Third Party Vendor Management Audit Program

Large organizations now depend on vendors and service providers to survive. They need those third parties to provide everything from critical components and goods to critical services, such as data storage, payroll, legal help, and much more.

All of this means that organizations must perform due diligence on those vendors, to assure that those third-party relationships don’t expose your own organization to unnecessary risk. You need a vendor risk management program.

What Are the Top Vendor Risk Issues?

The top vendor risk issue is cybersecurity. Service providers need access to your organization’s important data, and your employees need access to those service providers’ IT applications. Meanwhile, vendors of goods typically have access to your network so they can submit invoices, process orders from you, or otherwise communicate about the business relationship. Each time those third parties contact your IT network, that’s a security risk.

The rise of remote work has only made those risks even greater, since now your employees (and the vendors’ employees too) might access your systems and data from remote locations. Each of those locations brings its own security risks too, such as poorly configured networks or personal devices with weak security protections.

In short, your use of vendors and service providers expands your supply chain, and each link in that chain becomes a potential “supply stream security risk.”

What Are Supply Stream Security Risks?

Data breaches within your supply stream are a significant information security threat. The IBM Security X-Force Threat Intelligence Index 2023 found that phishing and ransomware attacks through the supply chain are a leading infection vector in the past year. Plus, the time to execute such attacks has gone down by 94 percent in recent years; attackers can launch new attacks more easily and quickly than ever before.

This puts enormous strain on your vendor risk management program. You need to incorporate vendor risks into your enterprise risk assessment, and then develop new mitigation measures to reduce those vendor risks to acceptable levels — and do it all double-quick.

Start with a Third-Party Risk Assessment Process

A risk assessment requires you to review the potential threats that can arise from working with third parties. Since malicious actors constantly update their tactics and strategies, you must start with primary risks and ultimately expand to an ongoing monitoring model.

Some inherent risks in using third-party vendors include:

• Unauthorized access to networks, applications, and data
• Ransomware attacks
• Privacy breaches
• Spyware
• Regulatory compliance risks

How Risk Assessment Differs from Vendor Management

Risk assessment is one part of vendor risk management, and importantly, it’s the first step. Risk assessment catalogs the potential risks that vendors might pose to your organization. Then (as the name implies) your larger vendor risk management program manages those risks so they’re kept at acceptable levels.

This can be a complicated process, because each vendor poses its own unique set of risks. Some might be slow to patch outdated software; others might have inadequate firewalls, and still more do poorly at employee security training. You’ll need to create an overall strategy that reviews all the vendors’ weaknesses, and then mitigates those specific threats while also establishing a long-term process for adjusting to a shifting threat environment.

How Internal Audits Can Improve Third-Party Risk Management

If your organization has an internal audit team, they can be an invaluable resource to strengthen your vendor risk management program. Internal audit teams assess your organization’s risks, test the strength of any internal controls you have to address those risks, and offer recommendations on how to improve any deficient internal controls.

For vendor risk management, this means internal audit can collaborate with IT, procurement, and supply chain leaders to prepare a due diligence checklist for vendor risks, and otherwise assess the state of your vendor risk management program. It will still require considerable effort to launch the program, but nobody knows your business processes better than your internal controls team.

How to Use Audit Reports to Enable Third-Party Risk Management

One tool to gain assurance over a vendor’s security risks is to commission an audit on that vendor’s own security program. For example, SOC 2 audits can assess a vendor’s cybersecurity program. Moreover, certain regulatory obligations (such as the European Union’s General Data Protection Regulation and the PCI-DSS standard to protect credit card data) require companies to assess the security risks of their vendors; independent audits such as those done according to SOC 2 standards are a great way to meet that obligation.

All that said, organizations must also worry about security risks that emerge between those vendor audits. In other words, you must also develop a continuous auditing or monitoring capability to detect security risks that might emerge after onboarding a vendor or between audit periods.

How Automation Supports Continuous Auditing of Vendors

You can maintain better control over vendor activities by using automated tools. For example, by continuously monitoring known vulnerabilities that might affect your vendors, you can understand their security stance and assure that it aligns with your own.

Patch management is another example, and an important one. Knowing your vendors’ security controls means you can also see whether they’re running Windows, Mac, or Linux operating systems. From there, you can understand when or whether they’re updating those operating systems to implement the latest security patches on a timely basis. That is, you can continuously monitor the risks they pose to your data environment.

Additionally, you need to maintain records of these monitoring activities. No matter where you are in the supply chain, you need to prove to your customers that you’re engaging in the appropriate review of your vendors’ threats so that up or down the chain, you mitigate risks the best way possible.

How RiskOptics Enables Continuous Vendor Risk Management

The RiskOptics System-of-Record dashboard makes continuous auditing and reporting easy, thanks to the comprehensive ROAR platform. By streamlining the workflow, organizations can eliminate emails while tracing outstanding tasks.

Additionally, the unified control management feature allows organizations to map controls across multiple frameworks, standards, and regulations to determine whether gaps exist in your vendor risk management program. This mapping capability allows organizations to assure consistency, which leads to more substantial audit outcomes.

For example, as part of the System-of-Record dashboard, organizations have at-a-glance insight into the percentage of controls finalized and a portion of controls mapped to a particular framework. The streamlined workflow on RiskOptics shows task managers the date a vendor provided a response and a status. Access to these details means that compliance managers no longer have to spend time following up with the organization’s many vendors.

GRC automation enables organizations to focus on fundamental compliance issues while eliminating the tedious tasks that often make compliance feel like a burden. Not only does this help compliance officers feel more effective at their jobs, but it also makes organizations more efficient at the ongoing task of governance and continuous monitoring.

To see what continuous vendor audit management looks like, schedule a demo with RiskOptics today.