Identify and Prevent Vendor Risk In Your Organization
Vendor risk management (VRM) is the process of making sure that the use of service providers and IT suppliers does not have a negative impact on business performance. VRM monitors risks from third-party vendors and suppliers of IT products and services. It is important to make certain that they do not cause business disruption or financial or reputational damage.
An organization should not engage with a third-party vendor until they have performed an evaluation of their potential risks, a vendor risk assessment. Once an assessment has been completed and approved, then the third-party vendor relationship can move forward. Regular assessments help to maintain business standards and provide visibility into vendor security. The assessment identifies hidden risks that otherwise may have been overlooked during vendor onboarding. The types of vendor risks include those related to compliance, reputation, finances, operations, and strategy, as well as an organization’s cybersecurity.
Until recently, traditional third-party risk management strategies focused on fixed points in time. Rather than devoting effort to ongoing monitoring strategies, they relied heavily on upfront due diligence and recertification processes. This article will examine why monitoring and managing vendor risk in real-time, with ongoing visibility, is so important, as well as how to prevent and mitigate those risks.
Managing Your Third-Party Relationships
A third-party vendor is anyone who provides a product or service to your company that does not work for the company. Organizations are outsourcing more of their business processes to third parties and business partners recently. According to Gartner research, compliance programs are focused on third-party risk more than ever before. More than twice the number of compliance leaders considered it a top risk in 2019 than three years ago. So it is so important to make sure that third parties are managing security, finances, and compliance. The risk of cyber-attacks and data breaches from any third-party vendors must be identified and mitigated.
Outsourcing has great advantages in any organization, however, if vendors lack strong security, your company is exposed to risk. Vendors who handle confidential, sensitive, proprietary, or classified information on your behalf are especially risky. If your third-party vendors have poor security practices, they can pose a huge risk to your organization, regardless of how good your internal security controls are.
Third-party relationships can range from one small project with an independent contractor to an ongoing relationship with a large vendor. When assessing a vendor, it is important to understand how the vendor fits into the overall context of your organization’s projects and goals. One important way to reduce risk is to only give vendors access to what data they need to get their job done. No more.
Gartner’s research also shows that the answer to improving risk identification and monitoring is to take an iterative approach. This approach requires some information gathering prior to the third-party engagement but ultimately places a larger emphasis on information gathering over the course of the relationship.
Vendor Risk Management is Needed
In order to reduce risk, organizations need to have a strategy in place for overall risk management in which vendors are measured and evaluated. There are several critical components to a vendor assessment:
- References from other clients
- Financial statements
- Liability insurance verification
- Licensing and training proof in industries with regulatory requirements
- Background and criminal checks
- Assess whether the vendor is able to meet your required service levels
- Determine if proper security controls and technology are in place to manage sensitive information
- Review the terms, renewals, service level, and termination requirements in the contract
You and your vendors need to be transparent about what you expect from each other and what risks are posed. Large parts of vendor risk management can be improved with software. Not only can software reduce costs and operational overhead, but it also can help you identify risks faster.
Traditional risk management techniques like security questionnaires or penetration testing have long turnaround times, often slowing down your ability to gain a comprehensive view of your security stance. This delay greatly increases your risk exposure and can also hurt business outcomes by delaying the onboarding of new vendors or service providers.
Consider investing in software that can help speed up your organization’s ability to comprehensively assess vendor information.
CABEM has a solution:
This decade has seen a massive leap in dependency on third-party vendors. With that has come news-worthy evidence of vendor security holes disrupting operations and damaging brand reputations. You have a responsibility to ensure your vendors are not putting your organization at risk. You need an automation tool that assesses your vendor according to the standards and proves due diligence has been completed thoroughly.
CABEM Assessment and Risk Manager is an assessment and risk management tool that is being used to assess and manage vendor risk and then report that risk to the auditors and stakeholders. It is a tool to help facilitate this assessment and manage the process of evaluating the vendor’s risk as seamlessly as possible. By covering topics such as PCI, PII, HIPPA, and CJIS, for example, the process of evaluating the Vendor can not only be efficient but the results can be easily reported to the Vendor as well as Auditors and internal stakeholders.
Some businesses still depend on semi-annual audits that are tedious, expensive, and not effective enough. So we’ve developed a next-gen solution for managing third-party risk.
With less effort than ever, you will:
- Assess vendors more frequently
- Help preferred vendors improve their standing
- Stay audit-ready
- Protect your brand reputation
- Ensure regulatory compliance
- Maintain operational stability
Here’s How It Works:
Create – Leverage assessment surveys or create your own
Invite – Send vendors a secure link to complete assessments online
Score – Configure automated scoring and acceptance thresholds
Inform – Surface opportunities for vendors to improve
Decide – Compare vendors side-by-side for more informed decisions
Report – Instantly output audit-ready reports
Repeat – Invite vendors to return frequently, confirm past answers, and provide updates
CABEM has 20+ years of experience developing custom enterprise solutions for organizations with the highest standards. To get started with Cabem’s Vendor Assessment and Risk Management tool, contact us today.