Third-Party Vendor Risk Management: Lessons from the 2024 Finastra Breach

In an increasingly interconnected financial ecosystem, financial institutions rely heavily on third-party vendors for various services, from IT solutions to customer support. While these relationships offer numerous benefits, they also introduce significant risks, as highlighted by the recent 2024 Finastra breach.

Understanding the 2024 Finastra breach

In November 2024, Finastra — a leading financial technology provider — experienced a significant data breach. Attackers exploited compromised credentials to access Finastra's secure file transfer platform (SFTP), resulting in the exposure of sensitive data. This incident underscores the vulnerabilities that can arise from third-party relationships and the critical need for robust risk management practices.

Why third-party vendor risk management matters

Protecting sensitive data

Financial institutions handle vast amounts of sensitive information, including personal and financial data. Third-party vendors often have access to this data, making them prime targets for cyberattacks. Effective third-party risk management requires vendors to implement stringent security measures to protect this data.

Complying with regulations

Financial institutions are subject to strict regulatory requirements. A breach involving a third-party vendor can lead to severe penalties and reputation damage. Third-party risk management programs help financial institution vendors comply with relevant regulations and standards.

Maintaining operational resilience

Disruptions caused by vendor-related incidents can severely impact a financial institution’s operations. Third-party risk management programs involve continuous monitoring and vendors assessment to verify they can maintain service levels and recover quickly from incidents.

Mitigating financial risks

Data breaches and operational disruptions can result in significant financial losses. By proactively managing third-party risks, financial institutions can mitigate potential financial impacts and safeguard their bottom line.

Key strategies for effective third-party risk management

• Due diligence — Conduct thorough assessments of potential vendors before onboarding them. This includes evaluating their security practices, financial stability, and compliance with regulations.
• Continuous monitoring — Regularly review and monitor vendors' performance and security posture. This helps identify and address risks promptly.
• Clear contracts and SLAs — Establish clear contractual agreements and service level agreements (SLAs) that define security requirements and expectations.
• Incident response planning — Develop and test incident response plans that include third-party vendors. This provides a coordinated and effective response to any breaches or disruptions.

How CLA can help with third-party vendor risk management

The 2024 Finastra breach serves as another stark reminder of the importance of third-party vendor risk management. By implementing robust third-party risk management practices, financial institutions can protect sensitive data, provide regulatory compliance, maintain operational resilience, and mitigate financial risks.

If you’re looking to validate your third-party risk management or cybersecurity programs, CLA can assess your strong suits and where gaps may expose your institution to threats. Contact us for a personalized risk assessment.