Showing posts with label technological advances. Show all posts
Showing posts with label technological advances. Show all posts

Wednesday, May 4, 2016

Third party management


Introduction

In favor of focusing and specializing on core competencies, most businesses nowadays are increasingly and heavily relying on third parties to support their businesses by outsourcing great amount of their activities such as IT support, software development, data hosting, physical security, cleaning services, heating and air conditioning, and thus subcontracting with external suppliers and service providers which are estimably responsible for driving around two-thirds of total revenue and often offer better services at low-costs. This tendency is generating numerous critical business partnerships and requires adequate control and oversight.

Third party management is the process of monitoring and managing business collaboration with external parties such as vendors, manufacturers, suppliers, partners, distributors, resellers, cleaning and security services, etc. the process is established by managing information, measuring performance, assessing risks, binding to contractual agreements and compiling to regulations.

Third party related risks

Studies revealed that the majority of recent security breaches occur as a result of third parties. Indeed, when organizations rely on third parties, their exposure to risk enlarges. If for instance a trusted vendor has deployed but poorly maintained an anti-malware software, it might end up in a massive cyber-attacks as his network gets compromised. A non-critical but trusted service provider such as an air conditioning contractor who is insecurely connected to the organization’s internal network for data synchronization or billing purposes should be then considered a high risk source. If an organization outsources the software development to a third party, he by then raises a significant risk if he closes down while the organization do not have the appropriate talent, documentation, tools or the source code itself to carry on the development and support activities.

The role or size of the third party is not as important as the nature of the relationship, the criticality of its activities, the level of access to sensitive data or property, and the organization’s liability for inappropriate behavior of its third parties. A cleaning company with access to a director's office represents a different but still significant risk relative to a supplier who provides a critical component to the production line.

When transferring operations and assets to third parties whom should be better in performance using adequate expertise and resources, businesses still assume the responsibility if any risks were to occur, combined from the likelihood of harmful events occurring and the consequence of harm, as risks remain relevant despite the fact that these operations and assets are out of the organization’s direct oversight which makes a higher burden for them to manage.

Third party risk management

Studies revealed that organizations tend to forget contracts once they’re signed, only 20% of organizations are actually including their third parties in their assessment scope.

Managing third parties is often challenging, complex and hard thus poorly addressed in most organizations, some related challenges are listed below
  • Responsibility for risk - it’s frequently unclean within organizations who is, and how they’re managing the individual or the overall third party relationships;
  • Reactive handling of risk - unless a critical issues surface and associated risks arise, organizations tend to ignore addressing third party risks;
  • Ignorance of risk factors - organization tend to prioritize third parties based on quality, cost and delivery time, assessing and managing related potential impacts and risks are often forgotten or ignored;
  • Integrity risk - if’s often hard to assure the transparency and honesty of third parties, any provided data are questionable in term of accuracy and completeness;
  • Contractual terms - contract terms are often underestimated, important factors such as right to audit, pricing changes due to taxes or discounts, timing, consequences of short and long term contracts are often ignored. Organizations lean toward standard and outdated outsourcing contract templates which do not cover recent business landscape changes and emerging technologies.
In assessing third parties, risk practitioners should consider wide range of potential risks, these risks can be grouped into the following categories
  • Financial risks - such as changes in currency rate, loss of product value, losses in market share;
  • Information risks - such as data breaches, data disclosure, data unavailability, data loss, data destruction, unauthorized access;
  • Integrity risks - such as fraud, conflicts of interest, damage of reputation;
  • Compliance risks – such as non-compliance to regulations, operating without licenses;
  • Operational risks - such as systems failures, supply chain disruptions, employees’ skills, employee’s turnover;
  • Strategic risks - such as poor business decisions, inadequate resource allocation, industry recession;
  • Technology risks - such as changing business landscape; outdated hardware, software malfunction, malware infection, denial of service, email phishing, human errors.
To overcome such threats and risks, risk practitioner should make sure to cover aspects such as
  • Outsourcing process - inventory, prioritization and selection of third parties, oversight activities, performance measurement, communication channels;
  • Business management - leadership, liability, trust, transparency, processes efficiency;
  • Information security - complying to security requirements, implementation of security controls, planning business continuity and disaster recovery, protection of intellectual property, adherence to a non-disclosure agreement (NDA);
  • Risk inventory - knowledge of exposed threats, inherent vulnerabilities, potential adverse impacts, and supposed risk scenarios
  • Contractual agreement - conforming to service-level agreement (SLA), enforcement of contract terms, constant contracts revision;
  • Regulatory compliance - conformance to relevant regulations, adoption of best practices; 
  • Assessment and auditing - right to audit, periodic risk assessments, internal auditing;
  • Ongoing monitoring - internal controls monitoring, independent and on-site reviews, reporting non-compliance.

