Organizations that rely heavily on vendors but lack adequate visibility into their vendor networks put themselves at risk. A vendor risk management program assists businesses in anticipating inherent risks rather than simply responding to incidents after they occur. It is important for companies to consider best practices when planning their vendor risk management plans.
In this article, we will discuss vendor risk management best practices.
What is Vendor Risk Management
The term vendor refers to an outside entity that provides goods or services to an organization, often as part of its supply chain. These include cloud service providers, consultants, software developers, payment processors, etc.
Businesses are increasingly outsourcing aspects of their operations to third parties as their operations become more complex. The process of assessing, monitoring, and mitigating the risks introduced by an organization’s external business relationships is known as vendor risk management. VRM helps to reduce the risk of these vendors disrupting the business by controlling these risks. It is a discipline that assists businesses in managing and monitoring the risks associated with using third-party vendors or IT products and services. VRM is required because of the risks associated with using third-party vendors. Outsourcing work to third-party vendors frequently necessitates the sharing of sensitive information. This information could be confidential or sensitive. You must be aware of all potential risks and take steps to mitigate them as much as possible. Risk can manifest itself in a variety of ways, and it is critical that you understand how to identify and manage each one. You can keep your company safe and profitable by doing so.
Benefits of Vendor Risk Management
The benefits of VRM are as below:
- Maintaining Compliance: Compliance is critical for businesses in regulated industries. As third-party breaches continue to rise, regulators are cracking down on organizations that fail to manage their third-party vendors properly. A VRM program can help you simplify your compliance initiatives and meet all industry regulatory compliance requirements.
- Reduces Costs: When you consider the costs of data loss, remediation work, and compliance fines, a temporary vendor risk management process is usually expensive. Companies benefit from centralizing and standardizing vendor risk management in the long run. It lowers the cost of evaluating vendors while increasing operational efficiency.
- Minimizes Risks: Companies can perform due diligence and rate vendor risks with an effective vendor risk management program. They can also track and measure problems and take corrective action before they harm the organization’s bottom line. This prevents companies from losing money or experiencing supply disruptions.
VRM Best Practices
Implementing vendor risk management practices has several advantages, including increased security for both parties, lower fraud rates, better customer service outcomes, and more streamlined communication processes. The VRM best practices are as below:
- Determine each vendor
To understand your entire vendor ecosystem, find every vendor relationship, including shadow IT. Determining which vendors are most critical to your operations is essential in managing vendor risk. You should also consider what level of access each vendor requires to perform their duties effectively. Organizations can better define controls by understanding the complexities of vendor relationships. Consider which of your vendors poses the most significant risk. High-risk vendors should be closely monitored and controlled more strictly than lower-risk vendors.
- Establish vendor performance metrics
Monitoring vendor performance allows organizations to be constantly aware of a vendor’s ability to meet contractual obligations. Vendors with access to sensitive data, such as PHI or PII, should be required to conduct third-party risk assessments on their vendors to reduce their exposure to fourth-party risk. If you are a HIPAA-covered entity, you are liable for vendor data breaches. Even if you are not legally liable, data breaches cause reputational and financial harm. If you intend to have a long-term relationship with a vendor, you must define key performance indicators that govern the relationship.
- Vendor onboarding and offboarding procedures
Just as you have an onboarding process for new employees to familiarize them with your company’s policies, you should develop a standardized onboarding and offboarding process for your vendors. Risk can persist when a vendor relationship ends. A vendor who holds sensitive data must return or securely destroy it; support obligations may outlive a purchase agreement; and organizations must ensure that any third-party access to internal systems is terminated.
- Constant communication
The most important thing is to maintain open lines of communication with your vendors. Communication can help you avoid misunderstandings and address problems before they become security incidents. You must establish a clear line of communication down your supply chain as your vendors bring their vendors with them. One fourth-party data breach can ruin your business by holding you liable for stealing your customers’ information. As a result, it’s critical to keep in touch with your vendors to avoid misunderstandings. This enables you to address potential issues before they become full-fledged security breaches.
- Train your team
An effective vendor risk management program begins with basic risk assessment and mitigation training for your team members. After your team has been educated, it is critical to developing a system for tracking and monitoring vendor performance. This information can be used to make informed decisions about whether or not to continue working with a specific vendor and identify trends that may indicate potential problems.
- Include third-party vendors in your Data Map
The foundation of your third-party risk management program should include a data map of all consumer data held by your vendors. A clear understanding of what data your vendors can access and how they use it will assist you in putting the right agreements in place and requesting the appropriate compliance information from each vendor.
How Scrut Can Help You Manage Vendor’s Risks
Vendor risk management is critical for safeguarding a company’s reputation, customers, and intellectual property. Auditors want to know how secure an organization’s suppliers are for it to achieve compliance. It will be difficult to adhere to the desired compliance frameworks if your vendors do not have a strong information security posture.
Scrut allows you to identify, evaluate, and track vendor risks that your company faces in a single window. It speeds up assessing your vendors’ security posture by 70% and determines whether they meet your compliance standards. You can use this platform to automate vendor audit programs and conduct audits to evaluate vendor risk profiles.
You can use this platform to automate vendor audit programs and conduct audits to evaluate vendor risk profiles.
There are two types of risk scores.
Internal risk scores: These are the risks that arise within the organisation. It is difficult to evaluate because internal scores are difficult to identify. Internal risks that are commonly encountered include data leaks caused by human error, undefined roles and responsibilities that create no accountability, and damages and loss of business assets.
External risk scores: External risk scores refer to externally exploited risks such as phishing, malicious software, a volatile economic environment, and natural disasters. External risks have the potential to jeopardize business operations. Businesses evaluate these risks to ensure the company’s safety and its customers’ interests.
It enables simple vendor management by allowing you to create individual programs to manage vendors of varying risk levels. Using an intuitive dashboard, you can compare vendor responses and make informed decisions to mitigate vendor risks. To manage proof of compliance, you can use the console to provide auditors with vendor security reports.
Scrut provides effective methods for evaluating, monitoring and managing vendor risks. The tool informs you of your vendors’ performance and whether their security posture is appropriate for your organization.
Scrut automates your vendor compliance check with security questions. You can design your questionnaire or use one of our pre-made templates.
Upload a security questionnaire: Scrut’s vendor risk management tool allows you to upload your security questionnaire or use one of our pre-built templates.
Invite vendors: You can invite your vendors to fill out the security audit questionnaires on the platform. It assists you in comparing vendors in order to select the lowest-risk business partner or develop a risk security strategy tailored to vendor risk categories.
Assess your vendors’ compliance and information security posture: It provides quick insights into your vendors’ compliance and information security posture. From a single dashboard, you can send security surveys and identify deviations.
Share review data: You can quickly share vendor review data for compliance and audit purposes. All vendor security certifications, software vendor audits, and paperwork are kept in one place by the tool.
To learn more about how Scrut can help you with VRM, schedule a demo.