Vendor Risk Management Audit Checklist

Vendor Risk Management VRM Audit Checklist RiskXchange The leader in Third-Party Cyber Risk Management

RiskXchange’s VRM framework can identify and mitigate third-party risk factors, business uncertainties, legal liabilities, and repetitional damage.

Vendor risk management (VRM) encompasses all measures that monitor and manage risks that may arise from third-party vendors and suppliers of information technology (IT) products and services. VRM programs are designed to ensure that IT service providers, third-party products and vendors cannot cause business disruption and financial or repetitional damage to your organisation.

As organisations around the world increase their use of outsourcing, it is fundamentally important to use VRM programs which outline a comprehensive plan for the identification and mitigation of business uncertainties, legal liabilities, and repetitional damage.

An efficient VRM audit process ensures that your vendor risk assessment process is up to date, protects sensitive information, reduces cybersecurity risk, and improves your organisation’s overall risk management process. To help get this under control, one of the main priorities for any business today is to come up with an effective vendor risk management audit checklist. Let’s take a closer look.

Vendor risk management audit checklist

Any successful vendor risk assessment begins with a vendor risk management audit checklist. This includes the operating model, third-party risk assessment framework, and living documents that guide the process. Another element includes using an approved methodology to categorise vendors based on an overall security risk assessment.

To ensure that all avenues are covered, organisations must also supply vendor report reviews that support and document ongoing governance throughout the vendor lifecycle.

What should be included in a vendor risk management audit checklist?

A vendor risk management audit checklist should include a range of security protocols which will protect your network and secure your business. A vendor risk assessment begins here:

Operating model

The operating model refers to the processes, policies, procedures, and people that are in place to guide your vendor management processes. Most organisations now organise their process into three lines of defence (LOD):

1. Business line – generates, owns, and controls the risk.

2. Support functions – provides oversight to the first line. Also includes risk disciplines of operational risk, compliance and more. 

3. Internal audit – remit devised by the board to process-audit the first and second lines of defence.

The lines of defence, along with the vendor risk assessment documents that outline their functions, are basically the foundations of any vendor risk management program. 

Now, let’s take a closer look at the checks you can use to assess your operating model and documentation.

Vendor risk assessment policy

  • Has a structured and easy-to-follow way of assessing information value
  • Has an established and document vendor risk assessment methodology
  • Pinpoints and prioritises assets
  • Pinpoints common threats
  • Pinpoints vulnerabilities
  • Includes a non-bias and consistent way of assessing vendors – RiskXchange cybersecurity ratings are one of the more popular options
  • Analyses, controls, pinpoint when upgrades or when new controls are necessary
  • Calculates the impact of likely scenarios
  • Prioritises risk based on the level of importance and cost
  • Documents the results of all risk assessments
  • Uses a tried and test security questionnaire

Other important elements include: 

  • Vendor management policy – where vendors are categorised by risk
  • Vendor management procedures – provides the workflow to engage in vendor management review
  • Ongoing governance – includes reviewing audit reports and policies

Vendor lifecycle management 

Vendor lifecycle management is a lifetime approach to managing vendors in a consistent way. Vendor lifecycle management places an organisation’s vendors at the heart of the procurement process by recognising their importance and integrating them into the procurement strategy. 

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 to ensure that all third-party vendors and external parties are following your organisation’s operations, rules, and regulations.  

A good vendor risk assessment begins with a comprehensive due diligence exercise on all third-party vendors and service providers. Using continuous security monitoring and attack surface management tools to automatically assess existing and new vendors is key. 

Once this initial stage has been implemented, any high-risk vendors should be sent a vendor risk assessment to complete that can assess their regulatory compliance, internal security controls and information security policies.

The industry standard for vendor lifecycle management protocols include:

1. Qualification: Starts with the process of needs identification and solicitation. 

2. Engagement: Once a vendor is chosen, both your organisation and the vendor go through an onboarding process. 

3. Information security management: Starts from initial contact of a potential vendor through to the end of the vendor relationship. 

4. Delivery: The process of the vendor delivering the good or service, and vendor performance management which can improve disaster recovery and reduce repetitional risk.

5. Termination:  The process of ensuring vendors are off boarded properly – making sure that any contractual obligations are completed, and any sensitive data is returned or destroyed. 

It’s also extremely important to stay on top of the following:

  • Vendor qualification checklist – collect information to ensure the company is legitimate and licensed to conduct business in the relevant sector. 
  • Vendor engagement checklist – once it has been established the vendor is a legitimate business, it is important to ensure they’re not on any watch lists or can pose any threat to your business. 
  • Vendor information security management checklist – data breaches often originate from third-party vendors; it is, therefore, important to stay on top of security management throughout the lifecycle of any partnership.
  • Vendor services delivery checklist – once the security management requirements have been implemented, it is important to monitor how the vendor is delivering the services you have paid for.  
  • Vendor termination checklist – understanding how to off-board a vendor is key. Devising a complex checklist to ensure you off-board vendors properly makes sure your business always remains safe and secure.

How RiskXchange can help  

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. 

About RiskXchange

RiskXchange provides a powerful AI-assisted, yet simple automated and centralised unique 360-degree cybersecurity risk rating management approach. We generate objective, quantitative reporting on a company’s cybersecurity risk and performance, that enables organisations with evolving business requirements, to conduct business securely in today’s open, collaborative, digital world. 

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.