Free Shared Assessments CTPRP Practice Exam with Questions & Answers | Set: 3

 A regulation is a rule of order having the force of law, prescribed by a superior or competent authority, relating to the actions of those under the authority’s control. Regulations are issued by various government departments and agencies to carry out the intent of legislation enacted by the legislature of the applicable jurisdiction. Regulations also function to ensure uniform application of the law. A standard is a guideline established generally by private-sector bodies and that are available for use by any person or organization, private or government. The term includes what are commonly referred to as ‘industry standards’ as well as ‘consensus standards’. Standards are developed through a voluntary process of collaboration and consensus among stakeholders, such as manufacturers, consumers, regulators, and experts. Standards may reflect best practices, technical specifications, performance criteria, or quality requirements. Standards do not have the force of law unless they are adopted or referenced by a regulation. Therefore, a regulation must be adhered to by all companies subject to its requirements, but companies can voluntarily choose to follow standards that are relevant and beneficial to their operations, products, or services. References:

• The Difference Between Regulations and Standards
• Regulations vs Standards: Clearing Up the Confusion - AEM
• Standards vs. Regulations
• Certified Third Party Risk Professional (CTPRP) Study Guide

 Personal information is any information that can be used to identify an individual, either directly or indirectly, such as name, address, email, phone number, ID number, etc. Personal data is a term used in some jurisdictions, such as the European Union, to refer to personal information that is subject to data protection laws and regulations. However, the scope and definition of personal data may vary depending on the jurisdiction and the context. For example, the GDPR defines personal data as “any information relating to an identified or identifiable natural person” and includes online identifiers, such as IP addresses, cookies, or device IDs, as well as special categories of data, such as biometric, genetic, health, or political data. On the other hand, the US does not have a single federal law that regulates personal data, but rather a patchwork of sector-specific and state-level laws that may have different definitions and requirements. For example, the California Consumer Privacy Act (CCPA) defines personal information as “information that identifies, relates to, describes, is reasonably capable of being associated with, or could reasonably be linked, directly or indirectly, with a particular consumer or household” and excludes publicly available information from its scope. Therefore, from a privacy perspective, it is important to understand the different legal definitions and obligations that may apply to personal information or personal data depending on the jurisdiction and the context of the data processing activity. References:

• GDPR personal data – what information does this cover?
• Personal Information, Data Classification, Life Cycle and Best Practices
• 5 Types of Data Classification (With Examples)

Vendor classification or risk tiering is a process of categorizing vendors based on the level of security risk they introduce to an organization12. It is a key component of a third-party risk management (TPRM) program, as it helps to prioritize and allocate resources for vendor assessment, monitoring, and remediation12. The statement D is true, as it reflects the first step of vendor classification or risk tiering, which is to determine the inherent risk of each vendor relationship based on the nature, scope, and complexity of the product or service being outsourced3 . Inherent risk is the risk that exists before any controls or mitigating factors are applied3 . By calculating the inherent risk, an organization can assign each vendor to a risk tier that reflects the potential impact and likelihood of a security breach or incident involving the vendor3 .

The other statements are false, as they do not accurately describe the vendor classification or risk tiering process. The statement A is false, as vendor classification and risk tiers are not based on residual risk calculations, but on inherent risk calculations. Residual risk is the risk that remains after controls or mitigating factors are applied3 . Residual risk is used to evaluate the effectiveness of the controls and the need for further action, but not to classify or tier vendors3 . The statement B is false, as vendor classification and risk tiering should be used for all third party relationships, not only for critical ones. Vendor classification and risk tiering helps to identify and prioritize the critical vendors, but also to manage the low and medium risk vendors according to their respective risk profiles12. The statement C is false, as vendor classification and corresponding risk tiers do not utilize the same due diligence standards for controls evaluation based upon policy, but different ones. Due diligence standards are the criteria and methods used to assess the security posture and performance of vendors. Due diligence standards should vary according to the risk tier of the vendor, as higher risk vendors require more rigorous and frequent evaluation than lower risk vendors.

References:

• 1: What is Vendor Tiering? Optimize Your Vendor Risk Management | UpGuard Blog
• 2: Vendor Tiering Best Practices: Categorizing Vendor Risks | UpGuard Blog
• 3: Third-Party Risk Management (TPRM): A Complete Guide - BlueVoyant
• [4]: Supplemental Examination Procedures for Risk Management of Third-Party Relationships
• [5]: Third Party Risk Management: Why It’s Important And What Features To Look For - Expert Insights

Contract addendums are supplementary documents that modify or amend the original contract terms. They can be used to address third party risk obligations, such as security, privacy, compliance, or performance standards, without having to rewrite the entire MSA. However, contract addendums should be consistent with the MSA and clearly specify the scope, duration, and responsibilities of each party. Contract addendums can also be used to update or revise the contract terms in response to changing business needs or regulatory requirements12.

