In recent years, vendor risk management (VRM) has become a complicated practice as businesses aim to scale and manage potentially hundreds or thousands of vendors. With more vendors, cybersecurity risk is introduced, necessitating software and other digital solutions to adequately manage these vendors. The role of software in vendor risk management products is more important than ever now and moving forward.
However, the intricacies of VRM also dictate that software must be comprehensive and complete to accomplish all aspects of the process, including vendor risk assessments, risk remediation workflows, continuous monitoring, security posture management, and more. Incomplete solutions and tools may not be enough for businesses looking to improve their cybersecurity.
This post will cover how software impacts VRM products, what businesses need to look for in VRM software, and the current best VRM products and tools on the market.
What is Vendor Risk Management?
Cyber vendor risk management is the set of practices required to address the risks of working with third-party service providers. From a cybersecurity or IT standpoint, risks refer to issues affecting data protection and privacy, information security, regulatory compliance requirements, and business continuity.
A cloud-based data storage company is a typical example of a third-party vendor many businesses use. They are useful for storing the increasingly large quantities of data required to run a modern business, which may include mission-critical backups and customers’ personal data.
However, cloud-based solution providers are an inherent risk to their business partners. If the cloud storage company is compromised during a data breach, every firm that partners with them is impacted. Organizations need to consider their risk tolerance and appreciate that there is an inherent risk that can grow exponentially as their attack surfaces expand.
Why is Vendor Risk Management Important?
Because the business world is increasingly connected, firms have larger attack surfaces than ever. With this increasing complexity, more solutions are required. A management system for vendor onboarding, monitoring, and offboarding is vital.
Modern organizations must look beyond their network when considering information security. Once a firm has secured its network, due diligence is required to assess and remediate vulnerabilities beyond its physical boundaries. Consideration of the wider business ecosystems in which organizations exist is critical.
The modern business world is one in which the weakest link from a cybersecurity standpoint is not necessarily within your own organization. A compromised supplier, a disgruntled staff member working for a business partner, or a software solutions business with inadequate cybersecurity protocols are all examples of entities that can damage a connected firm’s security posture.
Cybercriminals and hackers target software solution providers because doing so could provide them access to multiple companies' valuable data. Cybercriminals can initiate ransomware attacks to extort the companies storing customer information or valuable intellectual property data. Alternatively, cybercriminals could sell the data to other cyber criminals on the dark web.
Furthermore, cybercriminals may seek to disrupt a cloud storage or software-as-a-service provider for the knock-on effect of disruption. A distributed denial of service (DDoS) attack, for example, can overwhelm an organization to the point it must shut down, impacting many of its clients.
Most large firms don’t know how many vendors they use or how secure they are. Vendor risk management requires planning, organization, prioritizing, assessments, evaluations, and continuous monitoring.
For these reasons, a vendor risk management system helps businesses gain visibility of their vendor risk and take the required steps to minimize this kind of risk. Vendor risk management software helps keep all the plates spinning so the firm remains as protected as possible in light of the organizations within its network.
How Software Helps Vendor Risk Management
Managing supplier risk for an organization is a significant challenge. Gaining awareness of the risks associated with vendors and attempting to manage them is a massive undertaking.
However, the current cyber threat landscape is such that threats are increasingly likely from a business’s partners and suppliers. These businesses need to be able to:
- Gain visibility into other firms’ security postures
- Understand at what point a firm’s cyber risk is too high to do business
- Help vendors improve their security postures to gain and maintain contracts
Many software services exist to help companies manage external risks. Here’s what to look for in a vendor risk management software service.
Continuous Security Monitoring
Businesses must understand that third-party risk management (TPRM) is not a one-off event. Organizations change their information security procedures, personnel, technology, and workflows. Cyber risks are constantly evolving.
Due to the dynamic nature of the modern business ecosystem, a vendor risk assessment must occur before onboarding the vendor and throughout the vendor lifecycle.
Continuous monitoring renders traditional security questionnaires ineffective. While a questionnaire can be useful, it provides a snapshot of the vendor's ever-changing security profile and risk exposures.
Another issue with traditional questionnaires is that the respondents may give inaccurate, false, or biased information. A vendor risk management (VRM) system with continuous monitoring will automatically seek the relevant certificates and risk profile information and update the IT vendor's risk rating accordingly and in real-time.
