Whether you’re a small business or a large enterprise, a vendor risk management program, also known as third-party risk management (TPRM), is critical to the cybersecurity and long-term sustainability of your business in today’s threat landscape.
Third-party vendors are external persons or companies that provide a product or service to your organization. From a business standpoint, relying on third parties often makes lots of sense. They can help you maintain a competitive advantage, decrease in-house costs, and improve overall profitability. Businesses often enlist a third-party vendor to fill a gap in the company’s existing capabilities.
That said, third parties are still outsiders accessing your internal systems and information. It’s critical to manage them properly and avoid unnecessary risk exposure.
What is the importance of vendor risk management?
Vendors introduce additional risks to your organization. While vendors might also bring significant cost savings or competitive advantage to your operations, those gains can quickly be erased if a vendor is the cause of security breaches, compliance violations, or data loss. You must be able to manage, mitigate, and monitor these risks for the sake of your business.
According to the 2020 IBM Data Breach Report, the average total cost of a data breach was $3.86 million in 2020! A single loss of that size could be enough to cripple your business, or at the least, cause significant damage to its reputation.
Hence the need for a robust third-party vendor risk management strategy.
How do you manage third-party vendors?
So how do you manage third parties (especially high-risk vendors) and the threat they pose to your business?
Before onboarding a third party, it’s important to conduct a vendor risk assessment to understand what inherent risks are involved in the proposed working relationship, and then do your due diligence to manage those risks. We’ll review how to conduct a risk assessment in the next section.
It’s also important to communicate frankly and routinely with your third parties about your business needs and what they need to do their job. A good best practice would be to schedule a weekly phone call or video chat to talk, review project status, and uncover any issues that must be addressed.
That communication discourages vendors from acting unilaterally, even if they believe they’re acting in your company’s best interests. It allows you time to consider what levels of access to grant them, or what controls to introduce. Regular communication allows you to consistently re-evaluate vendor performance and ensure that your business and the project are on track toward a successful conclusion.
What do I need to perform vendor risk assessment?
When conducting your vendor risk assessment, we suggest the following best practices.
- Identify and document inherent risks and their criticality. It’s important to prioritize by criticality or severity: low, moderate, or high; and designate the vendor by its risk rating.
- Supply your vendor with a vendor risk management questionnaire. This helps to assure that your vendors have done their due diligence to avoid a data breach or other cyberattack due to lax security measures.
- Assess the vendor as a whole, as well as the individual services it’s providing. Particularly for those vendors that provide multiple services, it’s important to understand risk scores for each of the services they provide as well as their overall risk as a company.
- Determine what remediation steps are necessary. This will vary depending on the level of risk that a new vendor poses. When determining risk management processes, consider their contract, service level agreements (SLAs), as well as on-going monitoring throughout the relationship lifecycle.
- Stay up to date with changing risk and compliance regulatory requirements. Laws and standards receive updates routinely, and it’s your responsibility to understand them and implement new requirements into your processes as well as your vendor risk management policy.
- Assure stakeholders and senior management stay informed. Senior management and stakeholders should be kept informed about your vendor risk management program and any changes that occur. This visibility can assure that everyone is informed and prepared in the event of a breach.
- Maintain a consistent, repeatable vendor management plan. Risk assessment and ongoing management need to be a reportable, repeatable process that is consistent across all vendors and that all appropriate parties have visibility into.
Bottom line: it’s important that you apply a comprehensive vendor management workflow for vendor risk assessments to every vendor. Don’t underestimate the potential risk for a vendor simply because it appears that its work doesn’t directly affect your information security.
Even a landscaper or shredding company may pose a severe risk that you might overlook, unless you do your due diligence with the help of a robust risk management solution.
What are IT vendor risk management tools?
Vendor risk management software gives your business a comprehensive overview of a vendor’s IT infrastructure so you can better understand and assess the risk to your own organization. A risk management platform will also assign a security rating and provide insights on potential areas for concern.
With the insight provided by third-party risk management software, your organization can:
- Gain the visibility you need to understand and manage vendor risk
- Allow you to monitor vendor risk continuously
- Verify details provided by vendor questionnaires
- Prioritize risk based on the severity, and take action to mitigate risk
How does GRC software help me manage vendor risk?
Trying to conduct due diligence reviews of vendors and their security risks can be time-consuming and expensive if you use manual processes and legacy tools like spreadsheets.
A GRC compliance management tool can help you to streamline vendor risk management through the automation of tedious manual tasks, allowing you to understand vendor risk at a glance.
Onboarding a vendor is only the beginning. From there, continuous monitoring of your vendor is necessary to assure compliance and risk management is maintained.
The ZenGRC software solution takes the headaches and stress out of vendor risk management. Its easy-to-use risk management templates provide the framework you need to properly evaluate risk, while our user-friendly dashboard centralizes your monitoring efforts in real-time so you always know where you stand.
ZenGRC automates your risk management workflows so you can quit sweating the details, and focus on tasks that grow your business, like nurturing your vendor relationships, and creating a collaborative environment that allows you both to thrive.
Furthermore, Zen keeps track of vendors’ compliance across multiple frameworks such as GDPR, CCPA, HIPAA, and more.
Worry-free vendor risk management is the Zen way. Find out more by booking a free demo of our software today.