9 Tips to Streamline Your Vendor Risk Management Program

LMG Security’s consultants are frequently asked by our clients for advice on vendor risk management and how to build an effective process and program that is also efficient. If you’re not familiar with this topic, vendor risk management is the process of evaluating risk to your organization’s data, systems, and operations that is related to using other companies’ services or platforms. It is also called vendor vetting, third-party risk management (TPRM), supplier risk management, or supplier security, and it has been in the spotlight in recent years as organizations recognize the risk that vendor relationships and services introduce to their data and operations.

Why is Third-Party Vendor Risk Management Important?

A recent study found that 61% of organizations experienced a third-party data breach or security incident in 2023. This is an almost 50% increase over the previous year. Third-party vendor risk management is a source of significant risk for your organization, especially when you consider it’s not just your vendors that pose a risk. It’s also your vendor’s vendors and partners. We have seen data breaches from fourth and even fifth-party connected vendors.

The general principles and goals of vendor risk management are straightforward:

1. Identify vendors that may pose a risk to your organization. The risk often stems from having access to your systems or data, housing or processing your data, or playing a key role in your mission, such as continuity of operations and service delivery.
2. Evaluate the risk, considering the likelihood and potential impact of a vendor incident that could affect your organization.
3. Find out what controls the vendor has in place to manage the risk.
4. Decide if the risk is acceptable to your organization. If not, you can either work with the vendor to reduce the risk or you can look at other vendors instead. Please read my blogs on how to measure cybersecurity risk and how to turn your risk assessment results into an actionable plan.
5. Monitor and manage these relationships over time to identify any changes that could affect the risk, such as changes to the vendor’s security posture, changes to their platform/SaaS, or changes to the services they are providing.

This all sounds reasonable, right? Especially if you can establish an organized, repeatable process that is well-understood by all members of your organization who select vendors, work with vendors, or manage vendor relationships. However, LMG Security’s cybersecurity consultants often hear from our clients that establishing an effective, organized, repeatable process is challenging for a number of reasons.

How to Streamline Your Vendor Risk Management Program

To help organizations streamline their vendor risk management programs, our team has put together some tips. Our list is focused on improving efficiency and consistency without losing sight of the goal of risk management.

1. Stay Focused on Third-Party Vendor Risk Management:

Here are some tips to help you focus on risk management and avoid spending time on scope creep or aspects that don’t directly impact your risk.

• • Standardize your third-party vendor risk rating criteria.
    • Vendor risk management typically starts with assigning each vendor a risk rating. This rating is used to prioritize your reviews and decide what level of vetting is appropriate for each vendor. You want to spend your time and resources on the vendors and vendor relationships that pose the most risk to your organization.
    • To assign a risk rating, use consistent criteria that consider the sensitivity of any data your vendors will access, house, or process, as well as the level and nature of integrations with your environment and other applications and the criticality of the systems or services your vendors provide.
    • Don’t be afraid to classify a vendor as low risk if they don’t fall into these categories. Your assessment time will be better spent on higher-risk vendors.
  • Focus your review on third-party risk to your organization, not risk to the vendor in general.
    • Understanding your organization’s specific use case for the vendor’s platform or service is key to focusing the scope of your review.
      • For example, if the vendor will access sensitive data on your systems, you can focus your assessment on what they will have access to and how they will access it, plus security concerns like employee screening and consistent offboarding communications.
      • If you are using the vendor’s platform, focus on the security of the platform including data security and authentication. Also, consider availability measures such as business continuity planning and incident response preparedness.
    • It can be helpful to frame your assessment around simple yet key questions such as:
      • How is the vendor protecting your data?
      • How are they ensuring uptime?
      • Are they prepared for an incident?

2. Build an Efficient Process:

Process inefficiency can slow down your vendor risk management program and add overhead with little added value. Here are some ideas to work towards a consistent, smooth process that gets you quickly to risk identification and management.

• • Establish a consistent intake process.
    • Ensure your team understands what types of vendors and vendor relationships need to be included in your vendor risk management program. Make it clear that use of SaaS solutions is a vendor relationship that needs review.
    • Use a standard format for gathering initial information from your internal team to support initial risk rating and avoid excess back-and-forth to gather needed information.
      • This may be a form, ticketing system, or use of a vendor risk management platform (see next section).
      • Gather information such as what service or SaaS the vendor is providing, what data and systems are involved, and the criticality of the service for your operations.
      • Get clarity on the use case for the vendor service, meaning how your organization will be using the vendors’ service or SaaS. Will your data be on the vendor’s platform? Will the vendor have access to your systems? Will the vendor’s platform integrate with other applications already in use?
  • Adopt a vendor risk management platform.
    • • Using a platform supports vendor onboarding, assessment, document management, task assignments, and keeping track of annual reviews or following up with vendors on specific security concerns.
      • Our consultants have evaluated many platforms and we recommend Venminder for managing your vendor risk management program.
  • Aim for efficiency with vendor information gathering.
    • • Start with publicly available information. As more and more companies are regularly being asked for their security information and proof of certifications, you can often find what you need on their websites rather than start with an information request. If not, ask for the vendor’s standard security information package.
      • These standard sources of information may meet your needs without having to send a questionnaire that could sit in their queue for a while.
      • If you need to follow up for additional information, you can make your request very targeted and specific, which often gets a quicker response than a long questionnaire.

3. Manage Risk on Your Side

Vendor risk management programs appropriately focus on the vendors and their services, solutions, and security controls. However, a substantial amount of vendor risk reduction can come from how you manage the vendor service on your side.

• • Carefully manage vendor access.
    • If a vendor will be accessing your systems or data, limit their access to only what is needed for their specific role.
    • Apply strong authentication measures and audit logging for all vendor access.
    • For vendors who will be storing or processing your data, limit the data to the minimum needed.
    • Establish consistent access management practices such as periodic access reviews to ensure appropriate role-based access and to remove any access no longer needed.
    • Ensure any integrations with your applications are configured to limit data access and transfer to the minimum needed.
  • Manage security elements that are in your control.
    • For SaaS solutions, find out what security controls can be selected and/or managed by your organization.
      • Don’t assume things like password length requirements, account lockout, session timeout, and audit logging are stuck as a default.
      • As much as possible, align these controls with your organization’s security requirements.
      • If controls are not customizable, tell the vendor you are interested in stronger options.
    • Include SaaS solutions in your standard security processes and requirements, such as strong authentication (long passwords, MFA, Single Sign-On), regular account review, and inclusion in employee offboarding checklists.

We hope you found these tips helpful! If you would like personalized advice on establishing an efficient, risk-based vendor risk management program, please contact us to see how our experienced cybersecurity consultants can help.