With continuous monitoring, a vendor risk management program can monitor and help protect a business from exposure, such as compromising a vendor’s application programming interface (API) keys or exposure due to server misconfigurations.
Using security ratings is helpful because they provide an objective measure of a business’s security posture and its associated risk. Such measures help Chief Information Security Officers (CISOs) and other key stakeholders in information security to develop a dialogue with shareholders and the C-suite regarding the risks associated with the business’s third-party relationships.
Security ratings clarify what service levels a business requires of its partners. New vendors that don’t meet those standards must work on their cybersecurity measures to ensure they meet those standards or cannot enter into a secure business relationship with the organization.
These security standards and risk ratings must also be applied to existing vendors. A risk management program will help a business identify and rank its existing vendors. Those that do not meet minimum security standards need to go through an offboarding process to ensure the integrity of the business’s network and the safety of it and its partners.
With the implementation of security risk scores and contract management frameworks, vendor risk software can significantly improve the facility with which businesses manage their vendors and their inherent risks.
Implementing security ratings is not about a firm pulling up its drawbridge to defend itself from other businesses’ inadequate security systems. On the contrary, risk scores can be used to build a necessary discourse about acceptable vendor risk. Organizations can help each other by identifying the issues and streamlining vulnerability mitigation and remediation.
An effective third-party risk management program will likely include a threat or risk intelligence function. This will provide the cybersecurity team or IT professional with responsibility for security with prompt notifications regarding the changes in the risk profiles of vendors.
For larger organizations, a real-time risk intelligence notification system ensures the continued security of critical systems and customer data. Risk intelligence allows organizations to gain visibility into their biggest risks and take necessary measures to prevent them at all costs.
Dedicated Account Manager Support
While a high-quality risk management program should offer user-friendly dashboards that put the power of the system directly into the hands of the user, it’s also extremely useful to have access to an account manager.
The software facilitates vendor risk management but remains a potentially complex and challenging process, so getting support and advice is essential. Excellent supplier risk management solutions offer users the ability to communicate with an account manager as needed and plenty of assistance learning how to use the tools through written resources, webinars and videos, and other learning aids.
Vendor Risk Governance
Governance, Risk, and Compliance (GRC) comprise a major part of end-to-end vendor risk management solutions. The governance, risk, and compliance considerations go beyond risk assessment processes and risk management procedures. Cyber risk governance concerns itself with maintaining documented information security policies, ensuring that procedures are aligned with business objectives and compliance requirements and that audits and accountability exist.
Just as business ecosystems and the cyber threat landscape change over time, regulatory compliance requirements also change. Existing laws are susceptible to change over time and a system for monitoring and reacting to such changes will keep businesses safe from regulatory scrutiny and potential fines.
The General Data Protection Regulation (GDPR) has significantly impacted how businesses collect, process, and store sensitive data. While this has been challenging for many businesses, it also sets transparent standards for GRC professionals and helps businesses focus and measure their risk management activities.
Customizable, User-Friendly Dashboards
The best risk management software takes this into account by providing customizable dashboards. In this way, each business can use the software in a way that makes the most sense according to their objectives. Furthermore, different stakeholders within the organization may be able to use customizable templates to get what they need from the software despite different goals and approaches.
While such software most likely comes with pre-built workflows, the ability to customize its risk management processes will help any business tailor the software to its unique way of doing things and its particular priorities.
Software including an application programming interface (API) allows businesses to ensure communication between the vendor risk management program, other software run by the business, and software run by their vendors.
Third-party risk management software can streamline vendor risk management by automating repetitive and time-consuming tasks. For example, a risk management platform can perform routine vendor certificate checks, providing real-time risk profile information.
With artificial intelligence and machine learning, risk management systems can send alerts and decide based on agreed security metrics.
Supplier risk management and cyber risk governance can be complicated, but that doesn’t mean the software should be a tool. While a modern third-party risk management solution should be sophisticated, look for a user-friendly dashboard that makes it as easy for users to achieve their goals.
A user-friendly software solution is flexible and customizable, with an intuitive user interface to ease any friction between the accomplishment of goals and the means of achieving them. Cloud-based software is also useful as it means that assessments, monitoring, communications, and reports can all be performed from multiple locations and on the go.