The other statements are true regarding the different types of contracts and agreements between outsourcers and service providers. Evergreen contracts are contracts that do not have a fixed end date and are automatically renewed unless one party decides to terminate them under the existing contract provisions3. RFPs are documents that solicit proposals from potential service providers for a specific project or service. RFPs should include mandatory requirements based on an organization’s TPRM program policies, standards and procedures, such as risk assessment, due diligence, monitoring, reporting, and remediation . SOWs are documents that define the operational requirements and obligations for each party, such as the scope, deliverables, timelines, costs, quality, and performance metrics . References:

• 1: Contracts and third-party risk - KPMG UK
• 2: Third-Party Risk & Contract Management: A Comprehensive Beginner’s Guide - Trackado
• 3: What Is an Evergreen Contract? | Legal Beagle
• : [Best Practices Guidance for Third Party Risk - GARP]
• : Third-Party Risk Management: A Comprehensive Guide - UpGuard
• : Statement of Work (SOW) - Definition, Contents & Examples
• : How to Write a Statement of Work for Any Industry | Smartsheet

Risk registers are tools that help organizations document, monitor, and manage their third party risks. They typically include information such as the risk description, category, source, impact, likelihood, rating, owner, status, and action plan. Risk registers enable organizations to prioritize their risks, assign responsibilities, track progress, and report on their risk posture. According to the CTPRP Study Guide, "A risk register is a tool for capturing and managing risks throughout the third-party lifecycle. It provides a comprehensive view of the organization’s third-party risk profile and facilitates risk reporting and communication."1 Similarly, the GARP Best Practices Guidance for Third-Party Risk states, "A risk register is a tool that records and tracks the risks associated with third parties. It helps to identify, assess, and prioritize risks, as well as to assign ownership, mitigation actions, and target dates."2

References:

• CTPRP Study Guide
• GARP Best Practices Guidance for Third-Party Risk

 Questionnaires are one of the most common and effective tools for conducting third party risk assessments. They help organizations gather information about the security and compliance practices of their vendors and service providers, as well as identify any gaps or weaknesses that may pose a risk to the organization. However, not all questionnaires are created equal. Depending on the nature and scope of the third party relationship, different types and levels of questions may be required to adequately assess the risk. Therefore, it is important to configure the assessment questionnaires based on the risk rating and type of service being evaluated12.

The risk rating of a third party is determined by various factors, such as the criticality of the service they provide, the sensitivity of the data they handle, the regulatory requirements they must comply with, and the potential impact of a breach or disruption on the organization. The higher the risk rating, the more detailed and comprehensive the questionnaire should be. For example, a high-risk third party that processes personal or financial data may require a questionnaire that covers multiple domains of security and privacy, such as data protection, encryption, access control, incident response, and audit. A low-risk third party that provides a non-critical service or does not handle sensitive data may require a questionnaire that covers only the basic security controls, such as firewall, antivirus, and password policy12.

The type of service that a third party provides also influences the configuration of the questionnaire. Different services may have different security and compliance standards and best practices that need to be addressed. For example, a third party that provides cloud-based services may require a questionnaire that covers topics such as cloud security architecture, data residency, service level agreements, and disaster recovery. A third party that provides software development services may require a questionnaire that covers topics such as software development life cycle, code review, testing, and vulnerability management12.

By configuring the assessment questionnaires based on the risk rating and type of service being evaluated, organizations can ensure that they ask the right questions to the right third parties, and obtain relevant and meaningful information to support their risk management decisions. Therefore, the statement that assessment questionnaires should be configured based on the risk rating and type of service being evaluated is TRUE12. References: 1: How to Use SIG Questionnaires for Better Third-Party Risk Management 2: Third-party risk assessment questionnaires - KPMG India

TPRM vendor classification is the process of categorizing vendors based on their criticality, risk level, and service type. Vendor classification helps to prioritize and allocate resources for vendor assessment, monitoring, and remediation. Vendor classification should be updated periodically to reflect changes in the business environment, vendor performance, and regulatory requirements.

