Many companies are daunted by the task of building a vendor risk management (VRM) program that gathers all vendors in one place, classifies them, assesses the risky ones and determines if that risk should be remediated or terminated. However, the benefits of an automated VRM program easily outweigh the risks of not doing vendor risk management.
1. Reduced Costs and Time
When defining your VRM program, ensure you setup a centralized process. A centralized VRM program is one that is built and coordinated so that all information is easily accessible by members of your organization, not just those that are managing vendor relationships.
To be successful, your vendor risk management program must include members from a variety of groups, such as finance, legal, IT, procurement, accounting, purchasing and more. Each should have a role in helping to inventory and classify your vendors. In the long run, a centralized process will help to reduce costs and time involved in managing your VRM program.
2. Reduced Risk
Once all vendors are in your VRM program and classified, you’ll begin to get a good snapshot of where the third-party risk lies in your organization. All vendors should be classified by low, medium or high risk, so the vendor risk manager in charge of your VRM program can start focusing on just the medium- and high-risk vendors.
Once your high-risk vendors are pinpointed, you can begin to reduce the risk they pose on your organization by requiring them to do a risk assessment. If this assessment results in unsatisfactory risk, you’ll have the choice of asking them to remediate their risky practices or eliminate them as a vendor.
3. Maintaining Compliance
It’s critical for businesses in regulated industries to remain complaint. As third-party breaches continue to rise, regulators are cracking down on organizations that are not properly managing their third-party vendors. Regulators classify vendors as an extension of the company’s ecosystem and, as such, both the company and the vendor could be penalized and/or fined in the event of a breach.
An adequate VRM program can simplify your compliance initiatives and can satisfy all industry regulation compliance requirements, thus putting your business in a good position when the regulators arrive.
After the legendary third-party breach of Target, many CEOs and Boards of Directors began taking notice of vendor relationships. As a result, many are now asking for comprehensive reports on the state of risk of the organization as it relates to vendors. Without an adequate VRM program, pulling together this information can be nearly impossible.
Ensure that your VRM program has a robust reporting component so that you can easily pull an executive summary for your Board of Directors and a detailed vendor risk report for management.
Above all, being defensible in the event of an information security breach should be at the top of every CEO’s mind. No company will ever be 100-percent secure, so it’s more important to develop your company’s defensibility.
When a breach occurs at your company, regulators, lawyers, customers and more will come after you for retribution. Your company could be liable, even if the breach was caused by a third party, if you don’t have a VRM program in place that shows your due diligence. Your company’s due diligence is shown when you take the necessary steps to both track your vendors and determine their level of risk on your company.
If you want an easy-to-use automated workflow that evaluates all third-party vendors and brings your weakest links to the surface, schedule a demo with us today!