Vendor Risk Assessment: 11 Best Practices to Help Manage and Mitigate Third-Party Risk

Here’s how successful organizations are conducting vendor risk assessments.

A vendor risk assessment, also known as a vendor risk review or a vendor assessment questionnaire, allows your company to gauge the amount of risk involved in your relationship with a third party vendor. Why is a vendor risk assessment so important? It’s the first step in a strong vendor risk management program, and it could make your job a lot easier too.

A strong vendor risk assessment allows you to pinpoint potential problems before they arise, giving you the option to either remedy the situation, or end your relationship with the vendor in question. When done right, vendor risk assessments can save you time, money, and energy.

Here are 11 best practices that will help you create a more efficient, effective vendor risk assessment program.

1. Modernize your Processes.

The vendor risk assessment landscape is rapidly changing. If you are still using the same skillsets, methods, and systems that worked three years ago, it’s probably time for an update! To keep abreast of current risks, vendor information security professionals should always be open to adopting new tools and methodologies.

2. Ask for the tools and resources you need.

You already know that vendor risk assessment plans are vital, but everyone in your company may not agree. Be prepared to demonstrate the value of a strong vendor risk assessment plan to those who may not speak the language of technology. Discussing specific examples of situations that could have been prevented, such as recent third-party data breaches, might help your case.

3. Take advantage of control frameworks that are already in place.

Your vendors and third parties employ an ever-changing array of architectures and technologies. By basing your vendor risk management work on a standardized framework such as NIST, ISO, FFIEC CAT, COSO, or COBIT, you can benefit from the efforts of hundreds of professionals and organizations all over the world.

4. Streamline your process by working backwards.

You can create a stronger vendor risk assessment  by designing your activities around your control framework. Work backwards from your controls in order to determine what activities you need to perform to assess compliance. Your current activities that don’t fit can be eliminated.

5. Improve communication by leveraging your control framework.

Mitigating vendor risk takes cooperation, but it can sometimes be challenging to communicate with stakeholders outside of the tech industry if they don’t know the lingo. Standardized controls are instantly understood internally and externally. They are especially helpful with non-IT professionals who make key decisions on vendor approval and commitments.

6. Don’t forget about the small vendors.

If you are only evaluating risk for vendors in specific categories or above a certain spend, you are in effect, labeling the others as zero risk. Instead, consider using a brief materiality assessment that determines their level of risk based on criteria you can defend.

7. Spend most of your time and resources on high risk vendors.

Once you’ve found a way to easily assess your small vendors, you can focus on the big guys. You should always subject your medium and high risk suppliers to a virtual or onsite vendor risk assessment. Low risk vendors can be moved to the approval process to be re-evaluated periodically or when conditions change.

8. Customize your efforts to the specific risks of each vendor.

A blanket process for all high risk vendors may not be effective. It’s helpful to think about what risks each vendor poses before starting. If Physical Security is a risk for Vendor A, focus your time & efforts there. If Incident Management and Cloud Security are a concern for Vendor B, be ready to shift gears. In other words, taking the time to understand the data that the vendor touches will make your job easier in the long run.

9. Automate your vendor risk assessment process and workflow.

If you are using spreadsheets and email to manage your vendor information security risk, you could be spending more time chasing, aggregating, and presenting information than mitigating vendor risk. When you automate the clerical and administrative tasks associated with assessing vendor information security, you will see large increases in productivity. And you’ll be happy you don’t have to do as much entry work, too.

10. Utilize the valuable vendor risk data already in your systems.

Some of the data critical to vendor risk assessment security is already housed in your ERP’s vendor master, in a P2P program such as Ariba, or in a GRC (Governance Risk & Compliance) system. Why not take advantage of the tools you already have?

11. Buy the critical information you are missing.

Some of the information you seek as part of your vendor risk assessment is available from outside sources for a price. Examples include IT security feeds, industry category, and parent/child information. With the stakes as high as they are, the ROI on these expenditures usually justify the cost.

Managing the vendor risk assessment process and third party risk efficiently and effectively requires time and effort. Protecting your business with an automated risk management platform frees up resources to focus on growth. Opus provides solutions that streamline the process for you, thereby enabling your company to 1. assess and monitor vendor risks and 2. automatically apply the appropriate controls to mitigate the risks and ensure regulatory compliance. Could your company use some assistance implementing a stronger vendor risk assessment procedure?

Request a free demo today.

This post originally appeared on LinkedIn.

David Giat
David Giat
Account Executive