What is the Vendor Risk Management Lifecycle?

The vendor risk management lifecycle (VRM lifecycle) is an end-to-end system that categorizes critical VRM or third-party risk management processes into three phases: vendor onboarding, ongoing risk management, and continuous monitoring. This organized lifecycle, sometimes called the third-party risk management lifecycle (TPRM lifecycle), simplifies the VRM process, empowering security teams and organizations to proactively identify, manage, and remediate security issues across their entire vendor network. 

This article explores the vendor risk management lifecycle, defining the lifecycle’s three phases in more detail and explaining what activities security teams should complete during each phase. Keep reading to learn how adopting the VRM lifecycle can help your organization optimize its vendor risk management program.

Eliminate manual work and automate your VRM lifecycle with UpGuard Vendor Risk > 

Stage 1: vendor onboarding

Vendor onboarding is the first phase of the VRM lifecycle, during which organizations introduce vendors and service providers into their ecosystem. Throughout this phase, organizations conduct a thorough background check, appraising a vendor’s security posture, operational and financial stability, and compliance with legal requirements and industry regulatory frameworks. This process occurs after procurement (vendor selection) and is known as vendor due diligence. Due diligence is one of the most critical activities in the vendor risk management lifecycle, as it sets the stage for future risk management and ongoing monitoring practices. 

Key activities your organization should complete during the vendor onboarding stage: 

• Due diligence: Conduct a thorough evaluation of a vendor’s security posture, compliance status, and operational, financial, and supply chain stability using security ratings, trust pages, and other tools to gather evidence.
• Risk assessment: Perform an initial risk assessment to appraise what risks your organization will inherit by forming a third-party relationship with a particular vendor. How does this vendor stack up compared to your risk tolerance and specific cyber risk objectives? 
• Vendor classification: Assign critical attributes to a vendor relationship, such as contract length, roles and responsibilities, compliance requirements, service level agreements (SLAs), and criticality. 
• Vendor tiering: Dedicate special attention to vendor criticality, tiering vendors based on their level of inherent risk and importance to your overall business continuity. Does this vendor handle sensitive data, or is it essential to everyday operations? 

Even though onboarding is just one phase in the overall VRM lifecycle, many organizations struggle to develop a comprehensive vendor onboarding program if they rely entirely on manual processes and workflows. Utilizing a 360-degree VRM solution, like UpGuard Vendor Risk, is an excellent way to simplify and streamline the process by harnessing the power of automation and real-time data. 

Related reading: How to Create an Effective Vendor Onboarding Policy

How can UpGuard help with vendor onboarding? 

UpGuard Vendor Risk provides organizations access to automated security ratings, streamlined risk assessment workflows, relationship questionnaire templates, and vendor tiering capabilities to reduce the time and effort associated with vendor onboarding. 

Utilizing the UpGuard platform, security teams can quickly gather evidence regarding a vendor’s security posture. UpGuard’s Security Ratings objectively measure a vendor’s cyber hygiene, collecting and evaluating billions of data points through industry-trusted commercial, open-source, and proprietary methods. 

UpGuard provides an executive-level overview of a vendor’s security posture through the Vendor Summary module. This module includes vital information regarding an individual vendor, such as: 

• The number of domains and IPs UpGuard monitors for the vendor
• Questionnaire and remediation information
• Security rating trend
• Website risks
• Email security risks
• Network security risks
• Reputation risks
• Phishing & malware risks
• Brand protection risks

UpGuard Vendor Risk also includes a Vendor Relationship Questionnaire and automated risk assessment workflows (more on these in Stage 2) to help users streamline the onboarding process and reduce the manual burden impacting security teams.

UpGuard users can automatically tier vendors and assign labels and other attributes using vendor answers from the relationship questionnaire. This capability further reduces the manual work security teams must complete to onboard vendors effectively. 

Stage 2: vendor risk management

Risk management is the second phase of the VRM lifecycle, during which organizations evaluate risks associated with a vendor further and develop mitigation strategies to prevent these risks from impacting their security posture or business operations. Many security professionals refer to risk management as an ongoing process because new and existing vendors can develop risks anytime throughout the tenure of a vendor relationship. The risk management phase of the VRM lifecycle ensures vendors continue to meet an organization’s cybersecurity and compliance standards, even as new risks emerge. 

Key activities your organization should complete during the risk management stage: 

• Regular security audits: Conduct periodic security audits and risk assessments to ensure vendors comply with agreed-upon standards and identify new risks that may have emerged between previous assessments. Combine point-in-time risk assessments with continuous monitoring and risk ratings to achieve comprehensive vendor oversight. 
• Risk mitigation plans: Develop strategies to address risks after identification and discovery. Depending on the nature of risks and vulnerabilities, these plans may involve additional security controls, policy changes, or other corrective actions. 
• Vendor collaboration: Develop open communication channels to foster cooperation between stakeholders and the vendor. Doing so will improve vendor performance, provide a space to address security and compliance issues, and allow your organization and vendor to provide periodic updates regarding information security practices, policy changes, risk mitigation, and remediation progress. 
• Incident response: Establish protocols and formal incident response plans to address security incidents involving a vendor, including severe events such as data breaches, data leaks, cyber attacks, or periodic service disruptions. 

