The Conundrum of Handling the Challenge of Third-Party Digital Risk Management (Part 2)

ADDRESSING THE CHALLENGE OF CONTINUALLY MITIGATING DIGITAL RISK

Within the blog post series, “The Conundrum of Handling the Challenge of Third-Party Digital Risk Management”, this week we will visit the matter, “Addressing the Challenge of Continually Mitigating Digital Risk”, after addressing the different angels of the “Problem Statement” in the previous blog post within this series. Largely, we will address the ever-increasing criticality of managing and following the evolution of digital risk and provide ideas and insights as to how organizations can start to position themselves when it comes to mitigating digital risk with high complexity.

A starting point towards addressing third-party digital risk includes incumbent digital risk process analysis, which may result in significant process uplift, mitigation reinforcement, and increasing protection. Direct consequences might be that risk types that may be accepted or not reflect internal risk appetite and tolerance, and those in parallel risk posed by the supply chain are not yet sufficiently aligned with internal preparedness, prevention, and mitigation to shield overall business performance impact. Thus, the need for newly developed processes will require specific strategic and operational digital risk alignment vs. KPIs, KRIs, and key business objectives to ensure that efficient KPI and scorecard control link directly with the implementation of performance management.

Furthermore, external digital risk management tools can strengthen protection, providing integrated real-time views of digital risk exposure. Specifically, tailored digital risk advisory and integration services can also help automate end-to-end processes for information gathering, real-time monitoring, digital risk compliance and control assessments, and risk mitigation.

Thus, the business criticality of achieving solid digital risk process implementation hinges on the mentioned incumbent risk process analysis and results in that the wider organization can collectively become more conscientious and prepared by implementing a digital risk management transformation primarily based on:

• Develop a qualitative and quantified overview of the organization’s strategic assets
• Identify which digital risks pertain to strategic assets and their dependency and interfaces toward third parties
• Establishment of internal digital risk tolerance and acceptance criteria
• Establishment of digital risk rating methodology
• Establish internal security supervision processes that also fully consider third-party interfaces
• Establishment of dedicated steering mechanisms, such as mandatory escalation guidelines and governance rules, providing the proper basis and focus for active digital risk management
• Top management articulates third-party digital risk management as a formal stand-alone or operational KPI to cascade implementation to appropriate levels of the broader organization.
• Systematically include and embed digital risk in the organization’s annual target-setting exercise as an additional critical measure to secure traction on required implementation and follow-up on the broader organization 
• Digital risk assurance via external certifications (e.g., ISO27001), certification, audits (e.g., SOC 2 reports), security testing, etc.