Just when you thought you had a handle on your vendor management program, auditors and examiners have started inquiring about something else in recent years - your fourth-party vendors.
It can be quite confusing to figure out exactly where to draw the line on all the vendors that indirectly affect your organization. After all, each of your vendors has their own vendor inventory, known as your fourth-party vendors. Are you responsible for managing all of them? This endless web of vendors can quickly become overwhelming, so let’s break it down.
Simply put, a fourth-party vendor is also referred to as a subservice provider or subcontractor. This is a company or entity that has a direct contract with your vendor, but not with your organization. These fourth-party vendors will be included in your vendor’s SOC reports and your vendor should also identify any that are critical to their operations.
With the introduction of the SSAE 18 report in 2017, this process of identifying your fourth-party vendors is a little easier. According to the report, your third-party vendors are required to include applicable complementary subservice organization controls in their SOC reports, which effectively identifies your fourth-party vendors.
To gain a better understanding of your fourth-party vendors, answer the following questions:
By answering these questions, you’ll be better prepared for risks that may not be as apparent. For example, consider how your data might need to be shared and possibly stored in a vendor’s system in which you have no direct contract.
A data breach at this level with your fourth party can be just as impactful as a third-party data breach.
Since you don’t have a direct contract with your fourth-party vendors, it’ll be understandably difficult to obtain information about controls they have in place. Most organizations won’t share this information with other parties unless they were bound by confidentiality agreements or had solid “need to know” justification.
So, how can you comply with regulators if you don’t have the same information to assess your fourth parties? The first step is to communicate with your own critical vendors. Let them know that you’re reviewing the next level of your vendor management program and need to focus on your fourth parties.
Ask your third-party vendor to provide you the following pieces of information:
Once you have this information, review it and formulate your opinions of the risk these fourth-party vendors pose to you (not your third-party vendor). If needed, ask additional questions to ensure you understand the products or services being provided and how they can impact you.
Here are a few common situations where a fourth-party vendor may pose a risk to you:
You don’t need to be concerned about fourth parties who pose incidental risk (e.g., the third party’s vending machine company).
Don’t forget to thoroughly document your review and repeat annually. It’s also a good idea to monitor news headlines for any public information that may alert you of a breach or other potential issue with your fourth parties.
As you've learned today, fourth-party risk management can be tricky, but it's sometimes just as important as third-party risk management.