In our digital age, where business partnerships and collaborations can span the globe, managing the risks associated with vendors and third parties has become a crucial part of cybersecurity. Cyber vendor risk management (VRM) is a strategy to address those risks, and to assure that vendors tapping into your IT systems don’t pose unacceptable risk to your data or IT operations.

This article explores what cyber VRM is, why it’s important, and the best practices organizations can adopt to manage vendors’ cyber risks effectively.

What Is Cyber Vendor Risk Management (VRM)?

Cyber vendor risk management is a process to identify, analyze, mitigate, and monitor the risks that arise from vendors and service providers that have access to your company’s IT systems and data. 

In today’s interconnected world, your vendors’ IT weaknesses can quickly become your own problem. Attackers might target those vendors, and then use the vendors to worm their way into your systems. VRM addresses this threat by giving you a structured approach to assess vulnerabilities, manage risks, and monitor the cybersecurity of your high-risk vendors. 

Vendor Risk Management vs. Third-Party Risk Management

While the terms vendor risk management (VRM) and third-party risk management (TPRM) are often used interchangeably in business contexts, they’re not quite the same. Understanding the difference is important so that you can develop effective risk management strategies. 

Vendor Risk Management (VRM)

VRM is a concentrated discipline that focuses specifically on identifying, assessing, and mitigating risks associated with suppliers and vendors. It primarily concerns itself with entities that supply products or services to an organization. The main focus is often on IT and cybersecurity, given the significant impact that vendors can have on an organization’s IT infrastructure.

The benefits of VRM are numerous.

  • Targeted risk assessment. VRM allows for a more focused approach to assessing risks, particularly in IT and cybersecurity. By concentrating on vendors, organizations can more effectively gauge and mitigate risks related to software, hardware, and service provision.
  • Enhanced cybersecurity posture. Given its focus on IT and cybersecurity, VRM plays a crucial role in strengthening an organization’s defenses against cyber threats that might originate from, or be amplified by, its vendors.
  • Regulatory compliance. Many sectors have specific regulations regarding vendor relationships, especially concerning data security and privacy. VRM helps assure that vendor-related activities comply with such regulatory requirements.

Third-Party Risk Management (TPRM)

TPRM is broader in scope, encompassing all types of third-party relationships an organization might have. This includes vendors, partners, affiliates, contractors, and even joint ventures. TPRM addresses a wide range of risks — cybersecurity being one, but also financial, operational, legal, and reputational risks.

The benefits of TPRM are as follows.

  • Comprehensive risk coverage. By addressing a broader range of third parties and risks, TPRM provides a holistic view of the potential threats facing an organization. This comprehensive approach helps in creating strategies that safeguard against various forms of risk.
  • Strategic risk alignment. TPRM assures that third-party risks are managed in alignment with the organization’s overall risk management framework and business strategy. This alignment helps to prioritize risks and resource allocation effectively.
  • Reputation and relationship management. TPRM emphasizes not just direct risks but also indirect ones, such as reputational damage that can occur from a third party’s actions. This is crucial in maintaining trust and integrity in the market.

Interrelation and Integration

While VRM and TPRM have their specific areas of focus, they are not mutually exclusive. In practice, an effective risk management program will integrate elements of both.

  • Alignment of objectives. Both VRM and TPRM should align with the organization’s overall risk management objectives and contribute to a cohesive strategy.
  • Shared practices. Many risk assessment and mitigation practices are applicable to both VRM and TPRM. Organizations can leverage these shared methodologies for efficiency and consistency.
  • Information sharing. Insights gained from VRM can inform broader TPRM strategies and vice versa. Sharing information between the two domains enhances the understanding of risks and improves decision-making.

Essentially, VRM focuses on the specific and often technical risks from vendors, while TPRM provides a broader view of all third-party risks, encompassing a wide array of potential threats. Organizations that appreciate the distinct benefits of each approach are better equipped to protect their assets, reputation, and bottom line in the complex web of modern business relationships.

What cybersecurity risks and threats are possible through vendors?

A wide range of cybersecurity risks reside within your vendors, and those risks can inflict significant harm on your security posture. If not properly managed and monitored, vendors can become conduits (either deliberately or inadvertently) for various types of cyber threats and risks. Some of the biggest risks include:

Data Breaches

  • Sensitive data exposure. Vendors may have access to your sensitive data. Ifthey suffer a breach, your data could be exposed, leading to financial loss and reputational damage.
  • Inadequate data handling. Vendors may not adhere to the same data protection standards as your organization, leading to mishandling and potential leaks of confidential information.

System Vulnerabilities

  • Outdated software. Vendors using outdated software or systems can expose you to vulnerabilities that hackers can exploit to gain unauthorized access to your network.
  • Weak security practices. Vendors with weak security practices, such as insufficient password policies or unpatched systems, increase the risk of breaches and attacks.

