Vendor risk tiering and 3 Reasons to use it for effective vendor risk management

Vendor Risk Tiering for effective Vendor risk management

A survey revealed that only 34% of companies are confident that they can track vendor logins, while over 37% can track the vendors accessing their system—an indication that vendor security standards are fluctuating. What role does the vendor risk tiering play in all that?

Given that businesses interact with over 180 vendors a week, it is understandable that organisations may have trouble implementing an effective third-party risk management policy (TPRM).

With cyberattacks like ransomware and phishing wreaking havoc on the supply chain, however, it is becoming increasingly clear that trusting vendors is no longer an effective security mechanism. 

This means that businesses need to improve vendor risk management to assess their vendors and ensure they are following best security practices.  

How can vendor risk tiering improve vendor risk management?

With cybersecurity teams looking for more efficient ways to monitor third-party vendors, vendor tiering model is quickly becoming a popular option for securing an ever-expanding supply chain. When tiering, cybersecurity teams divide vendors based on the level of risk they present to the supply chain – vendor tiers.

Vendors are often divided into three distinct categories—Tier 1, Tier 2, and Tier 3. 

Classifying vendors allows your cybersecurity teams to streamline third-party risk management (TPRM) while also holding vendors to a higher standard of security. 

Here’s how it could help you. 

It improves vendor security and compliance 

Working with hundreds of vendors a week makes it difficult to guarantee that every vendor follows best security practices. 

Vendor criticality classification, however, helps your cybersecurity team identify third parties that are vulnerable to a cyberattack or are in violation of compliance regulations.

This allows your cybersecurity team to find the vendors that pose the highest risk and allocate more time and resources to improve security. This allows them to focus on fixing the most critical areas and streamline vendor risk management, while simultaneously ensuring that any vendors you work with are following best data security practices. 

It improves vendor security processes 

Vendor tiering allows businesses to implement effective vendor risk management programs by incorporating automation and advanced security metrics to improve vendor security. It allows security professionals to dive deeper into security, prompting them to use advanced security metrics, and create a more sophisticated vendor risk management policy.   

Tiering vendors also creates continuous vendor risk management workflows, which can eventually be automated. Automating vendor security reduces security breaches by 80%, boosting supply chain security.

It improves the onboarding process 

As the supply chain expands, cybersecurity professionals may have a hard time assessing every new vendor accessing your system. This, in turn, makes it difficult to assess vendor security when onboarding a new vendor. 

Vendor tiering circumvents these difficulties by creating helpful workflows that allow security teams to incorporate vendor risk management into the onboarding process. 

Information about each vendor is collected to reveal their current security standards. This information can then be leveraged to assess new vendors, and determine if they are vulnerable to ransomware attacks or compliance violations, before they are granted access to your systems; a process that ensures new vendors follow the best data security practices. 

What is the best method to tier vendors?

Your security team is responsible for establishing criteria to categorise vendors. 

This is particularly helpful for organisations operating in high-risk industries. For example, healthcare organisations can divide vendors into tiers based on how well they follow HIPAA regulations. 

Your team can also establish this criterion using two methods: questionnaire-based tiering or manual tiering. 

Questionnaire-based tiering is an automated method for tiering vendors that saves time without compromising accuracy. 

Vendors will first answer a standard or customised questionnaire that assesses their security standards. An algorithm will then analyse their responses and assign each vendor to a tier. 

By contrast, with manual-based tiering, security teams are responsible for assessing the security capabilities of each vendor by creating a risk profile detailing each vendor’s data security practices. 

This method is advantageous because it allows businesses to customise the process and focus on what is important. For example, they can incorporate GDPR or ISO 27001 requirements into their vetting process to identify vendors falling short of these standards.

Incorporating new vendors efficiently 

As cyberattacks such as phishing and ransomware attacks grow in frequency, and the supply chain expands, organisations need to find new ways to streamline TPRM without compromising accuracy in third-party security. 

Vendor risk tiering is critical for accomplishing this goal because it adds organisation and structure to the supply chain, making it easier to assess vendors and ensures an effective vendor risk management is in place.