RiskXchange’s VRM framework can easily identify and mitigate third-party risk factors.
Vendor risk management (VRM) is the process of dealing with monitoring and managing risks that may arise from third-party vendors and suppliers of information technology (IT) products and services. VRM programs are designed to ensure that third-party products, IT service providers and vendors cannot cause business disruption or repetitional and financial damage.
As businesses increase their use of outsourcing, it has become abundantly clear that using VRM programs which outline a comprehensive plan for the identification and mitigation of legal liabilities, business uncertainties and repetitional damage is key.
Organisations worldwide are now entrusting more of their business processes to third parties, which means they must ensure external partners are managing data security, information security and cyber security well. Taking steps to protect a business ensures threats from attackers and data breaches are kept to a minimum. Vendor management manages these risks.
The top reasons why you should prioritise vendor risk management
A whole host of things can happen if you fail to adopt VRM within your organisation. Let’s take a closer look at the top reasons why you should prioritise vendor risk management:
1. The likelihood of data breaches is significantly increased, and the lack of disaster preparedness can be extremely damaging. A load more issues tend to follow the initial breach, like repetitional damage, customer complaints and more.
2. If vendor risk management isn’t made a priority, organisations run the risk of failing to verse their employees on the best practices to follow. Confusion on processes will arise if people are not on the same page.
3. Insurers, examiners and auditors will have a problem if they realise that you’re not properly analysing third-party vendors.
4. The chances that significant vendor risk will go unnoticed for much longer is significantly increased, or even worse it could cause irreparable damage.
5. If you do not prioritise practices through a VRM plan then neither will the teams that work for you, therefore increasing the risks.
6. Critical vendor dates like contract renewals or servicing will be missed, which will not only cause issues in the short-term but the long-term too and cost you more money.
7. Vendor due diligence will begin to fall by the wayside because vendor risk management is something that needs to be monitored and maintained constantly. Compliance will become outdated and the flaws that exist within third-party vendors will fall through the net.
A lot can go wrong if you push vendor risk management to one side, so it’s important to come up with a plan to protect your organisation and its assets.
Implementing a healthy vendor risk management plan
A VRM plan is an organisational wide initiative that outlines the behaviours, access and services plan all parties agree to when going into partnership in business. It is the lead initiative set forth by the “ruling organisation” to ensure that all third-party vendors and external parties are following their operations, rules and regulations.
The plan should outline key vendor information and guide all parties involved to ensure that everyone is aware of exactly what is expected, how and when. It should outline how the “ruling organisation” tests and gains assurance of vendor performance. The plan should also describe how the vendor will be able to ensure the organisation’s regulatory compliance and how not to expose data in security breaches.
The document will fully outline the relationship between the vendor and third parties, include a detailed account of the services provided and a step-by-step checklist of all elements involved.
In order for a VRM plan to be successful, all parties must understand the vendor risk assessment process and be willing to work with the “ruling organisation’s” compliance, HR and legal teams and internal audits so that the plan can be followed for each new and existing vendor.
How RiskXchange can help
Before considering third-party vendors or choosing an operating model, companies must establish a clear VRM framework and methodology for categorising their business partners. This process aligns business objectives with vendor services and articulates the underlying logic to senior management.
When reviewing risk assessments, documentation proving the evaluative process as well as Board oversight is needed. Review of the vendor categorisation and concentration will also take place as part of the risk assessment methodology.
RiskXchange’s VRM framework can identify and mitigate third-party risk factors, business uncertainties, legal liabilities and repetitional damage.
Many organisations conduct due diligence into their third-party vendors, but what most are unaware of is that in order to maintain strong security controls these vendors must be audited and continuously monitored.
RiskXchange knows that successful audits begin by establishing an audit trail. The operating model includes vendor categorisation and concentration based on a risk assessment. Organisations must also supply vendor report reviews showing ongoing governance throughout the third-party vendor life cycle in order to pinpoint and avoid the risks.
More about RiskXchange
RiskXchange is an information security technology company, that helps companies of all sizes fight the threat of cyber threats by providing instant risk ratings for any company across the globe. RiskXchange was founded and is led by recognised experts within the security industry, who have held leading roles within companies such as IBM Security.
Find out more here.