Managing ICT Third-Party Risks In DORA

by Sneha Naskar

Today's organizations, wanting to maximize modern technical capabilities, cut expenses, and improve operational efficiency, are depending more and more on outside ICT (information and communication technology) service providers in the digital age. But this reliance also brings with it a number of hazards, such as operational interruptions, data breaches, and infractions of compliance. Effective risk management is essential to preserving the availability, confidentiality, and integrity of information systems. This blog examines risk management techniques and legal frameworks pertaining to outside ICT service providers.

Strategies for Managing Third-Party ICT Risks

Understanding Third-Party ICT Risks

Third-party ICT risks arise from the potential vulnerabilities and threats introduced by external service providers. These risks can be broadly categorized into several areas:

  • Cybersecurity Risks: Third-party providers may be targets of cyber-attacks, which can lead to data breaches or unauthorized access to sensitive information.
  • Compliance Risks: Organizations must ensure that third-party providers comply with relevant laws, regulations, and industry standards.
  • Operational Risks: Service disruptions or failures on the part of third-party providers can impact an organization's operations and service delivery.
  • Financial Risks: Financial instability or failure of a third-party provider can affect the continuity of services.
  • Reputational Risks: Issues with third-party providers, such as data breaches or poor service quality, can harm an organization's reputation.

Strategies For Managing Third-Party ICT Risks

Effectively managing third-party ICT risks requires a multi-faceted approach that includes comprehensive risk assessments, robust contractual agreements, continuous monitoring, and incident response planning. Here are key strategies to consider:

1. Comprehensive Risk Assessments

Conducting thorough risk assessments is the foundation of effective third-party risk management. This involves:

  • Identifying Critical Third Parties: Identifying which third-party providers have access to sensitive data or play critical roles in operations.
  • Evaluating Risks: Assessing the potential risks associated with each third-party provider, including cybersecurity, compliance, operational, financial, and reputational risks.
  • Due Diligence: Conducting due diligence to evaluate the security posture and compliance status of third-party providers. This may include reviewing security certifications, conducting audits, and assessing financial stability.

2. Robust Contractual Agreements

Formal agreements with third-party providers are essential for defining expectations, responsibilities, and security requirements. Key elements of robust contractual agreements include:

  • Data Protection Clauses: Including specific clauses that outline data protection obligations, such as data handling, storage, and transmission practices.
  • Compliance Requirements: Mandating compliance with relevant laws, regulations, and industry standards.
  • Security Controls: Specifying required security controls and practices, such as encryption, access controls, and incident response procedures.
  • Audit Rights: Granting the organization the right to conduct regular audits and assessments of the third-party provider's security practices.
  • Termination Clauses: Including provisions for contract termination in case of non-compliance or security breaches.

3. Continuous Monitoring and Auditing

Continuous monitoring and auditing are critical for ensuring that third-party providers maintain the required security posture and compliance status. This involves:

  • Regular Audits: Conduct regular audits of third-party providers to assess their compliance with contractual and regulatory requirements.
  • Continuous Monitoring: Implementing continuous monitoring tools and processes to detect and respond to potential security incidents involving third-party providers.
  • Performance Metrics: Establishing performance metrics and key performance indicators (KPIs) to evaluate the ongoing performance of third-party providers.
  • Third-Party Risk Management Tools: Utilizing third-party risk management tools and platforms to automate and streamline monitoring and assessment processes.
DORA Compliance Framework

4. Incident Response and Contingency Planning

Effective incident response and contingency planning are crucial for mitigating the impact of security incidents involving third-party providers. Key components include:

  • Incident Response Plans: Developing and implementing incident response plans that outline procedures for addressing security incidents involving third-party providers.
  • Communication Protocols: Establishing clear communication protocols for notifying relevant stakeholders, including third-party providers, in case of a security incident.
  • Contingency Plans: Creating contingency plans to ensure business continuity in case of a disruption caused by a third-party provider.
  • Regular Drills: Conducting regular incident response drills and exercises to test the effectiveness of incident response and contingency plans.

5. Training and Awareness

Training and awareness programs are essential for ensuring that employees and third-party providers understand their roles and responsibilities in managing third-party risks. This involves:

  • Employee Training: Providing regular training sessions for employees on third-party risk management, data protection, and cybersecurity best practices.
  • Third-Party Training: Ensuring that third-party providers receive training on the organization's security policies, procedures, and compliance requirements.
  • Awareness Campaigns: Conducting awareness campaigns to promote a culture of security and risk management throughout the organization and among third-party providers.

6. Risk Mitigation Strategies

Implementing risk mitigation strategies can help reduce the likelihood and impact of third-party risks. Key strategies include:

  • Access Controls: Implementing strict access controls to limit third-party access to sensitive data and systems.
  • Encryption: Ensuring that sensitive data shared with or accessed by third-party providers is encrypted both in transit and at rest.
  • Segmentation: Segmenting networks and systems to limit the potential impact of a security breach involving a third-party provider.
  • Insurance: Obtaining cyber insurance to cover potential losses and liabilities resulting from third-party security incidents.
DORA Compliance Framework

Regulatory Frameworks And Standards

Several regulatory frameworks and standards guide organizations in managing third-party ICT risks. These frameworks emphasize the importance of due diligence, ongoing monitoring, and comprehensive risk management practices.

General Data Protection Regulation (GDPR)

The GDPR imposes strict requirements on organizations to protect personal data. Key provisions relevant to third-party risk management include:

  • Data Processing Agreements: Organizations must have formal agreements with third-party processors outlining data protection obligations.
  • Due Diligence: Organizations must conduct due diligence to ensure third-party providers comply with GDPR requirements.
  • Accountability: Organizations remain accountable for data protection, even when outsourcing to third parties.

National Institute of Standards and Technology (NIST)

NIST provides a comprehensive framework for managing cybersecurity risks, including those associated with third-party providers. Key guidelines include:

  • Risk Assessment: Conducting regular risk assessments to identify and mitigate third-party risks.
  • Continuous Monitoring: Implementing continuous monitoring processes to detect and respond to third-party-related security incidents.
  • Supply Chain Risk Management: Establishing a robust supply chain risk management program to manage risks throughout the supply chain.

ISO 27001

ISO 27001 is an international standard for information security management. It provides a framework for managing third-party risks through:

  • Supplier Relationships: Establishing policies and procedures for managing supplier relationships, including risk assessments and contractual agreements.
  • Security Controls: Implementing security controls to protect information assets shared with or accessed by third-party providers.
  • Continuous Improvement: Regularly reviewing and improving third-party risk management practices.

Financial Industry Regulatory Authority (FINRA)

FINRA regulates the financial industry in the United States and provides guidelines for managing third-party risks. Key aspects include:

  • Vendor Due Diligence: Conducting thorough due diligence to assess the financial stability and cybersecurity posture of third-party providers.
  • Ongoing Monitoring: Continuously monitoring third-party providers to ensure they meet contractual and regulatory requirements.
  • Incident Response: Establishing clear incident response protocols for addressing third-party-related security incidents.


Managing risks associated with third-party ICT service providers is a critical aspect of modern business operations. Organizations must adopt a comprehensive approach that includes risk assessments, robust contractual agreements, continuous monitoring, incident response planning, training and awareness programs, and risk mitigation strategies. Regulatory frameworks and standards, such as GDPR, NIST, ISO 27001, and FINRA, provide valuable guidelines for managing third-party risks. By implementing these strategies and adhering to regulatory requirements, organizations can effectively manage third-party ICT risks, ensuring the security, compliance, and continuity of their operations.

DORA Compliance Framework