Imagine your organization partners with a promising vendor, a new ally poised to boost operations with innovative solutions. But as your relationship deepens, so does the access they gain to your systems and sensitive data. Suddenly, this partnership isn’t just about mutual benefit; it's also about trust, security, and vigilance. In today’s interconnected landscape, managing vendor risk has become more than a mere checklist — it’s a critical strategy for safeguarding your business while fostering resilient relationships.
You can confidently navigate this terrain with ServiceNow GRC (Governance, Risk, and Compliance) solutions. Their comprehensive VRM framework empowers organizations to monitor and mitigate risks at every stage of the vendor lifecycle, ensuring both security and continuity. Let’s focus on the four essential stages of an effective vendor risk management approach.
4-Step Approach to Effective Vendor Risk Management
Vendor risk management is essential for today’s businesses. With the help of a clear, structured process, organizations can minimize risks, ensure compliance, and build resilient vendor relationships. The four essential stages of effective vendor risk management are as follows:
Stage 1: Secure Vendor Onboarding Workflow
The onboarding process is the very first and most crucial process that sets the tone for vendor relationships. A secure onboarding workflow can identify potential risks before a vendor integrates into the organization’s processes.
- Screen Vendors: Centralize vendor data and conduct a thorough vetting process. This involves gathering information on vendor security practices, financial stability, and compliance history.
- Risk Scoring: Develop a system to assess and rank vendors based on their potential impact on your organization. Vendors with access to sensitive data or critical operations should be carefully evaluated and scrutinized more to ensure they align with your security standards.
- Clear Compliance Criteria: Establish clear and measurable standards that vendors must meet before onboarding. By leveraging ServiceNow GRC, organizations can automate parts of this process, making it easier to integrate vendors securely and efficiently while ensuring compliance.
Stage 2: Establish a Vendor Risk Assessment Process
After successfully onboarding a vendor, the next step is to focus on implementing a rigorous risk assessment regularly. This process should be flexible and tailored to changes that will take place in the vendor operations and the organization. Indeed, the 2023 Cost of a Data Breach report by IBM and the Ponemon Institute found that the costs of breaches involving third-party vendors add to an average of $216,441 in breach costs1. This emphasizes why it is crucial to conduct regular vendor assessments to eliminate costly surprises in the future.
- Due Diligence: Begin with an in-depth risk assessment process during the early phases of the vendor relationship. Focus particularly on those vendors that might pose a higher risk, like those handling sensitive data or essential infrastructure. This gives you a solid foundation for identifying potential risks immediately.
- Ongoing Monitoring: Risk management requires continuous monitoring to detect the changes that could impact your vendor’s risk profile. Whether it's the latest regulations, a breach incident, or a shift in business strategy, staying vigilant and adapting your approach ensures that you can always manage any potential risks.
- Risk Mitigation Strategy: After identifying risks, implement a mitigation strategy. A seamless risk management strategy is presented by ServiceNow GRC, which provides risk acceptance, avoidance, reduction, or transfer in relations to the risk to the business.
Get insights on Strategies for Effective Vendor Risk Management
Stage 3: Establish An Efficient Vendor Collaboration Process
Communication and collaboration are essential to maintaining a stable relationship with vendors. By setting up a continuous, open communication process, both parties can address concerns swiftly and maintain alignment on security and performance standards.
- Establish Clear Communication Protocols: Users should state and document communication channels, roles, and escalation procedures. Ensure each vendor understands who to contact for specific issues and how to escalate them, if needed.
- Regular Risk Assessment: Establish a schedule for performance evaluations and risk reassessments with the key vendors. Such reviews should be devoted, among others, to compliance with security policies, performance standards, and other emerging risk areas.
- Provide Feedback: Collaboration is a two-way street. Inviting vendors feedback strengthens the relationship, improves operational efficiency as well as the partnership.
Incorporating a platform like inMorphis facilitates seamless communication, allowing organizations and vendors to stay in sync with compliance requirements and risk management processes.
Stage 4: Secure Vendor Offboarding Workflow
As the onboarding process is vital in an organization, so is the offboarding. As companies today are more and more dependent on third-party vendors, the complexity of managing these relationships grows.
Indeed, the threat of a third party has emerged as the biggest challenge for compliance teams. According to a Gartner report, a mere 16% of organizations2 reported that they adequately contain these risks. When a supplier relationship is dissolved, some procedures need to be practiced, such as data custodianship, access privileges revocation, and a conclusive risk review. These activities help to eradicate the last few remaining dangers and secure the important components of your firm.
- Data Retrieval and Destruction: Retrieve any company data that the vendor may possess. If data cannot be retrieved, ensure the vendor follows stringent data destruction protocols to prevent leaks.
- Access Termination: Remove the vendor’s access to your systems immediately upon termination. This step is crucial in preventing unauthorized access to sensitive information after the end of the partnership.
- Exit Review: Conduct a final review of the vendor’s performance, noting any areas for improvement in future vendor relationships. This exit review can also provide insights into potential risks that need mitigation.
The offboarding process is where an effective vendor risk management framework truly pays off. By ensuring structured and secure offboarding, organizations can protect their assets and reduce the chance of post-termination security breaches.
Conclusion
Effective vendor risk management entails more than managing the risks at the onset of the relationship. It is an ongoing activity that extends throughout the entire duration of the vendor relationship. By following the four-step approach to vendor risk management, organizations can help strengthen their partnerships with vendors while keeping risks to a minimum.
Working with inMorphis’ experts and utilizing their solutions, organizations can grab the opportunity to manage and track vendor relationships and eventually turn risks into business opportunities.
Contact inMorphis today to help your organization stay ahead of the curve. Book a demo and see how our platform can transform your risk management approach.
