As your business grows and you work with more third-party vendors, you need to ensure security and stability across your entire vendor supply chain. With hundreds, if not thousands, of external vendors, it can be daunting and time-consuming for teams to compile all the necessary data about each vendor, evaluate the vendor's impact, and take action to ensure compliance with organizational needs.
This article outlines five steps to help you scale your vendor risk management program, whether you’re just setting up or expanding. We highlight how to add automation along the way so you can focus on your most urgent tasks over the repetitive, manual tasks that take up so much time.
Step 1 — Gathering Vendor Information
Your first task in managing vendors is to compile a full list of vendors and all the relevant information.
With UpGuard Vendor Risk, you can manage your vendor lifecycle and ecosystem in a convenient and organized dashboard with automated questionnaires, custom reporting, and continuous monitoring. A central platform like Vendor Risk serves as the single source of truth for your vendor ecosystem, thus enabling your team to focus efforts on vendor evaluation rather than list-making. You can monitor vendors by adding them individually or in bulk.
Gathering information from a variety of stakeholders in your business requires a significant time investment. You might have to chase down team members to get the information you need and analyze the vendor's business impact. To ease that process, you can use an automated tool like UpGuard's vendor relationship questionnaire, which is an internal information gathering tool. By sending the relationship questionnaire to the internal team members responsible for that vendor, you can ensure that you retrieve the necessary detail and appropriate level of depth required to assess the vendor.
Once you have a complete list of vendors and all relevant details, you can begin to evaluate each vendor according to your business needs.
Learn how to implement an effective VRM workflow >
Step 2 — Assessing Vendors According to Risk
To implement a vendor risk management program, you need to understand how third-party vendors introduce risk to your business operations. If you are unsure how external vendors manage data security and access control, then your business and your customers' data could be at risk.
When you evaluate vendors, you need to identify which vendors have the most significant impact on your business. Determining vendor criticality is a crucial piece of the due diligence process for your vendor risk management program. If something were to go wrong, like your vendor suffered a data breach and your business data was exposed, then you would consider that vendor a critical risk to your business. By identifying your highest risk vendors, you can set organizational expectations around vendor behaviors and required compliance activities.
As you determine your criticality threshold, use the following items to assess vendor significance and risk tolerance:
- Potential business impact if vendors are compromised
- Vendor security ratings
- Importance of items included in the vendor relationship questionnaire
- Key performance indicators for your business
- Organizational requirements and compliance needs
- Vendor access to customer information or other sensitive data
Once you have determined what information comprises your risk threshold, you can organize your vendor data and prioritize actions for your most critical vendors.
Learn how to create a vendor risk assessment matrix >
Step 3 — Tiering and Classifying Your Vendors
You can use vendor tiering to classify vendors according to the risks they introduce to your organization. Once you determine the factors that comprise your vendor criticality standards, you can focus your VRM practices on the critical vendors that have the most impact on your business.
Manual tiering is tedious and time-consuming. Validating information for hundreds or thousands of vendors is not an effective use of resource hours. We designed UpGuard Vendor Risk with intuitive, time-saving features to help you keep your vendor catalog organized. With tiers, portfolios, labels, and custom attributes, you can sort and organize your vendors according to criteria you define. You can then filter vendors to generate reports with specific information, such as a label that identifies which department is responsible for that vendor relationship.
You can use each of these methods to classify vendor information in UpGuard:
- Tiers: With vendor tiering, you can classify your vendors according to the inherent risk they pose to your organization. Tiers help you identify the appropriate allocation of resources when assessing and monitoring that vendor.
- Labels: With labels, you can tag vendors according to key characteristics. UpGuard provides five default labels (in-use, business data, customer data, network access, and physical access), but you can always create custom labels according to your organizational needs.
- Custom Attributes: With custom attributes, you can provide additional information about each vendor. Create custom attributes for any information not accounted for in your tiers and labels.
- Portfolios: With portfolios, you can segment vendors into groups aligned to the business purpose, such as grouping by suppliers, partners, or departments. Set access control for specific portfolios, and use portfolios to create reports and filter information.
As you scale your program to hundreds or thousands of vendors, manually classifying each vendor's tiers, labels, and custom attributes becomes more time-intensive. With UpGuard's automated vendor classification, you can optimize vendor classification with both simple and advanced automation logic to suit your organization's needs. Define the rules and logic to apply the necessary characteristics quickly and accurately. Automated vendor classification helps your team sort vendors by criticality, clarify risk thresholds, and drive consistency in your vendor management process.
The automation workflow applies tiers, labels, portfolios, and custom attributes to your vendors based on answers from the vendor relationship questionnaire and your custom automation logic. From simple rules like "If the department procuring this vendor is 'Marketing', then set the 'Marketing' portfolio" to more advanced logic that takes into account multiple questions and weighted scores, you can automate classification and allocate more resources to urgent risk assessment activities. Once you have set custom automation logic aligned to your business needs, that logic will apply to all vendors and ensure that vendors are classified according to consistent criteria.
Classifying vendors through an automated workflow empowers you to focus on risk assessments and security compliance needs. By tailoring your automation logic to your business needs, you can prioritize risk assessment activities for vendors that pose the highest risk to your business.
Step 4 — Conducting Risk Assessments
Automated vendor classification empowers you to prioritize your most critical vendors as you plan your assessment schedule so you can perform a comprehensive vendor risk assessment within the UpGuard platform, improving operational time to complete assessments and providing a long-term record of the results.
Because your vendor portfolio is organized according to the classification needs you set, you can identify your critical, high, and medium risk vendors for a regular risk assessment. Perform a comprehensive vendor risk assessment within the UpGuard platform, improving operational time to complete assessments and providing a long-term record of the results.
UpGuard Vendor Risk offers a complete vendor risk assessment workflow, empowering you to compile your organization's risk assessment activities in a single dashboard within the UpGuard platform. You can complete a quick review of automated scanning results, or you can engage a full assessment with additional evidence. With the risk assessment portal, you can assess the level of risk a vendor poses to your organization and save your commentary and information as a point-in-time reference for future assessment needs.
When you're ready to conduct a risk assessment, select the vendor from your monitored vendors and identify which assets will serve as evidence for the assessment. Your approach to the risk assessment will be focused on the security needs of your organization and your industry, from compliance regulations to infrastructure security to contract policies impacting your vendors. Through continuous monitoring and security questionnaires, you can collect key information related to a variety of risks while evaluating what level of threat your organization can tolerate and how much exposure is navigable for your industry.
A completed risk assessment will help you know whether your follow-up actions should include risk remediation planning, future risk assessments, compliance questionnaires, or continuous monitoring.
Step 5 — Continuous Monitoring for Long-Term Security
As you continue working with existing vendors and adding new vendors, you'll want to maintain awareness of any changes or issues in your vendor attack surface. While you can always communicate directly with the vendor about security concerns, a continuous monitoring platform will enable you to prioritize resolving known issues rather than trying to find out if there are issues at all.
There are a variety of tools that can help you collect information, including UpGuard Vendor Risk. Our real-time scanning data, paired with comprehensive reports and customizable notifications, will keep you up-to-date across your vendor portfolio. Ensure vendor compliance to regulatory standards such as ISO 27001, NIST Cybersecurity Framework, SIG Lite, and more through risk-mapped compliance questionnaires. Harness alerts from UpGuard to know when to take action or follow up with your vendors.
UpGuard provides an all-in-one solution with tools to help you save time and increase productivity during your vendor risk management process. By automating the administrative tasks, your team can drill into specific risks and remediation planning.
