As your company grows you’ll increasingly find it necessary to work with outside partners to meet business objectives. Taking on new vendors and contractors, however, also means taking on a certain amount of risk. Tracking your own risk is a challenge; managing third-party risk complicates matters even further. How can you keep your vendor risk management (VRM) efforts organized as your supply chain and relationships grow and expand?

Vendor tiering is a vendor risk management strategy where a company ranks its vendors based on the level of risk each one presents. This procedure allows you to look objectively at your vendor risk assessments and determine which parties require the highest level of security measures. If you’re contemplating vendor tiering at your company, keep reading to learn more about the benefits and best practices.

The Benefits of Vendor Tiering

A key benefit of vendor tiering is the ability to streamline your workflow and avoid allocating resources where they aren’t needed. Not all vendors have an equal amount of risk exposure, and treating all of your contractors as if they are high-risk results in time and energy wasted on lower-risk targets. Conversely, a high-risk vendor might slip through your risk management program if you treat every vendor as a low risk.

A vendor tiering system can also help you find a place for new contractors within your security framework. By applying the same standards to all vendors you run the risk of complacency over time, or the possibility that older risk prevention efforts won’t be sufficient as technologies change. Vendor tiering helps your security team prioritize which contractors pose the largest threat so the team can allocate its time and energy accordingly.

Finally, vendor tiering helps you decide which sectors to prioritize during a company-wide risk event. In the middle of a business disruption (say, a ransomware attack or a weather disaster that floods your data centers) it can be difficult to decide quickly which areas need your attention first. Ranking your vendors by risk can help you know immediately where to focus as you recover from a risk event.

How to Complete a Vendor Tiering Assessment

There are two established methods for ranking your vendors’ risk methods: manual tiering and questionnaires. Manual tiering is the more popular of the two since it’s easier to perform. In manual tiering, your vendors are ranked by their reputations and the opinions of your colleagues and stakeholders. This may seem appealing, but the lack of hard data with this method can also result in errors within your ranking system.

The questionnaire method requires more effort but will give you a more nuanced and thorough view of your vendor risk. In this method, you survey your providers about their risk prevention methods and allow a computer algorithm to rank the vendors for you. Generally vendors are organized into low, high, and critical risk levels, although your company may find the need to further divide these risk tiers. Each tier is ranked according to its criticality; Tier 1 level vendors are those that present the highest level of risk to business continuity, Tier 2 are those that are less critical, and so on.

The criteria in your questionnaire and your assessment process will be specific to your company and your individual needs. You should always take regulatory requirements into consideration: those that are required of your company and also those that are required of your contractor’s industry.

You’ll want to gather information on your vendor’s own cybersecurity measures and remediation plans, as well as how easily you could replace the vendor in the event of a data breach or other emergency. You should also consider what sensitive data your contractor will need to access to perform its function. This questionnaire should be circulated to your existing vendors and included in the onboarding process for any new third parties.

Once you’ve gathered information from your vendors, you can use the results to create a tiering matrix. This is a visual representation that allows you to see where your vendors fall based on their level of potential risk and the level of criticality they present for your daily business processes. This matrix makes it easy to see which parties should be considered high-risk vendors and which will require less attention.

Ensure Your Vendors Are Secure with ZenGRC

Tracking risk throughout your company is difficult enough; that difficulty only increases when third-party vendors are involved. While the end result of vendor tiering is valuable, performing due diligence with new vendors can be confusing and tedious. If you’re implementing a vendor tiering process, it’s important to find a risk management system that helps you stay organized and informed.

ZenGRC is a software platform that gives you a real-time view of your company’s risk ecosystem, including the entire life cycle of your third-party vendors. By automating your questionnaires and aligning to existing compliance frameworks, ZenGRC can make your third-party risk management program faster and easier than ever before.

Schedule a demo today to learn how ZenGRC can help you manage your third-party risk and move your company in the right direction.