Glossary

IT Vendor Risk Management

Almost all companies need to purchase goods and services from third-party suppliers to manufacture their products and maintain internal operations. However, every business relationship also comes with a degree of risk that must be addressed.

According to a study by BeyondTrust, 58% of businesses attribute recent security breaches to vendor access; and a report from the Ponemon Institute indicates that a lack of visibility into vendor risk is costing businesses significantly.

That risk is compounded when we’re talking about procuring IT resources, where the potential for cybersecurity incidents is high. Implementing an IT vendor risk management platform is key to mitigating this risk and getting the most value out of your vendors.

IT Vendor Risk Management

What Does Vendor Risk Management Involve?

Vendor risk management (VRM) is the practice of analyzing the third-party suppliers you work with and ensuring that any potential service disruptions or mistakes don’t significantly impact the daily operations of your business.

For instance, imagine you work closely with a vendor with whom you need to share sensitive customer information. If that vendor fails to maintain a strong cybersecurity posture and suffers from a data breach as a result, then the impact of that breach extends to your brand. You are ultimately responsible for the compliance, safety, and risks of all your third-party suppliers.

What Types of Third-Parties Should a Vendor Risk Management Program Cover?

Out of the hundreds or even thousands of suppliers a typical organization interacts with, there are a few types that fall under the influence of vendor risk management.

  • Suppliers sell raw materials to support manufacturing processes.
  • Resellers distribute your end product to the customer.
  • Service providers provide professional services, such as web hosting in the world of IT.

These partnerships are often complicated. And as your business grows and takes on more suppliers over time, it may be necessary to turn to software to help with IT vendor risk assessments.

Start Getting Value With
Centraleyes for Free

See for yourself how the Centraleyes platform exceeds anything an old GRC
system does and eliminates the need for manual processes and spreadsheets
to give you immediate value and run a full risk assessment in less than 30 days

Why Is VRM Necessary?

There are many benefits to taking a formal approach to vendor risk management, especially with regards to IT-related suppliers.

  • Patching up holes in your cybersecurity defenses: While vendors try to take responsibility over their own digital risks, you can’t risk the reputation of your own brand by not adding your own supplementary checks. By preparing for breaches and incidents beforehand, you can more easily recover from incidents and help prevent them in the first place.
  • Ensuring more reliable IT services: Dependability is always a major factor when it comes to choosing suppliers. VRM aims to expand your vendor list and ensure that a service disruption in one supplier doesn’t significantly impact your overall operations.
  • Protecting against legal liabilities: Adhering to government regulations also involves checking on the compliance level of your third-party partnerships as well. Government entities like the Office of Foreign Assets Control emphasize this point and encourage the implementation of vendor risk management practices.
  • Boosting reputation: Customers and business partners alike will see your dedication to improved risk management as a positive sign when they decide to work with your brand.

You can intensify these benefits by handling vendor risk monitoring with dedicated software designed for the job. And overall, a robust VRM program improves your incident response and cuts the cost of addressing future risks. It holds the right individuals accountable for risk management and prevents core business functions from being impacted by vendor-related issues.

Getting Started with Vendor Risk Management in Your Business

From vendor risk management reporting to planning out contracts, there are a lot of considerations to make to build a complete VRM program. What exactly you choose to do depends on the size and nature of your business as well as its needs and circumstances.

The following are some basic steps to get you started.

Get a Team Together

The objectives of VRM can be achieved much more easily when you have a dedicated team for the job. Vendor risk can impact multiple departments in a business, so be sure to include individuals from finance, legal, IT, and other parts of the organization.

This potential for cross-functional collaboration ensures that all risks are accounted for and addressed.

Prepare For Risk Assessments

Add a new step to the vendor onboarding process: performing a risk assessment to get a holistic picture of what the risks look like first. No supplier is completely free of risk, so the purpose of this assessment is determining whether you can accept the level of risk associated with the vendor.

Risk assessments are detailed analyses that take into account not only vendor performance risks but also the potential for legal non-compliance and IT-related cybersecurity. They also focus on how well-equipped the vendors are for mitigating their own risks themselves.

When performing an assessment, identify the potential risks and vulnerabilities that the vendor could be facing and form a plan of attack to address those risks accordingly. An on-site audit may even be necessary for a more detailed look in some circumstances, even if they cost more to conduct.

Plan Out New Contracts with Risk Management In Mind

Contract management and VRM go hand-in-hand in many ways. Contracts dictate how vendors interact with your brand and how negotiations will be conducted. Use this opportunity to address vendor-related risks.

Communicate with vendors about your intentions, expectations, and requirements for VRM and other risk assessments. If both sides can agree on these plans outlined in the contract, you have a higher chance of success for your risk management program.

Keep an Eye on Your Progress

VRM should never be considered a “set it and forget it” process. New IT cybersecurity risks come up every day, vendors’ security posture will vary, and the potential for service disruptions will never fully disappear. So remember to gather analytics on your performance regularly and implement changes to your security controls accordingly.

Start Getting Value With
Centraleyes for Free

See for yourself how the Centraleyes platform exceeds anything an old GRC
system does and eliminates the need for manual processes and spreadsheets
to give you immediate value and run a full risk assessment in less than 30 days

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