As your company grows, outsourcing certain tasks will likely become necessary. Whether procuring materials from outside manufacturers or contracting freelancers to help your marketing efforts, third- and even fourth-party vendors have become critical relationships in any developing business.
Opening your organization to third parties has many benefits. It also exposes your company to new risks you may not have considered. How can you make sure that your vendors are compatible with your risk management efforts?
Vendor risk management (VRM) focuses on managing and planning for third-party risk. The purpose of a VRM program is to provide a management framework to identify, measure, monitor, and mitigate the risks associated with third-party vendor management. It will also allow you to mitigate potential risk related to vendors, IT suppliers, and service providers.
One goal of a successful VRM program is to prevent cyber attacks delivered via third-party relationships, through due diligence and lifecycle management. A VRM program can work with an information security program to examine third-party risk with the lens of protecting corporate assets. Cybersecurity isn’t the only focus, since companies also have strategic, legal, privacy, operational, and reputational risks to consider. By integrating VRM into your risk management program you can protect your company and support a positive relationship with your vendors.
What Are the Benefits of a Vendor Risk Management Program?
The most important benefit of a VRM program is confidence. If you know you’ve done your due diligence, you’ll be able to prioritize running your business rather than minding your contractors. This freedom will give you the ability to expand your organization and take on new opportunities as they arise.
Improving your communications with vendors will also result in an increase in quality and output. With all parties walking in step on security, you’ll be able to streamline your workflow and enhance the services you provide to customers.
Finally, a VRM program will protect you from costly breaches and incidents in the future. A little money and effort today will go a long way towards saving you money tomorrow.
Key Considerations When Developing a Vendor Risk Management Program
When developing a VRM program, consider the following factors:
- All of your vendor relationships should support your institution’s overall compliance requirements and strategic plans.
- Both parties should have sufficient staff members to oversee and manage the relationship.
- New vendors should be evaluated based on the scope and importance of outsourced services.
- Contractors should agree to both initial vendor risk assessments as well as ongoing monitoring throughout their relationship with your company.
- If your company is subject to government regulations (HIPAA, for example) then any contractors who access your data must also be in compliance with those regulatory requirements.
Developing a Successful Vendor Risk Management Program
A third-party risk management program should start with the relationship between organizations. The business needs to work with IT and cybersecurity teams to establish a foundation upon which to build a successful risk management strategy.
The key to this foundation is understanding how the third party manages risk. During the onboarding process, both organizations must agree on what an acceptable risk is before the relationship proceeds to any exchange of sensitive information. Third-party vendor management programs need to examine the supply chain, vendor relationships, and risk management process.
While organizations leveraging a VRM program need to assess reputational, legal, and privacy risks, many organizations begin with cybersecurity risks — since those issues help to identify the other risk areas. An effective vendor risk management program focused on cybersecurity should provide an organization with the following abilities:
Identify. Examine your vendor relationships and flag those that have access to sensitive systems, networks, and data. Vendors should be assigned risk ratings and scores based on reputational scoring, cybersecurity risk, and an overall risk assessment.
Detect. Continuous monitoring is essential if the third-party risk has changed for a vendor. Effective vendors have robust data security practices to help mitigate cyber risk.
Protect. A sound VRM program needs protective security controls and technologies to prevent loss. Systems, networks, and data all need to be appropriately guarded against third-party risk.
Respond. Processes need to be in place in the event of a security incident. In most third-party risk scenarios time is of the essence, so pre-built playbooks are essential.
Recover. In the event of a data breach, organizations need a business continuity plan on how to return to normal business operations. An effective plan will consider staff, processes, and technology.
How ZenGRC Can Help
Whether you’re improving an existing vendor risk management program or starting one from scratch, ZenGRC’s streamlined interface can help you track risk throughout your entire organization — including third and fourth-party vendors.
Automation will also allow you to distribute questionnaires and surveys to your vendors with ease, giving you a clear picture of what your company needs to do to keep threats at bay.
Schedule a demo today to learn more about how ZenGRC can help you manage your third-party risk.