[Blog](/blog) Show links Resources [Blog](/blog) [Breaches](/breaches) [eBooks, reports, & more](/resources) [Events](/events) [News](/news) [Vendor Risk Management](/category/vendor-risk-management) Show links Categories [Attack Surface Management](/category/attack-surface-management) [Company News](/category/company-news) [Compliance and Regulations](/category/compliance-and-regulations) [Cybersecurity](/category/cybersecurity) [Data Breaches](/category/data-breaches) [DevOps](/category/devops) [Human Cyber Risk](/category/human-cyber-risk) [Risks and Vulnerabilities](/category/risks-and-vulnerabilities) [Third-Party Risk Management](/category/third-party-risk-management) [Vendor Risk Management](/category/vendor-risk-management) [How to Implement a Vendor Risk Management Program](/blog/vendor-risk-management-program) Publish date September 20, 2026 {x} minute read # How to Implement a Vendor Risk Management Program [Get a demo](/contact-sales) [Free trial](/demo) [Download the PDF guide](#) [Free trial](/demo) Written by [Catherine Chipeta](/team/catherine-chipeta) Cybersecurity Writer Catherine's work has influenced leaders in technology, SaaS, government, and financial services. Reviewed by [Kaushik Sen](/team/kaushik-sen) Chief Marketing Officer Kaushik has a background in software engineering, enterprise solution architecture, and data analytics. He brings a unique, data-driven perspective to cybersecurity education. Table of contents Free resource ### [Download now](#) In a threat landscape where organizations outsource vital business processes that leave [data security](https://www.upguard.com/blog/data-security) in the hands of third-party vendors, [vendor risk management](https://www.upguard.com/blog/vendor-risk-management) is increasingly important.  [A 2022 KPMG study](https://assets.kpmg/content/dam/kpmg/xx/pdf/2022/01/third-party-risk-management-outlook-2022.pdf) found that 73% of survey respondents experienced at least one significant disruption caused by a third party over the past three years. A vendor risk management program in place provides your organization with an accessible, consistent, and scalable framework for monitoring and managing vendor risk exposure.  The umbrella for that work is the [TPRM program](/tprm). It also allows organizations to proactively identify and remediate potential risks and ensure business continuity in the event of a [cyber attack](https://www.upguard.com/blog/cyber-attack).  This article details how to implement an effective vendor risk management program using risk management best practices. ## What is Vendor Risk Management (VRM)? [Vendor risk management (VRM)](https://www.upguard.com/blog/vendor-risk-management) manages and monitors risks that arise from [third-party vendors](https://www.upguard.com/blog/third-party-vendor) and service providers.  VRM is a crucial element of your organization’s [information risk management](https://www.upguard.com/blog/information-risk-management) and broader risk management process as it is a holistic way of approaching [third-party risk](https://www.upguard.com/blog/what-is-third-party-risk).  The main risks vendors bring to an organization include: * [Cybersecurity risk](https://www.upguard.com/blog/cybersecurity-risk) * Operational risk * Legal, regulatory, and compliance risk * Reputational risk * Financial risk [Learn about the top VRM solution options on the market >](https://www.upguard.com/blog/best-vendor-risk-management-software-solutions) ## What Is A Vendor Risk Management Program? [Vendor risk management programs](https://www.upguard.com/glossary/vendor-risk-management-program) are formalized processes and procedures that enable organizations to implement effective [third-party risk management](https://www.upguard.com/blog/third-party-risk-management) and mitigation policies. An effective third-party risk management program should cover all stages of the vendor lifecycle, including vendor risk assessments, [vendor onboarding](https://www.upguard.com/blog/vrm-onboarding-process), and vendor offboarding, and outline an incident response plan. A VRM program should also include frameworks to ensure vendors meet internal and regulatory compliance requirements.  ## Why is a Vendor Risk Management Program Important? [VRM programs are important](https://www.upguard.com/blog/vendor-risk-management-important) because they enable organizations to identify, manage, and mitigate cybersecurity risks across the entire vendor ecosystem, including third and fourth-party risks. Many regulations such as [PCI DSS](https://www.upguard.com/glossary/pci-dss), [HIPAA](https://www.upguard.com/blog/hipaa-privacy-rule), [NIST SP 800-171](https://www.upguard.com/blog/nist-sp-800-171), and [ISO 27001](https://www.upguard.com/blog/what-is-iso-27001) extend their compliance requirements to an organization's third-party vendors. Non-compliant vendors can cause direct legal, financial, and reputational damage to an organization – even an organization that adheres to the strictest regulatory compliance standards. Similarly, organizations