Is Your Current Vendor Risk Management Policy Effective?

In an interconnected business ecosystem, vendor risk management has become a critical strategic imperative for organizations seeking to protect their digital assets, reputation and operational integrity. This blog post will provide readers with a comprehensive guide to evaluating, improving, and fortifying vendor risk management policies against evolving cyber threats and regulatory challenges.

Without key vendors, many businesses may struggle to compete, and, in many cases, having the right vendors can revolutionize your operations. At the same time, your vendors can also expose your biggest vulnerabilities, especially because each may present a new attack vector. A comprehensive vendor risk management policy is key to any organization’s success.

Even if your cybersecurity solutions are air-tight, a small weakness in a vendor’s defenses can introduce threats into your ecosystem. Whether it’s a guest account for a business app, access to a VPN, or a shared database, there’s no shortage of opportunities for hackers if they want to use one of your vendors to gain a foothold in your system.

Vendor risk management, also referred to as third-party risk management (TPRM), hinges on stringent policy. Here, we’ll cover why it’s so important to have a vendor risk management (VRM) policy, what makes a policy ineffective, how to use technology for a strong VRM, and how to gain support, internally and externally, as you build your program.

Key Indicators of an Ineffective VRM Policy

At first, it may be difficult to spot an ineffective VRM policy. After all, it’s easy to assume that your current policy is adequate, especially if you haven’t fallen victim to a devastating attack that showcases ineffective vendor risk management. Here’s what to look out for:

• Lack of formalized vendor risk assessments. Your cyber risk team may informally send an email or have a conversation about a vendor’s risk management, but a systematic process should be in place.
• Outdated or incomplete vendor documentation. The documentation your organization has for each vendor should list up-to-date information regarding how they protect both their digital assets and yours.
• Limited visibility into third-party vendors risks. Even if you know how your vendors protect your information, you should also understand how they protect themselves from attackers.
• Reactive versus proactive management of vendor-related incidents. An effective vendor risk management policy includes systems that enable your organization to predict risks posed by vendors, not simply react to them in the wake of an incident.
• A lack of a documented risk tolerance level. When you clearly outline your risk tolerance level and what to do when a risk exceeds your threshold, you enable your organization to act on vendor risk instead of merely acknowledging it.

Evaluate Your Policy’s Alignment with Industry Standards

Vendor risk management is more than a thoughtful safeguard. It’s included in cybersecurity frameworks, such as NIST, ISO 27001, and CIS. These frameworks describe how to protect your system from third-party attacks and the vulnerabilities you need to watch out for. Each framework establishes standards and best practices regarding how to protect your digital infrastructure.

Regular audits and risk assessments also play a critical role, primarily because an effective solution on day one may not offer the same protections a few months later. This is especially true because new threats emerge in the landscape, and your third-party vendors may not have systems to defend against them. By systematically performing regular audits and risk assessments, you ensure that your protections and those of your vendors align with the most recent best practices.

It would be hard to overstate the importance of aligning your VRM policies with those specific to your industry. Adhering to these requirements helps safeguard sensitive customer data and that of the partners you serve, such as patients and other organizations. In addition to keeping your business running smoothly and avoiding security issues, adhering to regulatory requirements can help you avoid significant fines.

Use Technology for VRM

While implementing a vendor risk management system can seem laborious at first, technology can help. Modern solutions can collect and report vendor risk data using real-time monitoring.

As important, you can use a VRM platform to collect data regarding the risk each vendor presents automatically. Some tools that many find helpful include:

• Real-time risk assessments. These systems use data about a vendor’s potential vulnerabilities to assess their risk and report it to your security team and other stakeholders.
• Vendor scorecards. Using vendor scorecards, you can make an apples-to-apples comparison of different service providers, making it easier to compare the risks they each present and your overall risk tolerance level.
• Integration with your existing tech stack. By choosing the right vendor risk management software, you can integrate it with your existing enterprise resource planning (ERP), customer relationship management (CRM), or other system.

Engage Your Internal Teams

Building a solution that effectively minimizes the risk presented by vendors requires A-Team effort. There’s simply no way your IT team can do it on its own, especially because you have to share so much data, and there may be significant legal issues.

Therefore, you should bring several team members to the table, such as:

• Your legal department or consultants. They can identify liability risks that each vendor may present, as well as potential data protection issues introduced by different business partnerships. In addition, they can draft agreements with vendors that include cybersecurity clauses and what vendors need to do to protect your digital assets.
• Procurement. Your procurement employees should have a solid understanding of the kinds of information you need to share with each vendor to facilitate smooth transactions. This gives you a deeper view of potential vulnerabilities.
• Compliance. Your compliance team will better understand the regulatory risks you may assume by exchanging information with a vendor.

One of the most important pieces is establishing clear ownership and accountability for your vendor relationship management processes, particularly because it’s easy to pass the buck, even inadvertently, to someone else. For example, in some organizations, it may make sense for department heads to assume responsibility for minimizing the risk introduced by third-party vendors just because they personally interact with each vendor. In other organizations, the IT team may be best positioned to oversee the VRM solution.

Regardless of who’s held accountable, everyone needs to take ownership. This means you have to train employees so they can identify and mitigate vendor-related risks. For instance, they should understand how data moves between your organization and vendors, where it gets stored, if necessary, and what outsiders can access whenever they connect to one of your systems.

For example, suppose an organization uses a third-party, cloud-based application to store customer data. Every employee who interacts with that data needs to understand:

• Which internal database or area of their PC holds customer data – even if it’s only temporarily
• The information the vendor’s personnel, such as its customer support team, needs to have access to in order to perform their jobs
• The access controls in place to prevent vendor personnel from interfacing with data they shouldn’t
• How to differentiate a phishing attempt from a legitimate communication from the cloud app provider’s team
• Who to report suspicious activity to and what to do in the short term to protect your infrastructure if they think an incident is likely

When to Seek External Support

The signs that your internal resources aren’t enough to effectively manage vendor risk may be relatively easy to spot. For instance, if you have little to no data immediately available regarding the risk each vendor presents, it may be time to seek outside professional assistance. If your onboarding process doesn’t systematically examine the risks each vendor introduces, it could also be a good decision to get some help.

By partnering with consultants or third-party experts, you gain:

• Expertise regarding the risks presented when your network interfaces with one that has different security features
• Knowledge regarding the best types of questions to ask in your risk assessment surveys
• Experience with minimizing risks posed by vendors with varying levels of security resources
• An objective third-party expert who can help you determine your overall tolerance for vendor risk
• Assistance with creating strong cybersecurity clauses, incident response plans, and post-incident root cause analysis strategies

For many organizations, getting external support is a necessity. This isn’t because your internal teams are careless or lack the time to reduce your risk profile. Rather, many highly qualified professionals simply don’t understand the risks you may encounter.

To illustrate, your IT team may understand the threats attackers may use to get past your firewalls. However, they may not have experience performing penetration tests that simultaneously test your defenses and those of a third-party service provider.

Upgrade Your Vendor Risk Management Policies to Enhance Security

Your VRM policy needs to be comprehensive to reduce your risks adequately. Without deep visibility into the risks each vendor presents — and methods for mitigating and responding to them — you may inadvertently erode your business’ digital infrastructure and expose it to attacks.

Evaluate your vendor risk management policy today and ensure your vendors are assets — not liabilities.

Data breaches and ransomware attacks threaten financial stability and customer trust that could impact your organization for years to come. Our Cybersecurity experts can help you address your most pressing cybersecurity issues and keep compliance a continuous commitment at your organization. Contact us