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 In the past, managing vendor risk has been a tedious and error-prone task involving spreadsheets, email, and outdated vendor risk management tools.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:
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.
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. READ THE ENTIRE BLOG BY CLICKING HERE!