are exclusively accountable for compromising sensitive information, even if the cybersecurity incident occurred in the hands of a vendor. ## How to Create an Effective Vendor Risk Management Program Organizations can establish robust vendor risk management programs by following the steps below. ### Step 1. Write Vendor Risk Management Documentation Organizations must develop the appropriate vendor risk management documentation for inclusion in the information security policy. If there is no existing VRM documentation to work with, compliance teams can begin with a broad outline to act as a scaffold policy. Once the processes and procedures are better defined, the team can add further details. The finalized documents should specify the roles and responsibilities of stakeholders in the daily operations of vendor risk management within the context of information security and the organization as a whole.  VRM documentation requires constant revision to keep up with new and updated regulatory requirements, [security posture](https://www.upguard.com/blog/security-posture) maturity, and changes to vendor inventory. [Learn how to implement an effective VRM workflow >](https://www.upguard.com/blog/vendor-risk-management-workflow) ### Step 2. Establish Vendor Selection Standards When your organization onboards a new vendor, you’re likely granting them access to a significant amount of [sensitive data](https://www.upguard.com/blog/sensitive-data).  While your security controls may comply with all internal and external requirements, this is not necessarily the case for your vendors. A vendor itself may be compliant with regulatory requirements internally, but this doesn’t necessarily extend to its customers.  It’s crucial to ensure your security team has an effective process for vetting third parties before forming new vendor relationships and trusting them to [secure your data](https://www.upguard.com/blog/data-security).  Following the Request for Proposal (RFP) and submission review, the selection process relies heavily on [performing vendor due diligence](https://www.upguard.com/blog/vendor-due-diligence).  ### Step 3. Perform Vendor Due Diligence Vendor due diligence is a crucial element of the vendor selection process that involves screening potential vendors before onboarding. Performing due diligence should validate any claims the vendor has made regarding its security posture, certifications, and level of compliance.  Adequate due diligence should be performed during all stages of the vendor lifecycle through ongoing monitoring to manage third-party compliance efficiently. Vendor due diligence practices often include: * Sending risk assessment questionnaires at least annually. * Requesting relevant documentation, e.g., [SOC-2 reports](https://www.upguard.com/blog/soc-2), [business continuity plans](https://www.upguard.com/blog/business-continuity-plan), [incident response plans](https://www.upguard.com/blog/incident-response-plan), and [information security policies](https://www.upguard.com/blog/information-security-policy). * Using vendor tiering to evaluate high-risk vendors regularly. * Assessing security posture through security ratings and continuous monitoring of the attack surface. ### Step 4. Audit Your Vendors Regularly  Regular auditing following due diligence processes allows organizations to identify compliance gaps and [vulnerabilities](https://www.upguard.com/blog/vulnerability). Audits should involve detailed reporting of an organization’s vendor relationships, including the use of security questionnaires to assess ongoing compliance.   Organizations can streamline their auditing workflows by implementing a single source of truth to log significant vendor events, such as signing contractual agreements, risk identification, and remediation requests.  [Learn how to choose automated vendor risk remediation software >](https://www.upguard.com/blog/choosing-automated-vendor-risk-remediation-software) ### Step 5. Define Reporting Expectations Executive teams require periodic reporting to understand the importance of vendor risk management in the broader organizational context and drive effective [information security](https://www.upguard.com/blog/information-security) decision-making.  Reporting should be digestible to all stakeholders and contain consistent [cybersecurity metrics](https://www.upguard.com/blog/cybersecurity-metrics), summarizing essential aspects of your critical vendors’ risk portfolios.  