Addressing 2.5 Party Risk in the Era of Outsourcing and Remote Work

Introduction

Remote work and outsourcing is no longer just a trend, but a reality. Yet you can control remote work of your employees, how would

you control the remote work of your vendors…and their vendors?

As smaller outsourcing companies (2.5 parties) become more prevalent, should they be viewed with the same scrutiny as large third-party suppliers? Whether they’re engaged for budget reduction or one-time projects, learn how to adapt your security posture to include 2.5 PRM as a crucial component.

As we move away from traditional business models, what are the best practices to protect against these emerging risks?

2.5 Party Risk – A new buzzword! What is this actually?

2.5 Party Risk (Management) – 2.5 PRM is an emerging concept in cybersecurity. It addresses extended workplace risks induced by remote work and outsourcing. And especially outsourcing to small vendor companies. We are witnessing an increasing portion of the workforce operating from home. We can also evidence businesses entrusting many functions to third parties, including SMB outsourcing firms, it emphasizes the need to safeguard security in outsourced operations. This evolving topic recognizes the potential threats posed by these extended workplace and function models and the necessity to formulate new security strategies to mitigate risks effectively.

2.5-party risk refers to the increased vulnerability organizations face when engaging with small and less secure vendors, who themselves rely on other external service providers. These smaller vendors may lack robust cybersecurity measures, making them attractive targets for attackers seeking entry into larger networks. As a result, the risk extends beyond the immediate third-party relationship.

Challenges in Addressing 2.5-Party Risk

Outsourcing to small and probably insecure companies adds complexity to the already challenging task of managing third-party risk. Many suppliers and contractors, especially smaller ones may not have adequate security measures in place. These suppliers, aka 2.5 parties, are often engaged for budget reduction or one-time projects, but they can pose significant risks to the security of the extended workplace. For instance, hackers can use them as entry points to access the data and systems of their clients, or they can compromise their services or products to deliver malicious code or content.

Here are some specific 2.5-Party challenges that cybersecurity experts must take into account:

1. Limited Resources and Expertise

Small companies may lack dedicated cybersecurity teams or have limited resources to invest in robust security measures. This increases the likelihood of vulnerabilities and weaknesses that attackers can exploit.

2. Dependency on Additional Third-Parties

Smaller vendors may rely on multiple external often free services to fulfill their obligations. Each additional party in the chain represents an added level of risk, potentially compromising the security of the entire ecosystem.

3. Lack of Visibility and Control

When outsourcing to small and insecure companies, organizations often have limited visibility into the security practices of the vendor’s sub-contractors or partners. This lack of control makes it challenging to ensure the overall security posture of the ecosystem. This means the lack of control over the devices and networks used by 2.5 party employees, contractors and associates. When they use unsecured networks, such as public WiFi, free file transfer services and personal laptops shared with family members to perform their jobs, they create huge cybersecurity gaps that can be overlooked and easily exploited by hackers. For example, hackers can use ransomware to lock or block access to data or devices, phishing emails to trick into revealing sensitive information, or password cracking tools to guess login credentials.

How to Manage 2.5 Party Risks?

Despite the inherent challenges, cybersecurity experts can employ several strategies to address and mitigate 2.5-party risk effectively. Here are key steps to consider:

1. Rigorous Vendor Selection Process

Prioritize due diligence in the vendor selection process. Conduct thorough assessments of potential vendors’ security practices, certifications, and compliance with industry standards. Utilize risk assessment frameworks, such as NIST’s Cybersecurity Framework or ISO/IEC 27001, to evaluate a vendor’s preparedness.

2. Robust Contractual Obligations

Establish clear security requirements within contractual agreements. Define expectations around data protection, access controls, incident response protocols, and compliance with relevant regulations. Include provisions for regular security audits and reporting, ensuring transparency and accountability.

3. Continuous Monitoring and Assessment

Implement ongoing monitoring and assessment of the vendor’s security practices. Regularly conduct vulnerability scans and penetration tests on the vendor’s systems and networks. Employ IDS/IPS to detect and respond to suspicious activities promptly.

4. Require Subcontractor Due Diligence

Mandate that vendors provide transparency regarding their subcontractors or partners. Request information about their security practices and ensure they align with your organization’s risk tolerance. Engage in direct conversations with these sub-contractors to gain a better understanding of their security controls.

5. Effective Communication and Collaboration

Establish open lines of communication with vendors to foster a collaborative approach to security. Share threat intelligence and security best practices. Conduct joint tabletop exercises or simulated incident response drills to test the efficacy of the vendor’s security measures.

6. Periodic Security Reviews

Regularly review and update the security posture of your vendors. Perform periodic security audits, keeping in mind the ever-evolving threat landscape. Revisit contracts and agreements to ensure they address emerging risks and align with industry standards.

7. Incident Response Planning

Develop a robust incident response plan that includes specific protocols for addressing security incidents involving third-party vendors. Ensure that the plan covers the coordination and collaboration between your organization, the vendor, and any other involved parties.

8. Data Protection Measures

Implement strong encryption protocols for sensitive data shared with third-party vendors. Apply data minimization principles by providing vendors with only the necessary information required to perform their services. Regularly review access controls and permissions to ensure they align with the principle of least privilege.

Conclusion

In conclusion, addressing 2.5 party risk is a complex but necessary task, which must not be neglected. This requires a proactive and comprehensive approach. By implementing rigorous vendor selection processes, establishing robust contractual obligations, continuous monitoring, and fostering effective collaboration, cybersecurity experts can minimize the vulnerabilities introduced by these partnerships. It is crucial to recognize the evolving threat landscape and adapt strategies accordingly to ensure the security of sensitive data and maintain a resilient cybersecurity posture.

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