Managing third-party risk is a bit like throwing a fancy party. Everyone wants to attend, but you have to assure that only the most essential and top-rated VIPs get past the velvet rope. So you check attendees’ credentials at the door.
Every company uses a third-party vendor or contractor at some point. Whether you are purchasing raw materials or outsourcing specialized processes, working with third parties can help you achieve a competitive advantage and cost savings. As you rely ever more on those third parties, however, your exposure to third-party and fourth-party risks grows as well.
A third-party risk assessment analyzes the risk introduced into your organization through relationships with third parties along the value chain. These third parties may include vendors, service providers, software vendors, and other suppliers.
A faster vendor assessment results in less risk exposure and downtime. Conversely, an inefficient assessment process leads to poor use of corporate resources. Slow vendor selection could result in downtime as the business waits for a new vendor to arrive. If you are already doing business with a supplier, a lengthy assessment process means you’re exposed to unmitigated risks.
Organizations can minimize their cybersecurity risk and increase information security by simplifying and streamlining vendor risk management processes. Automation is the best way to do this.
What Is Vendor Risk Management Software?
Vendor risk management (VRM) software helps organizations develop and automate their vendor risk management program. It allows you to use a risk management framework and software-as-a-service (SaaS) to manage risk more efficiently.
Third-party and vendor risk management software collects and manages vendor risk data to protect companies from data breaches or non-compliance. This type of software documents, assesses, and monitors all risks that can harm the relationship between a company and its suppliers.
Risk management tools are used by managers in compliance, quality management, supply chain, and manufacturing departments. An integrated platform can help them track requirements, findings, and workflows. Automated reporting can inform the dialogue between you and your third parties as you work together to mitigate identified risks.
Compliance officers use third-party and vendor risk management software to assure compliance with internal policies and government regulations, such as the General Data Protection Regulation (GDPR) or the Health Insurance Portability and Accountability Act (HIPAA).
An automated vendor risk management framework is often implemented as part of a broader governance, risk, and compliance (GRC) initiative. Still, the software can also be used as a stand-alone product. When delivered separately, you and your vendor should integrate overall risk management solutions with other tools, such as supply chain suites and GRC software.
How Do You Perform a Vendor Risk Assessment?
Vendor risk assessment is part of vendor risk management (VRM). The VRM lifecycle consists of supplier identification, risk assessment, risk mitigation, continuous monitoring, and supplier onboarding. It’s also sometimes called supplier risk management, although both terms drive at the same basic idea: how companies manage their ongoing commitments with suppliers
The vendor risk assessment process identifies and assesses the potential hazards associated with dealing with a supplier. This is accomplished by evaluating the supplier’s security controls, values, objectives, policies, processes, and other security-related activities. Companies can then assess whether the benefits of working with a particular third party exceed the dangers.
Determine Which Risks Concern You
Before analyzing your suppliers, take a step back and consider the most critical threats to your company. Cybersecurity, financial, regulatory, reputational, business continuity, and many other types of hazards are all possible.
The specific risks you choose to track will depend on your organization and the objectives of your VRM program. Many businesses do not keep track of all possible hazards. Advanced vendor risk management tools can be more specific about the types of risks they track, giving you a better picture of your company’s overall risk exposure to third parties.
Automate Your Vendor Assessment Process
As with any repeatable process, you can automate the actions in those vendor risk evaluations. Review internal procedures to identify areas of your evaluation workflow that can be performed automatically.
Examples of automation include automatically flagging risks, assigning risk owners, and triggering reassessments based on a newly identified risk or expiring contract. Automation can be used to send out and collect due diligence questionnaires for each of your suppliers.
Automating these activities in your vendor risk management software provides myriad benefits. Workflows and audit trails are appropriately documented. Assessments and questionnaires are saved systematically and electronically. All of this information should be easy to search for and access within the software program.
Make Responding to Assessments Easy for Suppliers
Getting a supplier to respond to an assessment can be a laborious process, so consider how you can make the process easier for your suppliers. Questionnaires should be straightforward and simple without sacrificing the quality of information. Be available to guide vendors through the process in cases where they don’t have a lot of experience doing these types of assessments.
It is in your best interests to assure that your suppliers feel supported so they’ll give you honest and accurate feedback.
Automate Your VRM Program With ZenGRC
Once you’ve onboarded a vendor, keeping tabs on its security is only just beginning. You’ll need to send self-assessment questionnaires, obtain penetration testing results, continually update your vendor data, and more. And you’ll need to always be on top of changes in real-time. Otherwise, your own organization’s security and compliance could be in danger.
Using ZenGRC risk management software to manage your third-party vendors takes the hassle out of vendor risk management. Continuous monitoring features assure that you’re always on top of things. ZenGRC streamlines workflows so you don’t have to manage reminders manually. It will even send out questionnaires and tally the results as they come in.
With ZenGRC’s integrated platform, all of your governance, risk, and compliance activities can be managed from a single source of truth. Compliance officers, quality managers, and supply chain professionals will be aligned and can focus on the big picture. Liberated from the tyranny of spreadsheets, your business will rise above the risks.
Schedule a demo today to see how ZenGRC can help you to automate your VRM program!