A complete vendor risk management platform can automate the entire risk management process. This consolidation enables concise executive reporting of important vendor metrics, such as: * Average vendor [security rating](https://www.upguard.com/blog/what-are-security-ratings) * The number of monitored vendors over time * Distribution of vendor ratings * Most and least improved vendors * [Fourth-party risk](https://www.upguard.com/blog/what-is-fourth-party-risk) * Vendor geo-location ## Vendor Risk Management Program Best Practices in 2025 The following best practices help organizations optimize their vendor risk management programs. ### 1. Identify Your Supply Chain Attack Surface An effective VRM program should account for your third-party vendors and your fourth-party vendors. With [Gartner reporting over 60% of organizations as having 1000+ third parties](https://www.gartner.com/en/legal-compliance/insights/third-party-risk-management), gaining and maintaining visibility across the [supply chain attack surface](https://www.upguard.com/blog/what-is-the-digital-supply-chain) quickly becomes complex. Creating a vendor inventory provides a robust foundation for your organization’s VRM program, allowing you to identify all [attack vectors](https://www.upguard.com/blog/attack-vector), including your fourth parties.  Manually creating a vendor inventory is a time-consuming process requiring complicated spreadsheets and constant revision. Identifying fourth parties through manual methods is also difficult as organizations mainly rely on third-party reporting, which may not be up-to-date or accurate. The ideal solution to tracking the entire supply chain attack surface is to implement [third-party risk assessment software](https://www.upguard.com/product/vendor-risk/third-party-risk-assessments). This provides a centralized platform for tracking third-party vendors and enables the automatic discovery of fourth-party vendors.  Organizations can also leverage [VRM automation](https://www.upguard.com/blog/automate-vendor-risk-management) to categorize vendors based on important factors, such as their level of risk. This categorization allows security teams to prioritize their remediation efforts throughout the vendor lifecycle – from procurement to offboarding. ### 2. Prioritize Your High-Risk Vendors Given the hundreds to thousands of third parties that most organizations manage, allocating the same attention to each vendor is impossible. Each vendor poses unique risks to your organization, of differing importance and urgency. Each risk tier has a unique [due diligence process](https://www.upguard.com/blog/vendor-due-diligence) and other tier-specific requirements, meaning your information security team will need to categorize each vendor individually.  Managing such a large number of vendors requires prioritizing high risk over lower risk vendors. However, it is still essential to regularly assess all vendors against the same standardized checks to ensure no potential [cyber threats](https://www.upguard.com/blog/cyber-threat) remain undiscovered. [Creating a vendor tiering system](https://www.upguard.com/blog/what-is-vendor-tiering) based on the level of risk enables security teams to prioritize their vendors appropriately and efficiently distribute and scale their VRM efforts. ### 3. Assess Third-Party Regulatory Compliance  Regulatory compliance and certification with recognized frameworks provide greater assurance that an organization is implementing strong [cybersecurity measures](https://www.upguard.com/blog/the-best-way-to-measure-cyber-risk). Regardless of where a [data breach](https://www.upguard.com/blog/data-breach) occurs in the [supply chain](https://www.upguard.com/blog/supply-chain-attack), an organization always remains fully responsible for protecting its [sensitive data](https://www.upguard.com/blog/sensitive-data).  Organizations must sustain thorough VRM practices throughout the entire vendor lifecycle and regularly assess compliance via [security questionnaires](https://www.upguard.com/blog/security-questionnaire). This practice is critical in heavily regulated industries, like [finance](https://www.upguard.com/blog/cybersecurity-regulations-financial-industry) and [healthcare](https://www.upguard.com/blog/cybersecurity-regulations-and-frameworks-healthcare). Organizations can [streamline their risk assessment processes](https://www.upguard.com/blog/frustrations-vendor-risk-assessments) by combining the use of a [risk assessment questionnaire template](https://www.upguard.com/blog/vendor-risk-assessment-questionnaire-template) with a [complete VRM solution](https://www.upguard.com/product/vendorrisk) that automates questionnaire workflows. ### 4. Practice Continuous Monitoring Establishing a vendor risk management program is not a “set-and-forget” endeavor.  Upon onboarding, security teams must perform regular vendor assessments and continuously monitor the [third-party attack surface](https://www.upguard.com/blog/attack-surface) to ensure vendors’ [security postures](https://www.upguard.com/blog/security-posture) remain healthy. With new vulnerabilities emerging daily, security teams must quickly identify any third-party risks and request immediate remediation. Maintaining constant visibility into vendor performance across an ever-growing attack surface is near impossible without the help of automation.  