An effective vendor management policy is as critical as a lock on a safe for a business acquiring and working with sensitive data. The vendor management policy is an essential part of a holistic security compliance strategy, allowing companies to identify and prioritize vendors that pose a risk. Any organization working with customers' personal information and identities needs to have an airtight policy in place to review all vendors, including third-party contractors so that you're aware of their information security policy and practices.
Maintain Your Security Posture
Your company's security posture is determined not only by the internal controls that monitor the flow of information but also by external factors, like who has access to that information. You must wonder what role vendor management plays in your organization's overall cybersecurity? When your company uses a larger network of vendors and partners to deliver services that access or manage sensitive customer data, the security of those external vendors — and the risk associated with their data and network access — becomes just as important as the security you maintain internally.
Critical To Review Vendors When Working For Compliance
As more organizations outsource services to third and fourth parties and beyond, and as data breaches become all too common, regulators have toughened security and data management regulations in numerous industries to ensure that firms are effectively and proactively managing supply chain risks. A vendor management policy is frequently used to manage and demonstrate your company's adherence to current requirements.
Begin By Creating A Cross Company Team
The most difficult part of creating a vendor management policy is where to start. Begin by forming a team of members from throughout your organization. You'll want to make sure your vendor management team is made up of people from all departments who can offer diverse viewpoints to the table. Your decision-makers, your IT security department, a procurement team member, a legal team representative, and a representative from all business units should all be there.
Evaluate your Vendor List
Before you jump into creating, drafting, and implementing vendor management policy for your firm, there are a few parameters you should pay close attention to.
1. Critically Review Your Vendor List
After the vendor management team has successfully compiled a list of vendors, you should scrutinize it with a critical eye. This will ensure you are equipped with information on who has access to sensitive and important data and which vendors have access to your company's network. The vendors in these categories pose the highest risk as they have open access and, thereby, should be monitored closely to ensure that their security practices can handle sensitive data.
2. Monitor Current Vendors And Potential Future Vendors
Moving ahead with vendor management policy is credible only when you have an insight into the current vendors. You'll also want to think about the future vendor and partner connections and use the information you obtained from evaluating current vendors to make judgments regarding future collaborations. By including vendor evaluations in your vendor management strategy, your firm can better understand the risks associated with using a vendor's product or service.
3. Review Their Compliance Strategy
We know that compliance and vendor management often go hand in hand. Working with vendors who have security compliance, such as SOC 2, will mean that you don't have to be pragmatic about their standards. During the audit process, these vendors would be exposed to assessing their security practices and, therefore, have monitoring practices in place beforehand.
What should a Vendor Management policy include?
Considering vendor management policy as just another standard document is a mistake we would not recommend you to make. You must ensure that the following elements are included in the policy, whether you are creating it for the first time or revising your current policy for the better.
1. Purpose of the policy
This will act as an overview of what the management policy will consist of. It can be considered a thesis statement or a description explaining the many sections to follow.
2. The Audience and Scope of Policy
This section will clearly define who falls under the jurisdiction of the vendor management policy. Carve out the audience and scope using the reference of the master list consisting of all current vendors and potential future acquisitions.
3. Division of roles and responsibilities
The division is done in broadly two groups, one group that enforces the vendor management policy and the other group that reviews and updates it. Within these broad groups, you can have multiple roles.
4. Add clear terminology
Prepare a formal glossary of terms that your organization uses in the policy. This will ensure two things; firstly, it will establish the meaning of terms for anyone who may be reviewing the policy in the future. Secondly, it will present your understanding of the third party in clear and structured terms.
5. Include the Vetting Process
The processes used by your organization to assess and study a vendor before operating with them must be mentioned in this section. It can vary from organization to organization but mostly includes information on non-disclosure agreements between the parties, details on the data access provided to the vendors, what will entail if vendor assessment provides high-risk results and how many times vendor assessment will take place.
6. Management of vendors
The vendor management policy will also include the processes which the organization plans to use in order to assess and evaluate the vendors. You can include statements concerning minimum information requirements, instructions for destroying or disposing of the organization's data, and incident response criteria. All processes involved from the onboarding of a new vendor to the deboarding of a current vendor must be specified under this section.
7. Enforcement of the policy
You must include a section on how the policy will be implemented after detailing all vendor criteria. This section should spell out the ramifications of a vendor's failure to follow the policy. This might entail contract termination, access privileges withdrawal, or other civil or criminal sanctions.
How can you create an effective vendor management policy?
For a smooth management system, it is imperative to develop and implement a vendor management policy that is both transparent and effective. Here are some best practices you can follow to develop or improve the existing vendor management policy.
1. Have a contingency plan in place in case of vendor service failures
Be ready to act wisely in case of a vendor service failure. This can be done by recording sections of the company and studying the impact of the vendor’s product on them. Assign distinct roles to your vendor management team and create an internal reaction strategy for each vendor.
2. Dedicate a full-time manager for vendor relationships
As you expand your management team, you should aim to assign a dedicated manager to each of your vendors. This will prove to be advantageous from a managerial standpoint, especially in the long term.
3. Keep your policy simple and straightforward
A vendor management policy should provide a general picture of how you intend to manage vendors.
4. Ensure that all vendors are held to the same standards
It's critical that all of your vendors have the same set of criteria. Those posing major hazards, without a doubt, require additional attention from stakeholders.
5. Keep your policy up to date
As business processes evolve, ensure that your vendor management policy is updated on a regular basis. If quarterly or semi-annual updates aren't practicable, strive to update your vendor management policy at least once a year.
Whether you operate with a single vendor or many, failing to have a vendor management policy puts your company at risk. In order to come up with a comprehensive policy, you must cover all the standards listed in this article.
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