CTPRP Exam Dumps - Certified Third-Party Risk Professional (CTPRP)

Fourth-Nth party risk refers to the potential threats and vulnerabilities associated with the subcontractors, vendors, or service providers of an organization’s direct third-party partners. This can create a complex network of dependencies and exposures that can affect the organization’s security, data protection, and business resilience. To manage this risk effectively, organizations should conduct comprehensive due diligence on their extended vendor and supplier network, and include contractual stipulations that require notification and approval for any subcontracting activities. This way, the organization can ensure that the subcontractors meet the same standards and expectations as the direct third-party partners, and that they have adequate controls and safeguards in place to protect the organization’s data and systems. Additionally, the organization should monitor and assess the performance and compliance of the subcontractors on a regular basis, and update the contract provisions as needed to reflect any changes in the risk environment. References:

• Understanding 4th- and Nth-Party Risk: What Do You Need to Know?
• Best Practices for Fourth and Nth Party Management
• Fourth-Party Risk Management: Best Practices

Terms for return or destruction of data should be defined and agreed upon during contract negotiation, as this is the phase where the organization and the third party establish the expectations, obligations, and responsibilities for the relationship, including the handling of data. According to the Shared Assessments CTPRP Study Guide, contract negotiation is the phase where "the organization and the third party negotiate and execute a contract that clearly defines the expectations and responsibilities of both parties, including the scope of work, service level agreements, performance measures, reporting requirements, compliance obligations, security and privacy controls, incident response procedures, dispute resolution mechanisms, termination rights, and other relevant terms and conditions."1 One of the key contractual terms that should be addressed is the return or destruction of data, which specifies how the third party will return or dispose of the organization’s data at the end of the relationship, or upon request, in a secure and timely manner. This term is important for ensuring the organization’s data protection, confidentiality, and compliance, as well as reducing the risk of data breaches, leaks, or misuse by the third party or unauthorized parties.

The other phases of the TPRM lifecycle are not the best choices for defining and agreeing upon terms for return or destruction of data, because:

• B. At third party selection and initial due diligence: This is the phase where the organization identifies, evaluates, and selects the third party that best meets its needs, objectives, and risk appetite. This phase involves conducting due diligence on the third party’s capabilities, qualifications, reputation, performance, security, and compliance, as well as assessing the inherent risk of the relationship. While this phase is important for screening and choosing the right third party, it does not involve defining and agreeing upon the specific terms and conditions of the relationship, such as the return or destruction of data, which are usually done in the contract negotiation phase.
• C. When deploying ongoing monitoring: This is the phase where the organization monitors and reviews the third party’s performance, service delivery, risk management, and compliance on a regular basis, as well as identifies and addresses any issues, gaps, or changes that may arise during the relationship. This phase involves collecting and analyzing data and information from various sources, such as reports, audits, assessments, surveys, feedback, incidents, and metrics, as well as communicating and collaborating with the third party to ensure alignment and improvement. While this phase is important for ensuring the quality and security of the relationship, it does not involve defining and agreeing upon the terms and conditions of the relationship, such as the return or destruction of data, which are usually done in the contract negotiation phase.
• D. At termination and exit: This is the phase where the organization terminates and exits the relationship with the third party, either by mutual agreement, expiration of contract, breach of contract, or other reasons. This phase involves executing the termination and exit plan, which may include notifying the third party, transferring or discontinuing the services, settling the financial obligations, returning or destroying the data, revoking the access rights, and conducting a post-termination review. While this phase is important for ensuring a smooth and secure transition and closure of the relationship, it does not involve defining and agreeing upon the terms and conditions of the relationship, such as the return or destruction of data, which are usually done in the contract negotiation phase.