A [complete attack surface monitoring tool](https://www.upguard.com/product/vendorrisk) allows organizations to continuously monitor and manage third and fourth-party risks by identifying and reporting cyber risks throughout the supply chain in real time. ## 4-Pillar Framework for Scaling your Vendor Risk Management Program The following framework will help you efficiently scale your VRM program. ### 1. Identify Vendor Risk Management Skills Deficits Insufficient bandwidth to address all third-party risk management obligations isn't always a sign that you're ready to scale your cybersecurity efforts. This could also result from a skills deficit. Audit the skillset of your security team against the standards of proper [Vendor Risk Management](https://www.upguard.com/blog/vendor-risk-management). Identify cross-training opportunities with experienced staff members if certain skills are not shared across team members. ### 2. Partner with a Managed Service A skills deficit is no longer an obstacle to scalability. Vendor Risk Management programs have developed to the point of [now offering managed services](https://www.upguard.com/services) to organizations wanting to expand their third-party security efforts cost-effectively. > Insufficient human resources is one of the biggest obstacles to scaling VRM efforts. Such a service isn't intended to necessarily replace existing teams, but to cooperate with their efforts, allowing them to flex into a larger degree of vendor risk management whenever required. ## 3. Leverage the Benefits of Automation Implement solutions that replace all manual processes associated with administrative efforts. A process that's most prone to time-consuming manual assignments is vendor questionnaire management. An attack surface monitoring solution can instantly alleviate this manual component, allowing security teams to effortlessly manage risk assessments at scale, without ever needing to load a spreadsheet. [Learn how UpGuard is reimagining TPRM >](https://www.upguard.com/product/vendorrisk/ai) ## 4. Encourage Vendors to take Ownership of their Security Posture Vendor Risk Management programs can only scale seamlessly if all third-party vendors make a commitment to improving their cybersecurity. Maintaining such an exemplary attitude of continuous improvement requires more than just the routine risk assessment. It's most effectively encouraged with a third-party security feature benefiting both an organization and its vendors. [Trust Exchange by UpGuard](https://www.upguard.com/product/trust-exchange) allows vendors to showcase completed questionnaires and related documentation to both existing and prospective partners.This benefits vendors by reducing time spent responding to risk assessments while also increasing the potential for new partnerships through a demonstration of cybersecurity due diligence. Organizations also greatly benefit from the reduced administration associated with questionnaire management since vendors are encouraged to proactively demonstrate their cyber resilience. Free resource ### [Download now](#) ## Related posts Learn more about the latest issues in cybersecurity. Vendor Risk Management #### [Vendor Tiering That Scales: A Weighted-Model Implementation Guide](/blog/vendor-tiering-that-scales) UpGuard's guide to vendor tiering at scale: a weighted risk model that tiers vendors objectively and routes high-risk vendors for review automatically. [](/team/cassy-van-eeden) [Cassy van Eeden](#) October 13, 2026 Vendor Risk Management #### [The Vendor Tiering Series: Why Tier Your Vendors](/blog/vendor-tiering-why-tier-vendors) When every vendor is a priority, none actually are. Learn how effective vendor tiering defines criticality and maintains a defensible security posture. [](/team/revashni-moodley) [Revashni Moodley](#) February 25, 2026 Vendor Risk Management #### [Building a Robust Vendor Risk Management Dashboard](/blog/vendor-risk-management-dashboard) Discover the importance of building a robust VRM dashboard. This article outlines key features, essential metrics, and best practices. [](/team/nicholas-sollitto) [Nicholas Sollitto](#) September 20, 2026 Cyber Risk Posture Management #### [The Best IT and Cyber Risk Management Software](/blog/best-it-and-cyber-risk-management-software) Discover the best IT and cyber risk management software, including UpGuard, Riskonnect, Diligent, Optro, ServiceNow, Archer, and MetricStream. [](/team/cassy-van-eeden) [Cassy van Eeden](#) September 3, 2026 Vendor Risk Management #### [Shadow IT: Usage-Based Tiering for Vendor Risk](/blog/shadow-it-tiering-vendor-risk) How UpGuard User Risk and Vendor Risk use real-time usage signals to discover shadow IT and tier every app by true risk profile in 2026. [](/team/cassy-van-eeden) [Cassy van Eeden](#) October 20, 2026 Vendor Risk Management #### [Supply Chain Cybersecurity Strategies for Modern Business](/blog/supply-chain-cybersecurity-strategies-modern-business) Strengthen your supply chain cybersecurity with actionable steps and best practices for reducing risks across all vendor networks. Read more here. [](/team/revashni-moodley) [Revashni Moodley](#) November 18, 2025 [All posts](/blog) Experience superior visibility and a simpler approach to cyber risk management [Get a demo](/contact-sales) [Free trial](/demo)