The global commerce industry is more virtualized, outsourced, and interconnected than ever. For the longest time, third parties have delivered specialist and affordable services to businesses of all kinds. However, the increasing cybersecurity threats mean that your third party's risks are also your risks.
In other words, cybercriminals can compromise the link between a third party and your business and compromise the security of your operations. Losing sensitive information in a third-party data breach will harm your reputation and cost you substantial financial losses.
Are You At Risk From Your Links With Third Parties?
Digital advancements have encouraged more and more businesses to outsource critical business operations to third parties. Businesses turn to third-party collaboration to speed up production and delivery and take advantage of innovation. Subsequently, firms enjoy greater profit and improved customer satisfaction.
However, third-party collaboration brings many risks. In fact, 51% of organizations experienced data breaches caused by a third party in 2023. Third-party data breaches are particularly worrying because it costs an average of $7.5 million to remedy a single breach of sensitive information.
In most cases, you need to share sensitive information with third parties to facilitate collaboration. However, you put your company's security at risk if you overlook a third-party's cybersecurity weakness. Many risks arise from data breaches involving third parties, including strategic, operational, regulatory, compliance, financial, and reputational.
Reputational Risks From Third-Party Data Breaches
Third-party relationships that result in the loss of confidential information and dissatisfied consumers can harm your reputation. Keep in mind that your customer does not differentiate you from your vendor. For example, if a customer receives a faulty product after a supplier delivers faulty components, the consumer develops a negative opinion about your business. If you lose sensitive information in a data breach, all your customers will see is that you let them down, regardless of who was at fault.
A good reputation helps businesses attract talent, investments, and suppliers. Most importantly, consumers are drawn to organizations they can trust. However, the rise in cybercrime has left customers around the world on edge. Currently, consumers are increasingly worried about the safety of their data and are more willing to work with firms that have demonstrated a commitment to protecting consumer information. PricewaterhouseCoopers (PwC) reported that 87% of customers are willing to cut ties with an organization after a data breach.
Therefore, your reputation is at stake every time you deal with a third party. In case of a breach, here are steps you can take to save your reputation:
1. Communicate Clearly
Data breaches make prominent headlines, and the last thing you want is anxious customers wondering about the fate of their data. Thus, it is essential to tell the affected customers quickly and honestly. Include the data that was compromised in the email, text, or letter. Additionally, place a public statement on your website that describes how you are dealing with the breach. Moreover, leave your communication channels open to customers with additional questions.
2. Manage Expectations
After a third-party breach, you will have many angry customers seeking clarification. While it is tempting to promise quick solutions, it is more important to manage expectations. Besides, misleading your customers makes them less likely to forgive the data breach. Instead, be realistic with your promises.
3. Keep Your Customers Informed
The period after a data breach brings many uncertainties for customers. One thing to do is to keep them informed as you remediate the situation. Also, let your customers know the policy changes and IT steps you are taking to fix the problem and prevent future data breaches. You can even offer incentives and discounts to start rebuilding trust.
4. Provide Good Customer Service
After a third-party data breach, you will deal with endless phone calls, emails, and frequent customer visits. The stress can be overwhelming and cause you to slacken on professionalism. However, it is vital that you treat your worried customers with the utmost respect.
5. Be Proactive About Third-Parties Going Forward
The best way to rebuild customer relationships after a data breach is to take the necessary steps to prevent it from happening again. This can mean cutting ties with bad vendors who can’t sustain the required cybersecurity standards. However, ensure that the off-boarding process does not interfere with your firm’s daily operations.
It is also vital to assess the security policies of every new vendor and where their IT infrastructure is vulnerable. Additionally, add risk management clauses in third-party contracts to hold them accountable in case of data breaches. Additional insurance and legal clauses are always a smart idea as well to shore up your liability. Implement IT vendor risk management software to ensure you are protected.
Wrapping Up 3rd Party Reputation And Cyber Security Solutions
Third-party data breaches damage your reputation and may even discourage potential customers from dealing with your company. Thus, it is imperative to collaborate with companies that prioritize cybersecurity to protect your company’s public opinion.