References:

• 1: Shared Assessments CTPRP Study Guide, page 59, section 5.1: TPRM Lifecycle
• : Third-Party Risk Management: Vendor Contract Terms and Conditions, section: Data Ownership, Return and Destruction
• : [Third-Party Risk Management: The 3rd Party Ecosystem: How to Manage the Risk While Keeping the Benefit], section: Contract Negotiation
• : [Third-Party Risk Management: The 3rd Party Ecosystem: How to Manage the Risk While Keeping the Benefit], section: Termination and Exit

Inherent risk refers to the level of risk that exists in the absence of any controls or mitigation measures. It represents the natural exposure to risk in operations, transactions, or activities without considering the effectiveness of any risk management practices. In the context of Third-Party Risk Management (TPRM), inherent risk assesses the potential for loss or adverse outcomes associated with a third-party relationship before any controls or risk treatments are applied. Understanding inherent risk is crucial for organizations to identify where controls are necessary and to prioritize risk management efforts based on the potential impact and likelihood of different risks. This concept is foundational in risk management frameworks and is used to guide the development and implementation of controls to reduce risk to an acceptable level, aligned with the organization's risk appetite and tolerance.

References:

• Risk management standards such as ISO 31000 (Risk Management - Guidelines) provide a framework for assessing and managing inherent risks, emphasizing the importance of understanding the baseline level of risk in decision-making processes.
• The "Third-Party Risk Management Guide" by ISACA outlines best practices for assessing inherent risks in third-party relationships, highlighting the need to evaluate the nature and scope of third-party engagements to determine the baseline risk exposure.

A well-defined third party risk management program does not require conducting onsite or virtual assessments for all third parties, as this would be impractical, costly, and inefficient. Instead, a TPRM program should adopt a risk-based approach to determine the frequency, scope, and depth of assessments based on the inherent and residual risks posed by each third party. This means that some third parties may require more frequent and comprehensive assessments than others, depending on factors such as the nature, scope, and criticality of their services, the sensitivity and volume of data they access or process, the regulatory and contractual obligations they must comply with, and the results of previous assessments and monitoring activities. A risk-based approach to assessments allows an organization to allocate its resources and efforts more effectively and efficiently, while also ensuring that the most significant risks are adequately addressed and mitigated. References:

• Shared Assessments, CTPRP Job Guide, page 9: “The frequency, scope, and depth of assessments should be determined by the inherent and residual risks posed by each third party.”
• OneTrust, [What is Third-Party Risk Management?]: “A risk-based approach to third-party risk management means that you prioritize your efforts and resources based on the level of risk each vendor poses to your organization.”
• [Deloitte], [Third Party Risk Management: Managing Risk]: “A risk-based approach to third-party risk management helps organizations prioritize their efforts and resources based on the level of risk each third party poses to the organization.”

Shadow IT refers to the use of IT systems, services, or devices that are not authorized, approved, or supported by the official IT department. Shadow IT can pose significant risks to an organization’s data security, compliance, performance, and reputation. One of the main risks of shadow IT is that it often lacks governance and security oversight. This means that the shadow IT functions may not follow the established policies, standards, and best practices for IT management, such as data protection, access control, encryption, backup, patching, auditing, and reporting. This can expose the organization to various threats, such as data breaches, cyberattacks, malware infections, legal liabilities, regulatory fines, and reputational damage. Additionally, shadow IT can create operational inefficiencies, compatibility issues, duplication of efforts, and increased costs for the organization.

According to the web search results from the search_web tool, shadow IT is a common and growing phenomenon in many organizations, especially with the proliferation of cloud-based services and applications. Some of the articles suggest the following best practices for managing and mitigating shadow IT risks123:

• Performing SaaS assessments to proactively detect shadow IT
• Prioritizing user experience (UX) and providing support for integrating tools
• Streamlining user account and identity management
• Using operating systems and devices with which employees are comfortable
• Compromising and collaborating with users to minimize shadow IT risks
• Educating and training users on the security risks and consequences of shadow IT
• Establishing clear policies and guidelines for IT procurement and usage
• Creating a culture of trust and transparency between IT and business units

Therefore, the verified answer to the question is B. “Shadow IT" functions often lack governance and security oversight.

References:

• Shadow IT Explained: Risks & Opportunities - BMC Software
• Start reducing your organization’s Shadow IT risk in 3 steps
• What is shadow IT? - Article | SailPoint