Maximizing business Security: The importance of vendor risk assessment
Outsourcing is the new norm for businesses to scale and succeed. From IT service providers to manufacturing suppliers and marketing agencies, third-party vendors are crucial for companies to achieve their long-term goals.
This reliance, however, comes with substantial risks.
According o a recent Gartner survey, 84% of organizations experienced operational disruptions, and 66% had financial losses due to third-party risk incidents. This data highlights the importance of assessing your vendors to safeguard your business from disruption and financial harm.
In this blog, we’ll talk about vendor risk assessment and how you can effectively employ it in your organization.
What is vendor risk management?
Vendor risk management ensures that the third-party vendors in your supply chain won’t jeopardize your business. This business continuity plan involves identifying potential risks and performing due diligence on vendor relationships.
You’ll check each supplier’s data, policies, and practices. Then, implement security controls to manage the risks identified and ensure real-time information security and regulatory compliance. For instance, you can employ data encryption and firewall protection if you discover you’re vulnerable to cyber risk.
Importance of third-party vendor risk assessment
Nobody wants to work with someone with subpar quality control standards and performance. This management process helps filter out vendors who don’t meet your specifications.
Vendor risk management programs mitigate the inherent risk of vendor-related issues like:
- Data breaches
- Non-compliance with regulations and industry standards
To achieve this, you must first adopt a solid vendor risk assessment procedure.
Vendor risk assessment checklist
Vendor risk assessment is like preparing for a road trip. Just like you wouldn’t set off without a map or GPS, a checklist is essential to navigate potential hazards and ensure you’re on the right track.
Here are 5 line items to incorporate into your vendor risk management checklist.
- Vendor Details. List all your vendors with contact information, services, location, contract terms, and service level agreements. You can double-check your procurement and payment records to ensure everyone was documented.
- Vendor Risks. Investigate the risks each vendor poses, including operational, financial, legal, reputational, and security risks. (e.g., a vendor with a history of data breaches poses higher cyber risks)
- Vendor Due Diligence. Review vendor security, qualifications, quality standards, and legal compliance before entering a contract. Outline their responsibilities and dispute-resolution mechanisms.
- Vendor Performance. Conduct periodic reviews of contracts, performance metrics, and risk levels. If you notice a vendor consistently missing deadlines, it’s best to reassess their contract or seek out a new vendor.
- Risk Mitigation Measures. Use this to identify and address potential risks before they become major issues. Specify processes for regular security audits, data encryption, employee training, incident response plans, and other relevant measures.
No time to draft, employ, and review your checklist? Vendict is an AI-powered platform that can help expedite your vendor risk assessment process. You can automate responses to assessment questionnaires and collaborate with experts in no time.
Trust Vendict to handle your vendor management risk assessment while you steer your business to new heights. Book a demo today.