What is vendor risk management? Vendor risk management (VRM) is the policy of ensuring that the relationship between service providers and IT organizations does not create an opportunity for interruptions in business productivity, profitability, and performance. The VRM process indicates that organizations should consistently monitor, manage, and assess their risk potential from outside vendors and any third-party suppliers that provide IT products, services, and solutions or that have access to proprietary organizational data.
There are many vendor risks that third parties can bring to your organization. Below are some of the types of vendor risks to be aware of in order to keep your enterprise safe.
Reputational risk: A big part of third-party vendor risk management is based on reputation. It is imperative that an organization does a thorough due diligence investigation before starting a relationship with any third-party vendor. You want to be able to establish a solid reputation for maintaining the integrity and security of any shared data. The damage to your company that could be caused by a data breach could cause irreparable harm to your organization's reputation.
Vendor risk management is important because failure to appropriately acknowledge the risk vendors can potentially bring to your organization is irresponsible. An ineffective vendor could expose your organization to cyberattacks and data breaches that could potentially harm your organization’s reputation and financial standing tremendously. There are processes taking place today to make vendor risk management a requirement in the very near future.
There are three steps to help you reduce vendor risk:
Vendor risk management software is a type of business enterprise software that helps companies safely and securely manage the risk of vendor relationships. Although some of these solutions can be analytical, using existing data to help decision-makers identify risks and make adjustments to avoid possible threat scenarios, there are other options. Some solutions will offer audit trails, monitoring, assessment, and reporting to ensure all active parties are using their access to the organization’s data correctly and that no inappropriate activity is taking place.
The benefits of IT vendor risk management solutions include:
Look for the following features when choosing an IT vendor risk management solution:
Onboarding and due diligence made easy: The IT VRM solution should have a way to automate the screening and onboarding process for every potential type of vendor relationship within your organization. The solution should be able to evaluate the risk for each IT vendor, establish a schedule of regular assessments, and mitigate any risks prior to the onboarding process. Additionally, the solution should also be able to validate all vendor information from internal or external sources.
Consistent risk assessment and monitoring: Your chosen IT VRM should be able to regularly provide vendor-related alerts based on the level of importance or access to critical data within your organization. The solution should also be aware of the vendor's reputation, risk, and compliance standards gained from other industry content providers. All issues should be logged and rated depending on the potential risk mitigated. There should be continual on-site or online audit assessments for evaluating the IT vendor relationship, and performance improvements should be issued when required.