When updating TPRM vendor classification requirements with a focus on availability, the risk rating factors that provide the greatest impact to the analysis are the impact on operations and end users, the impact on revenue, and the impact on regulatory compliance. This is because:

• Availability is the degree to which a system or service is accessible and functional when required by authorized users. Availability is a key component of information security and business continuity, as it ensures that the business can operate normally and deliver value to its customers and stakeholders.
• Impact on operations and end users measures the extent to which a vendor’s service disruption or failure affects the business processes, functions, and activities that depend on the vendor’s service. A high impact on operations and end users means that the vendor’s service is essential for the business to perform its core functions and meet its objectives, and that any downtime or degradation of the service would cause significant operational delays, inefficiencies, or losses.
• Impact on revenue measures the extent to which a vendor’s service disruption or failure affects the business’s income, profitability, and market share. A high impact on revenue means that the vendor’s service is directly or indirectly linked to the business’s revenue generation, and that any downtime or degradation of the service would cause substantial financial losses, reduced customer satisfaction, or competitive disadvantage.
• Impact on regulatory compliance measures the extent to which a vendor’s service disruption or failure affects the business’s adherence to the laws, regulations, standards, and contractual obligations that govern its industry, sector, or jurisdiction. A high impact on regulatory compliance means that the vendor’s service is subject to strict regulatory requirements, and that any downtime or degradation of the service would cause serious legal penalties, fines, sanctions, or reputational damage.

Therefore, these three factors are the most important to consider when updating TPRM vendor classification requirements with a focus on availability, as they reflect the potential consequences and risks of vendor unavailability for the business.

References:

• CTPRP Job Guide
• Criticality and Risk Rating Vendors 101
• The Third-Party Vendor Risk Management Lifecycle
• What Is Third-Party Risk Management (TPRM)? 2024 Guide
• Third-Party Risk Management and ISO Requirements for 2022

Infrastructure as a service (IaaS) is a cloud deployment model that provides users with access to virtualized hardware resources, such as servers, storage, and network devices. Users can install and run their own operating systems and applications on the cloud infrastructure, and have full control over the configuration and management of the hardware equipment. IaaS is suitable for organizations that need high scalability, flexibility, and customization of their cloud environment. IaaS is different from other cloud deployment models, such as function as a service (FaaS), platform as a service (PaaS), and software as a service (SaaS), which provide users with higher-level services and abstract away the underlying hardware details. References:

• Cloud Infrastructure: 4 Key Components and Deployment Models
• Cloud Deployment Models - GeeksforGeeks
• On-Premises Cloud Deployment Model: Organization-Owned Hardware Explained

This statement is false because network connectivity or remote access may trigger a higher vendor risk classification for any third party that has access to the organization’s network, systems, or data, regardless of whether they process personal information or not. Network connectivity or remote access increases the exposure of the organization to cyberattacks, data breaches, or unauthorized access by malicious actors. Therefore, the organization should assess the security controls and practices of the third party, such as encryption, authentication, firewall, antivirus, and patch management, to ensure that they meet the organization’s standards and expectations. The organization should also monitor the network activity and performance of the third party, and establish clear policies and procedures for granting, revoking, or modifying access rights. The other statements (A, B, and C) are true regarding the primary factors in determining vendor risk classification, as they reflect the potential impact, likelihood, and severity of the risks associated with the vendor’s location, importance, and data processing. References:

• Vendor Classification, Shared Assessments
• Impact of Risk Attributes on Vendor Risk Assessment and Classification, SSRN
• Guide to Vendor Risk Assessment, Smartsheet
• How Do You Determine Vendor Criticality?, UpGuard

Multi-factor authentication (MFA) is an electronic authentication method that requires a user to present two or more pieces of evidence (or factors) to an authentication mechanism. The factors can be something the user knows (such as a password or a PIN), something the user has (such as a smartphone or a security token), or something the user is (such as a fingerprint or a facial recognition). MFA enhances the security of online accounts and applications by making it harder for attackers to gain access with stolen or guessed credentials. MFA is recommended as a best practice for third-party risk management, as it can reduce the risk of unauthorized access, data breaches, and identity theft. MFA is also a requirement for some regulatory standards and frameworks, such as PCI DSS, HIPAA, and NIST 800-63. References:

• What is: Multifactor Authentication
• Set up your Microsoft 365 sign-in for multi-factor authentication
• Multi-factor authentication - Wikipedia
• Shared Assessments CTPRP Study Guide, page 19
• Shared Assessments CTPRP Job Guide, page 14
• Best Practices Guidance for Third Party Risk, page 9