insofar that you have the knowledge to be able to verify new hires’ experience. 

Choosing outsourced IT services means you don’t get much insight into the team members managing your account. Instead, it’s important to verify the knowledge and experience of the outsourced IT company as a whole. Look for case studies, call references, and read online reviews.

Outsource Wisely:   Vetting third-party groups is a smart move. The vetting needs to occur before signing contracts and continue as an ongoing strategy. Carrying out independent audits of the third-party organisation’s activity will help determine if their practices are safe.

Make Sure the Third-party Representatives Have Unique Accounts:   Some organisations give their third-party vendor one single account that all representatives can access. While this might seem simple and efficient, it places the organisation’s data at great risk. A shared account can make it difficult to discover the root cause of cyber security issues. Having separate accounts will also increase security by preventing former workers from accessing the account in the event they leave the company.

Know When to Walk Away:   It takes a lot of effort to set everything up to work with a third-party group, but that doesn’t mean walking away isn’t sometimes the best option. If a third-party data breach has occurred, the management team from the primary organisation will need to determine whether moving forward together is the right move.

It’s possible that the third party wasn’t responsible for the breach. It’s also likely that after a breach, an outsourcing organisation will increase their cyber security to prevent the same thing from happening again. 

Switching to a different vendor won’t necessarily solve the issue. Nothing guarantees that the new organisation won’t also have issues with security. Leaders will need to examine all factors before making a decision.

Micheline Al Harrack / ACADEMIA:    Identity Management Institute:     Michel Benaroch / Springer:     

Netcov:     Robert Walters:     TXCPA:

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