According to a recent Gartner’s survey, 84% of companies reported that the inability to identify, evaluate and prioritize third-party risk has led to operational disruption. They need tools that give them greater visibility, context and continuous data on these risks to improve their effectiveness in third-party risk management. One of the tools to help organizations identify, mitigate and remediate against third-party risk is vendor assessment questionnaires.
Vendor Assessments and TPRM
As organizations rely increasingly on third-party vendors who often outsource critical services to fourth, fifth, and Nth parties, they are more susceptible to risks posed by these third parties. These risks can cause supply chain disruptions, hefty fines for non-compliance with various regulations and reputational damage, not to mention data breaches and other security incidents.
The recent CrowdStrike supply chain attack is one of the most recent examples of the extent to which these risks can impact customers. While it did not pose a cybersecurity threat, the failed third-party service update resulted in over 5,000 canceled flights and disabled an estimated 8.5 million computers globally. This impacted companies across various industries, from airports and transportation to supermarkets and broadcasters.
Why are Vendor Assessment Questionnaires Important?
Vendor assessment questionnaires evaluate the overall risk a specific vendor poses to your organization. While these risks can include cybersecurity risks, they may include business continuity, governance, compliance, operational, legal and financial risks. Due to the dynamic nature of third-party vendors, IT infrastructure, and the cybersecurity landscape, however, it is critical that vendors are continually reassessed by these questionnaires, as the information gained from it can quickly change.
A vendor assessment questionnaire functions as a due diligence tool that evaluates how the vendor complies with industry standards, regulations, the company’s own policies and security practices. It also verifies whether or not the vendor has a plan for operational capabilities in the event of disruption, and whether or not the vendor is strategically aligned with your organization. As a result, many organizations find that vendor assessment questionnaires help them to build stronger vendor relationships that are more collaborative and are able to negotiate better terms and conditions for each party.
The Vendor Assessment Questionnaire Process
The vendor assessment questionnaire process should be a coordinated effort between risk management teams, procurement, finance, project managers and business owners to strategically align the goals of the questionnaire with business objectives. For example, if the organization has prioritized avoiding regulatory fees at all costs, special attention must be given in the questionnaire to evaluating third-party compliance of relevant regulations such as PCI DSS, GDPR, CCPA and NYDFS. Since these goals can change at any point in a business, the different parties and stakeholders must meet regularly to synchronize and continually assess the ability of the vendor risk assessment to identify and evaluate the prioritized risks posed by third-party vendors.
10 Critical Question Categories for a Vendor Assessment Questionnaire
Since the vendor assessment questionnaire is typically broader in scope than a cybersecurity questionnaire, it covers a variety of topics to assess the vendor’s internal policies, procedures and practices and their potential for risk.
1) Governance and Organizational Structure
These questions would help identify your third party’s executive management, board of directors, and explain the role of any committee. It might also ask specific details of its risk management policy, such as the specific framework or strategy it uses. It may ask questions that attempt to gauge how stable the organization is, such as the implications of any recent changes and its succession plan for the retirement, firing or sudden departure of high-level executives.
2) Compliance and Risk Management
Questions related to compliance and risk management might include those that evaluate the preparedness of the vendor’s incident management and recovery, the compliance and regulations it requires both internally of its organization and its third parties, and any compliance training and awareness programs it offers its employees.
3) Data Protection and Encryption
These questions would explore data security policies such as data access controls, the specific standards of encryption used, and the process the vendor uses for handling, processing, and storing sensitive data.
4) Access Control and Monitoring
Questions in this category might be related to the technologies the vendor uses to secure remote connections, such as VPNs and endpoint security. It might also inquire as to how privileged accounts are monitored and the policies in place for secure third-party access to sensitive data.
5) Network Security
This includes questions that help to evaluate the overall security of the organizations’ network and how susceptible it might be to attack. Questions might evaluate security procedures for remote access services, wireless and physical connections and how they limit their exposure to external threats.
6) Incident Response and Management
The vendor risk questionnaire should ask about the process involved in responding to an incident, the training of the incident response team, how the incident is communicated within the organization, and how incidents would be potentially mitigated or contained. It would also ask about the roles of any third parties in this situation.
7) Third-Party Management
Questions about the policies the vendor has related to third-party management help evaluate whether or not the vendor is exposing your organization to compliance risks and whether or not they align with best practices in the industry. It might also include questions related to contract management, or how.
8) Security Awareness and Training
The questionnaire would ask about the types of security awareness and training given to employees, its frequency, and if the training is customized for employees in different roles. It might also ask how the vendor evaluates the effectiveness of the security awareness training program and if any follow-up training is offered to ensure the employees are able to retain their knowledge.
9) Physical Security Measures
This can include questions related to the policies and procedures for physical security, such as surveillance systems, disaster preparedness, and how physical assets are secured (e.g., servers, data storage devices, and network equipment). If the vendor operates a data center, it would include questions to evaluate the security measures on it.
10) Asset Management
These questions would include ones that seek to understand the lifecycle management of assets, including ones that ensure information and data is properly erased to pose no future threats. It would also ask about controls used to protect critical assets and how the vendor defends against unauthorized use or access to assets.
How Panorays Helps You Manage Vendor Risk
Panorays offers a contextualized approach to third-party risk that extends visibility into your supply chain to include identification and mapping of third, fourth and n-th parties.
Its modules include:
- Supply Chain Discovery. Automatically discover unknown third, fourth, and n-th parties in your supply chain and define the relationship between your organization and each third party so that you have a better understanding of potential risks and their impact on your organization.
- Risk DNA Assessments. Conduct both internal and external assessments of your third parties and determine each supplier’s risk appetite. Risk DNA also takes into account all third-party breach history and generates AI-driven predictions for future data breaches so that you can assess the risk of a business relationship with that vendor.
- Continuous Threat Detection. Leverage third-party threat intelligence and a contextualized view of your supply chain to get alerts of any relevant data breaches or supply chain attacks from third parties.
- Remediation and Collaboration. Close supplier gaps immediately with an aggregated remediation plan for each vendor. Each plan takes into consideration your risk appetite, critical findings and potential business impact of each risk.
Want to learn more about how Panorays can help you manage third-party risk and build stronger relationships with your third parties? Get a demo today!
Vendor Assessment Questionnaire FAQs
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A vendor assessment questionnaire evaluates the overall risk the vendor poses to your organization. It may cover areas such as compliance, business continuity, operational risks in addition to cybersecurity.
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A vendor assessment is executed by establishing a process that includes the input and aligns the goals of various departments throughout the organization. This includes the risk management and IT team, finance, procurement, project managers and business owners and any other stakeholders.
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The basic elements of a vendor assessment include identifying risks, evaluating their impact on the organization, deciding on which controls are necessary to mitigate the risks, documenting the process and policies within the organization. Finally, the vendor assessment must be monitored and reviewed continuously to ensure its accuracy.