Conclusion

In today’s world, doing business means relying on some third parties which exposes the business to significant risks. Hence, businesses should have a clear understanding of the inherent risks in their relationship with third parties. As risks continue to rise due to emerging technologies and market trends; organizations should not only establish comprehensive contractual agreements with third parties which is a step in the right direction but improve and strengthen their relationship and emphasize proactive third party risk management and make it one of main organization's goals and objectives.

Saturday, April 30, 2016

Technological advances



Introduction

Although technology is shifting the way organizations interacting, communicating and sharing information by enabling them to access, use and manage information anywhere at any time, emerging technologies such as smart devices, IoT, social media, cloud computing, big data and cyber security are driving change and innovation across all markets and industries.

In this rapid changing business landscape, organizations are engaging in a widespread adoption and integration of these technologies into their business as they offer the advantages of increasing productivity, operating more efficiently, enhancing communications, increasing mobility, better information handling and sharing, ensuring safer and healthier working environment…etc. thus generating economic benefits such as penetrating new markets and making more revenues in shorter period of times.

Since these technologies are breaking down the barriers of the traditional offices and defeating the old IT risk model, IT risk programs must expand and adapt to meet these challenges.

New technology risks

In recent years, organizations are often blindly embracing new technologies and creating new underlining risks by heavily investing massive resources in adopting new IT infrastructures with the associated cost in upgrading old systems following venders’ advertised or promised features of their products/services and the organizations’ own overstated assumptions regarding presumed performance and efficiency of these products/services without prior and detailed study and analysis.

Moreover, security related requirements are frequently overlooked in pursuit of willingness to deploy unconfirmed technologies which ultimately exposes the organizations to great and unknown risks while in reality bringing low added value that fails to meet their strategic objectives and stockholders’ expectations.

Organizations data is becoming available online, universally shared via social media, through variety of cloud platforms and devices such as smartphones, laptops and tablets. Thus enables data to be stored in low secured devices and exposed to a huge risk universe.

Organizations failed to oversight and support changing business landscape may endure severe market share losses. As emerging technologies are generating more market competitions with small entities whom are easily emerging and offering similar or better products/services in lower costs, organizations incapable of watching, adapting and constantly renewing their products/services to new market and technology trends find their business portfolio obsolete as their products/services are quickly becoming outdated.

Organizations are also challenged in either investing and offering training to current staff or hiring high payed talents as well as funding research and development initiatives to keep pace with these technologies.

Managing emerging risks 

Organizations should be primarily concerned by addressing current technology issues and cautioned about adopting emerging technologies. Unless they have a clearer understanding of the associated opportunities and risks, by then they can devote the attention and resources toward adopting these technologies.

Organizations need to build a foresight capacity that allow them to quickly respond to future challenges and uncertainties by adopting appropriate approaches such as Delphi Method, Horizon Scanning and Trend Impact Analysis that help them adopt emerging technologies, assess their trends in the long-term, comprehend related knowledge, develop corresponding risk indicators to watch the outcomes, and understand the potential benefits behind these technologies.

Organizations’ appetite in embracing changing and evolving technologies should be clearly defined by justifying the purposes to acquiring them, considering the expected added value, and understanding the potential risks they came up with. This in turn, enhance their ability to develop suitable controls such as plans, policies and procedures to manage the associated risks and train staff for adequate use of these technologies.

While organizations should limit the attitude and desire of acquiring new technologies just of the sake of getting them without actual need or clear return on investment. In the other hand, organizations should be keen to evaluate and review emerging technologies in order to implement suitable security controls as soon as they are appointed and validated via a proper change control process before putting them into production which reducing the misuse of unapproved but desired technologies.

Conclusion

The growing use of emerging technologies has introduced a higher threat of IT security breaches, misuse of customer data, and reputational damage. Understanding the threats that can emerge from these technologies is critical to avoid potentially catastrophic consequences.

As these technologies are disruption and threatening business models, organizations needs to keep pace with technology advances and scientific innovations, while they should always focus to stay ahead of the evolving industry, market and technology trends, their strategic vision should be aligned toward a thoughtfulness embracing of these trends, they should consider investing in related research and development efforts, they should also prevent in the same time the misuse of these new technologies by improving communication channels and cultivating awareness among staff.