With automated vendor scans and other features provided by the best vendor risk management solutions, organizations can streamline several critical activities in the risk management phase of the VRM lifecycle. 

How can UpGuard help with vendor risk management?

UpGuard Vendor Risk enables organizations to establish a standardized VRM process while emphasizing efficiency and using automation to scale the program to fit the needs of their vendor network, despite size or complexity. This process starts with UpGuard’s automated vendor scans, questionnaire templates, and end-to-end risk management workflows. 

UpGuard’s Vendor Risk Assessments eliminate the need for manual, spreadsheet-based assessments and reduce the time it takes to assess a new vendor by half. Users can tailor assessments to their needs and vendor relationships and evaluate, remediate, and review vendor risk exposure in one optimized workflow.

UpGuard also improves vendor collaboration by eliminating manual processes for vendors, improving questionnaire response times, and enabling efficient remediation. Watch this video to understand more about how UpGuard helps users and vendors shift away from manual work: 

UpGuard’s AI ToolKit includes an assortment of automated features and capabilities, helping vendors and users speed up the questionnaire process and increase the efficiency of vendor collaboration. 

• AI Autofill: Enables vendors to auto-populate security questionnaires from a repository of past answers and enables users to receive completed responses in record time
• AI Enhance: Improves vendor response quality, eliminating typos, refining answers, and minimizing human error 

Stage 3: ongoing monitoring

The third phase of the vendor risk management lifecycle, ongoing monitoring, involves continuously overseeing a vendor’s security posture, performance, and compliance status throughout the vendor relationship. The ongoing monitoring stage of the VRM lifecycle ensures vendors remain aligned with the organization’s risk management framework and security teams promptly address all issues. Security professionals sometimes refer to this process as continuous security monitoring, but it actually includes several other key activities and protocols, including performance reviews, contract renewal and termination, and establishing feedback loops. 

Key activities your organization should complete during the ongoing monitoring phase: 

• Continuous monitoring: Deploy automated tools and regular security reviews to monitor a vendor’s activities, performance, and compliance with contractual obligations and industry frameworks and regulations. 
• Performance reviews: Complete periodic performance reviews to evaluate a vendor’s performance, service quality, effectiveness, and SLA adherence. These overviews should be addressed in VRM reports for stakeholders.
• Contract management: Assess the necessity of renewing a vendor’s contract or pursuing vendor termination based on past performance metrics, level of residual risk, overall business needs, or future objectives. 
• Feedback loops: Establish feedback mechanisms to record insights and capture lessons from vendor partnerships. Use these insights and lessons to inform future engagements, develop additional protocols, refine SLAs, and calibrate risk management and vendor relationship management strategies. 
• Vendor offboarding: Develop protocols to offboard vendors when performance drops below expectations or contracts are fulfilled. 

Ongoing monitoring is a nonstop process. Organizations must monitor third-party relationships, especially high-risk vendors or those who handle sensitive data 24/7.The best vendor risk management solutions empower security teams to gain complete visibility over their vendor network with real-time notifications, daily security scans, automated evidence gathering, and continuous monitoring for VRM. 

How can UpGuard help with ongoing monitoring?

UpGuard Vendor Risk scans over 10 million companies daily, empowering users to monitor their vendors around the clock. This automated monitoring improves incident response times, facilitates proactive risk mitigation, and enables security teams to prioritize risks based on vendor criticality and overall organizational impact.

“UpGuard makes security monitoring effortless. Automated scans and continuous monitoring keep our systems safe without constant manual intervention.” - Legal Services Professional on G2

Establish a robust VRM program with the world’s #1 VRM solution: UpGuard Vendor Risk

UpGuard has helped thousands of organizations establish comprehensive vendor risk management programs. Here’s what a few of these customers have said about their experience using the UpGuard platform: 

• iDeals: "In terms of pure security improvement across our company, we now complete hundreds of maintenance tickets, which is a massive advancement we couldn’t have achieved without UpGuard. We previously wouldn’t have detected at least 10% of those tickets, so UpGuard has enabled us to work faster by detecting issues quickly and providing detailed information to remediate these issues."
• Built Technologies: “UpGuard is phenomenal. We’re required to do an annual internal review of all third-party vendors. We have an ongoing continuous review with UpGuard through its automated scanning and security scoring system.”‍
• Tech Mahindra: “It becomes easy to monitor hundreds of vendors on the UpGuard platform with instant email notifications if the vendor’s score drops below the threshold set based on risk or business.