Developing an Effective Vendor Risk Management Program

What is a Vendor Risk Management Program?

Organizations increasingly depend on third-party vendors to provide essential services, streamline operations, and foster innovation. While this dependency drives efficiency, it also introduces significant risks. In fact, 98% of organizations worldwide maintain relationships with at least one breached third party.

Each vendor relationship creates a potential entry point for cybercriminals, who often exploit supply chains to infiltrate larger networks. Addressing this risk requires more than a compliance checkbox; it demands a proactive and strategic vendor risk management (VRM) program. Trusting vendors to manage their own cybersecurity is not, and never has been, sufficient. Organizations must take the initiative to assess, monitor, and mitigate risks posed by external partnerships.

Data Breaches Caused by Vendors

Vendor-related breaches have repeatedly demonstrated how vulnerabilities in third-party relationships can ripple through supply chains, causing significant harm to organizations and their customers. Below are a few notable examples that highlight the critical need for vendor risk management:

Target (2013): In December 2013, Target experienced a significant data breach where attackers gained access to its network through compromised credentials from an HVAC vendor. This intrusion led to the theft of data from over 40 million credit and debit cards. The breach not only resulted in substantial financial losses and legal repercussions for Target but also underscored the vulnerabilities inherent in third-party vendor relationships, even those as simple as an HVAC company.

SolarWinds (2020): In early 2020, SolarWinds, a provider of IT management software, suffered a sophisticated supply chain attack. Attackers injected malicious code into SolarWinds’ Orion platform, which was subsequently distributed to approximately 18,000 customers, including several U.S. federal agencies. This breach had extensive reach and impact, clearly demonstrating the impact that a single compromised vendor can have on global cybersecurity.

Kaseya (2021): In July 2021, Kaseya, a company providing IT management solutions, was targeted in a ransomware attack. Cybercriminals exploited a vulnerability in Kaseya’s VSA software, enabling them to deploy ransomware to numerous managed service providers and their clients, affecting up to 1,500 businesses worldwide. Much like the SolarWinds breach, this incident emphasized the cascading effects that vulnerabilities in a single vendor’s software can have across multiple organizations.

Key Components of an Effective Vendor Risk Management Program

Developing a robust vendor risk management (VRM) program requires a framework that identifies, assesses, and mitigates risks across the vendor lifecycle. Below are three critical components of an effective VRM program:

Vendor Onboarding and Risk Assessment

The onboarding process sets the foundation for an organization’s VRM program, ensuring that all vendors meet minimum security standards before engaging with sensitive systems or data.

Due Diligence:

• Use third-party risk assessment platforms like BitSight, RiskRecon, or Prevalent to evaluate vendor cybersecurity postures.
• Verify the vendor’s history of breaches or incidents through publicly available resources and dark web monitoring tools, such as our Third Party Vendor Risk Management offering.

Compliance Documentation:

• Request evidence of compliance with standards like ISO 27001, SOC 2, or GDPR.
• Leverage automation tools such as OneTrust?for centralized document collection and verification.

Risk Scoring:

• Use frameworks like NIST 800-30 or FAIR (Factor Analysis of Information Risk) to assign risk scores.
• Employ tools such as ServiceNow VRM or Archer IRM to categorize risks based on vendor access and sensitivity.

By incorporating a structured onboarding process, organizations can identify high-risk vendors early and mitigate potential vulnerabilities before they are introduced into the supply chain.

Continuous Monitoring and Reporting

After onboarding, maintaining visibility into vendor activities ensures that security remains a priority throughout the vendor relationship.

Monitoring Tools:

• Deploy continuous monitoring solutions like our Third Party Risk Management solution to track real-time changes in vendor breach records.
• Use integrations with SIEM systems such as Splunk or LogRhythm to gather and analyze vendor activity data.

Real-Time Alerts:

• Set up alerts for security incidents, compliance changes, or new vulnerabilities affecting vendors.
• Utilize platforms like Rapid7 InsightVM to integrate vulnerability management into your vendor monitoring strategy.

Periodic Reassessments:

• Schedule annual or semi-annual vendor reviews to reassess compliance, update risk scores, and adjust monitoring protocols.
• Implement streamlined reassessment workflows through tools like Aravo or Coupa Risk Assess.

Continuous monitoring ensures that organizations maintain an up-to-date understanding of vendor risks, allowing them to take immediate action when new threats emerge.

Risk-Based Vendor Segmentation

Finally, segmenting vendors based on their risk level allows organizations to allocate resources efficiently and focus on protecting their most critical assets.

Critical Vendor Management:

• Apply enhanced scrutiny to vendors with access to sensitive data or critical systems by conducting annual onsite audits.
• Use advanced solutions like our Third Party Vendor Risk Management service to track high-risk vendor’s breach records.

Low-Risk Vendor Oversight:

• For vendors with minimal access or limited impact on operations, perform lightweight due diligence to conserve resources.
• Utilize vendor self-assessment tools, such as LogicGate?to gather basic security information without requiring intensive reviews.

Automated Segmentation:

• Leverage machine learning-enabled platforms like ProcessUnity or Fusion Risk Management to dynamically segment vendors based on real-time risk metrics.
• Assign predefined tiers (e.g., critical, moderate, low) and customize monitoring protocols for each tier.

Risk-based segmentation helps organizations focus their resources on the most impactful risks, reducing the likelihood of supply chain attacks while maintaining operational efficiency.

By addressing these components, organizations can build a VRM program that not only protects their own operations but also strengthens their entire supply chain. Such a program demonstrates due diligence, increases trust with stakeholders, and helps your organization defend itself against supply chain attacks.

Our Third Party Vendor Risk Management Solution

Our own Third Party Vendor Risk Management service can help your organization build out a VRM program by identifying risky external vendors, so your team can take action. By scanning the dark web once a month for all your vendor’s breach records we highlight risks such as bad password practices, a high number of stolen credentials, or frequent breaches.

Your security team can use this information to collaborate with vendors on better security practices, choose more secure vendors during the vetting process, or to axe them altogether if you deem it necessary. With our offering? you can enhance risk visibility, ensure compliance with regulatory standards, and safeguard organizational operations and reputations from third party threats.

Secure Your Supply Chain With a VRM Program Today

As organizations continue to outsource tasks to service providers, the risks associated with third-party vendors grows increasingly complex. Our Third Party Vendor Risk Management service provides organizations with the tools and expertise needed to stay ahead of these challenges. By combining our offering with your own VRM Program, you can use this service to enable your security team to protect your organization form supply chain attacks.