Supply Chain Attacks

  • Malware and ransomware. Attackers can compromise a vendor’s products or services to deliver malware or ransomware directly to your systems.
  • Targeted attacks. Cybercriminals may target less secure vendors as an easier entry point to reach larger organizations with more robust security.

Insider Threats

  • Malicious insiders. Employees within the vendor’s organization with malicious intent can abuse their access to your systems or data.
  • Accidental insiders. Unintentional actions by vendor employees, such as falling for phishing scams, can expose your network to threats.

Compliance and Regulatory Risks

  • Non-compliance. Vendors not complying with industry standards and regulations can expose your organization to legal penalties and fines.
  • Confusion over shared responsibility. Misunderstandings about who is responsible for securing data can lead to gaps in compliance and security.

Network and Infrastructure Risks

  • Interconnected networks. If a vendor’s network is compromised, the attacker might gain access to your network through connected systems.
  • Cloud services risks. Vendors hosting your data on the cloud might not have sufficient security controls, increasing the risk of unauthorized access.

Reputational Damage

  • Association with compromised vendors. If a vendor suffers a high-profile breach, your association with it can tarnish your reputation by extension.
  • Trust erosion. Customers and partners may lose trust in your ability to safeguard their data if a vendor you’re associated with is compromised.

Mitigation Strategies

Regardless of the specific vendor risk that might afflict your organization, a few basic mitigation steps can help you to reduce the chance of disaster.

  • Conduct thorough risk assessments. Regularly assess the security posture of vendors to identify and mitigate their potential risks to you.
  • Implement strong access controls. Assure that vendors only have access to necessary systems and data in your enterprise, and that their access is monitored and controlled.
  • Regular audits and compliance checks. Periodically audit vendors to assure that they comply with industry standards and regulations.
  • Incident response planning. Have a plan in place that includes how to respond to a breach involving a vendor.
  • Educate and train. Be sure that both your employees and your vendors’ employees are trained in cybersecurity best practices.

By understanding these risks and implementing strategies to mitigate them, organizations can significantly reduce the cybersecurity threats associated with vendors. And remember, vendor risk management is an ongoing process that requires regular revisits and updates to adapt to the evolving cyber threat landscape.

Cyber VRM Best Practices

Comprehensive risk assessments. Conduct thorough risk assessments for each vendor, considering the nature of their service, the sensitivity of data they handle, and their cybersecurity measures.

Regular audits and monitoring. Implement continuous monitoring strategies to confirm that vendors comply with your organization’s security standards. Regular audits help to identify and rectify issues before they escalate.

Establish clear contracts and SLAs. Assure that contracts and service-level agreements (SLAs) clearly outline the cybersecurity expectations, responsibilities, and breach notification requirements.

Incident response planning. Have a well-defined incident response plan that includes vendors. They should know the steps to follow and whom to contact in case of a security breach.

Continuous education and awareness. Educate your vendors about your cybersecurity policies and the importance of adhering to them. Regular training can significantly reduce risks.

Implement strong access controls. Only provide vendors access to your systems as necessary, and nothing more. Employ the principle of least privilege and regularly review access rights.

Why Is Cyber VRM Important?

Protects sensitive data. By assuring that vendors have robust cybersecurity measures, organizations can safeguard their sensitive data from unauthorized access and breaches.

Compliance and legal requirements. Many industries have regulations that require organizations to manage the risk of their vendors. Non-compliance can result in hefty fines and legal repercussions.

Reputation management. A data breach through a vendor can damage an organization’s reputation. Effective VRM helps in maintaining trust with customers and partners.

Financial stability. Cyber incidents involving vendors can lead to significant unexpected costs. VRM helps in mitigating these risks, protecting the organization’s bottom line.

Manage Cyber Vendor Risk With ZenGRC

ZenGRC is a governance, risk, and compliance software that streamlines your management of vendor risks. Here’s how ZenGRC can help.

  • Centralized dashboard: Provides a centralized view of all vendor risks, making it easier to monitor and manage them.
  • Automated assessments: Automates the risk assessment process, saving time and assuring consistency.
  • Continuous monitoring: Offers continuous monitoring capabilities to keep a real-time check on vendor risk profiles.
  • Compliance management: Helps to assure that vendor management processes comply with relevant regulations and standards.
  • Reporting and documentation: Generates detailed reports and maintains documentation required for audits and compliance.

In an era where cyber threats evolve rapidly, managing vendor risks is not just an option; it’s a necessity. Cyber VRM best practices help mitigate these risks, assuring the security of sensitive data and maintaining the trust of customers and partners. By understanding the importance of cyber VRM and implementing tools such as ZenGRC, organizations can protect themselves against the vulnerabilities introduced by their vendors and maintain a robust cybersecurity posture in this interconnected world.

Learn how ZenGRC can help ease the burden of data exfiltration detection by scheduling a demo today. That’s worry-free compliance and incident response planning — the Zen way.