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Vendor risk management includes various potential risks that your company may face when doing business with third-party vendors, including financial, operational, reputational and regulatory.
As technology and communications allow businesses to expand their supply chains, the complexity of vendor risk management increases. Your business is likely working with more vendors than ever before, and each of those vendors is going to pose some level of risk to your organization. Do you feel confident that you understand those risks, or that you have them under control?
With vendor risk management, you’ll take a more proactive role, identifying and analyzing your prospective vendor partners, and mitigating your potential risks as much as possible.
Third-party risk management programs need to focus on multiple layers of protection. One significant risk is security. Vendor security risk management is a strategy designed to limit the number of threats, vulnerabilities, and weaknesses your organization faces due to the vendors in your supply chain. A vendor is typically a third-party organization that sells a product, service, or piece of equipment that your business needs to operate.
Each vendor, upon being connected to your organization, is going to carry some level of cybersecurity risk. If they fail to uphold their end of the deal, or if they’re the victim of a cyberattack, it could impact your organization directly. An effective risk assessment, as part of a greater vendor risk management plan, strives to identify these potential failure points long before they become a problem and fix them.
Vendor security risk management is an ongoing process, and one you’ll execute with every vendor you bring into your supply chain. Typically, the process looks like this:
Design your third-party risk assessment so it addresses compliance requirements and regulatory requirements for the industry with the goal of strengthening the business relationship with potential vendors.
Companies face risks when they engage in third-party services. If you’re working with vendors handling confidential, sensitive, proprietary, or classified information, they may be especially risky. Third-party vendors who don’t follow best practices can be a big risk even if your own internal security measures are strong.
A good vendor risk program will ensure that vendors are paid on time and for their products or services. It’s easier to address potential risks than to deal with them after they occur. Accountability for both the company and vendor is understood.
Vendor security risk management helps organizations protect themselves against a variety of different threats, including operational risk, financial risk, legal risk, and reputational risk.
Vendor security risk management is designed to protect your organization from a number of independent threats, including:
If you’re going to be successful with a vendor risk management strategy, you’ll need to pay close attention to these areas:
Effective vendor risk management must hold up to regulatory scrutiny. This begins with understanding industry regulations, strategic objectives and acceptable risk levels. Make sure the people in charge of vendor risk management have the complete picture.
Do you need assistance conducting vendor risk management in your organization? Sign up for a free demo of Panorays today, or contact us to learn more.