The 5 Key Elements of Vendor Risk Management
A Vendor Risk Management Plan is crucial to the effectiveness of your information security policies and procedures, and with the right tools, your company can take a proactive role in vendor relationship management. Let’s take a closer look at five key elements to help do so.
1. Look for red flags at the start.
It’s easy to let excitement blind you to all of the potential pitfalls of a new vendor. This is why it is important to create and use a vendor risk management checklist. while searching for and onboarding new vendors.
This checklist should, at a minimum, include the following:
- Complete background and criminal checks
- Verify that up-to-date regulatory requirements have been met
- Analyze where the vendor has proper security controls in place
- Collect references from previous clients of the vendor
2. Share your expectations and standards.
Communication is key to a healthy vendor relationship. Leave no room for secondary interpretation, which could lead to financially disastrous events. Detailed due diligence and vendor standards should be clearly outlined in the company policy and procedures that are shared with third parties. Successful vendor relationship management requires that these standards are disseminated and agreed upon prior to onboarding any new vendor.
3. Conduct regular check-ins.
With a million other day-to-day responsibilities on your plate, your vendor relationship can easily be neglected, leading to potential security gaps. How do you avoid this? Namely, through oversight and accountability methods such as:
- Creating standard vendor performance metrics that are regularly audited
- Utilizing subject matter experts’ feedback on vendor methods
- Employing a third party to audit vendor performance
4. Keep an inventory.
Once you’ve committed to a vendor relationship, documentation is critical. It is in your best interest to maintain a detailed vendor inventory. This documentation should include the following:
- The vendor contract and acknowledgment of company policies and procedures
- Any performance issues that have since been identified
- Specific expectations agreed upon by both parties (i.e., specific projects, dates, meeting notes, etc.)
5. Exit with grace.
Nobody likes a messy break-up, and, unfortunately, contracts will always reach an end. Vendor lifecycle management is critical in safeguarding your business and shared sensitive information.
When vendor contracts reach their end, important decisions must be made, such as contract renewal, how data will be returned or destroyed, and whether or not a new third-party vendor will be contracted. It is vital that your company play an active role at the end of the contract lifecycle—you want to be the one calling the shots!
Every year, companies outsource more elements of their businesses so that they can focus on what they do best. Vendor relationships force companies to become vulnerable, but it should always be worth it—boundaries, safeguards, and policy and procedure should all be present and working together to manage the lifecycle of a third-party relationship.