Vendor Risk Management: Crucial checkpoints and iRM's role

Nowadays, third-party partnerships are crucial for business success as enterprises increasingly rely on them for innovation, digital transformation, and growth. However, this also exposes organizations to higher risk since a third party's risk and compliance posture can directly impact their risk posture, resilience, and reputation. In the past, managing vendor risk has been a tedious and error-prone task involving spreadsheets, email, and outdated vendor risk management tools.

According to a survey of 154 third-party risk management professionals, 79% have formal programs to manage third-party risk, and more than 60% said managing such risk is a growing priority for their organization. The survey also found that 31% of vendors are considered a material risk in the event of a breach.

To address these challenges, Vendor Risk Management provides a solution that contextualizes and connects third-party risk to business success, delivers reporting on vendor risk and issues, streamlines assessment and remediation processes through automation, promotes transparency and accountability with third-party stakeholders, and aligns with overall enterprise risk management to create an integrated view of risk.

Essential Criteria to Check During Vendor Risk

A survey revealed that in 2020, 83% of organizations had a breach that was related to a vendor. Nearly half of the respondents stated that the financial impact of a failure caused by a third party or subcontractor has at least doubled over the past five years, while one in five believed the financial impact has increased tenfold. To ensure safety, it is essential to crosscheck certain criteria during vendor risk management:

Inspections

Conducting a vendor risk assessment is crucial to ensure that your partners comply with your organizational guidelines and do not compromise the security of your assets in any way. This assessment helps to evaluate the vendor's work portfolio, assess the associated risk levels, identify any red flags from their history, and determine the likelihood of exposing your assets to unwanted risks.

Failure to conduct a proper vendor risk assessment can lead to severe security risks for your organization, resulting in irreversible damage to your business reputation, legal sanctions, monetary losses, and even premature termination.

To avoid such risks, it is essential to assess vendors based on their credibility and security levels. Three criteria to consider when assessing a vendor's security performance include their history, risk exposure, and adherence to organizational guidelines.

Background checks

Conducting thorough background checks is crucial to ensure the credibility of a vendor before associating with them. It is important to verify that the vendor can consistently produce and supply high-quality materials without compromising the safety of your business and its patrons. Partnering with a sub-par vendor can negatively impact your customers and harm your company's reputation, potentially leading to a loss of customers.

Compliance Agreement

One of the crucial factors to consider when choosing a vendor is their adherence to all regulatory compliances required by your business. This is the initial step in determining whether the vendor handles confidential data with appropriate care.

It is important to review the security controls implemented by the vendor and ensure that they align with those in practice within your organization. Any discrepancies should be corrected through cooperation. Additionally, it is essential to assess the vendor's response effectiveness in the event of a security breach to mitigate potential security risks and safeguard your organization.

Documentation Routines

A key trait of a vendor who follows a reliable security framework is that they possess all the necessary documentation that showcases their security credentials. It is advisable to avoid partnering with vendors who lack the essential paperwork to demonstrate their security standing.

Comprehensive iRM Solution for Effective Vendor Risk Management

iRM’s vendor risk management solution is designed to help organizations manage vendor risk effectively. The solution provides a range of features to help organizations assess and monitor the risks posed by third-party vendors. With iRM, organizations can perform thorough background checks on vendors to ensure their credibility and assess their risk levels. The solution also enables organizations to evaluate a vendor's compliance with regulatory standards and their ability to maintain data security. Some prominent features are:

Dashboards and reporting

Dashboards and reports are included in the platform to offer insight into vendor tiering, risk assessment plans, open issues, and overall risk throughout the vendor ecosystem. Users can customize dashboards to their liking, while reports can be either scheduled or run at any time.

Vendor portfolio

The vendor portfolio in the platform stores all vendor-related data, such as vendor contacts, services/products provided by the vendor, assessment records, and other relevant vendor information. To manage the growing complexity of your vendor ecosystem, you can create vendor hierarchies and specific vendor engagements. You can also aggregate the assessed risk for a vendor. The existing company table in the platform is the default location for organizing vendor data, which can be updated manually or through integration with an existing supplier management system. Additionally, a self-service portal is available for vendors to update their information independently.

Assessment management

The platform provides assessment management workflows that enable you to monitor assessments throughout the process from inception to conclusion. Assessments can be created internally to assess a vendor's tier or externally to assess the risk based on an assigned classification schema. You can also create and evaluate specific risk areas, such as reputational, financial, or security risks, that correspond to various assessments. Automated scoring is based on a hierarchical weighted scoring framework, which incorporates a configurable scoring methodology and risk engine. Additionally, tier scores are generated automatically based on responses to tiering assessments.

Intelligent Risk Feeds

iRM platform provides integrations with various third-party risk content providers to ensure that vendors are objectively and effectively monitored for financial, operational, ESG, geopolitical, regulatory, and cyber risks. These risk feeds and ratings can offer more profound insights into a supplier's risk posture, enabling you to make better decisions regarding supplier selection. Integration with these content providers allows for vendor tiering and automated risk assessment, offering a third-party view of vendor performance. This knowledge can be used to manually adjust calculated vendor tier scores and validate assessment responses. Vendors can receive risk assessments on a predefined schedule, on demand, or automatically based on initial tier assignment, manual tier change, or rating change.

Vendor Portal

The iRM vendor platform offers a centralized vendor portal that streamlines vendor communication and eliminates the need for inefficient email exchanges and manual tracking via spreadsheets. The vendor portal enables the vendor to manage their response team, collaborate with members from different functional groups, and assign tasks within the platform. By using the vendor portal, both you and your vendor stakeholders can have visibility and transparency regarding the status of assessments, issues, and tasks.

Issues and remediation

The iRM platform facilitates cross-functional collaboration for issue management based on assessments. In the event of an issue, it is simple to work with the vendor and subject matter experts to develop remediation plans. You can link issues with risks, controls, and risk ratings at the questionnaire and assessment levels. A status column indicates critical issues that may have the most significant impact on the vendor's risk posture and require immediate attention, while notifications keep you updated on relevant events via email, SMS text message, or push notification.

iRM Platform & workflow capabilities

The iRM Platform offers workflows that seamlessly integrate across departments, systems, and applications. This creates a unified enterprise system that promotes employee and customer satisfaction while boosting productivity. Vendor risk management is integrated with other risk and compliance functions via cross-functional apps, a common data model, and a single platform, eliminating the need for multiple applications.?

The Configuration Management Database (CMDB) integration accelerates dependencies mapping and fine-grained impact analysis. The service management platform streamlines testing and evidence data collection of vendors' processes and IT controls at scale. Utilizing the GRC and security applications on the iRM platform, you can establish a more comprehensive definition and proactive approach to risk and compliance management for your organization.

Connected across the enterprise?

By integrating with the iRM, Vendor Risk Management becomes part of a comprehensive enterprise risk management program. This integration links vendor risk and supplier resilience with broader enterprise risk, operational resilience, and business continuity programs. Bringing together vendor risk management with enterprise and operational risk programs in a unified environment breaks down existing silos and enhances cross-functional visibility, improving risk mitigation and management.

In today's dynamic and intricate business environment, organizations must recognize the significance of partnering with the right vendors. With businesses unable to function in isolation, collaboration and coordination with external parties become essential to create a mutually beneficial and synergistic environment. Vendors are crucial in this context, as they not only assist the functioning of larger organizations but also present opportunities for strategic partnerships, unlocking new avenues that were previously unexplored. Schedule a demo with us by clicking here to know more.