Download Now

Onboarding is perhaps the most precarious phase of the Vendor Risk Management process. A single oversight could expose your organization to dangerous third-party security risks, increasing your chances of suffering a data breach. This post explains how to bolster the most vulnerable access points of the vendor onboarding process to help you securely scale your VRM program.

Learn how UpGuard streamlines Vendor Risk Management >

Cybersecurity Challenges in Vendor Onboarding

With businesses now entirely dependent on digital processes, every new third-party partnership extends digital networks, ultimately leading from your sensitive resources. This unfortunate byproduct of digital transformation presents some significant cybersecurity challenges that surface during vendor onboarding.

When you onboard a new vendor, their security risks ultimately become your security risks — not eventually, but instantly. Due diligence processes are responsible for quickly disqualifying potential third-party vendors that fail to meet your third-party risk appetite standards. To sufficiently minimize data breach risk levels to a standard that’s acceptable to information security regulations, this selection process must be nearly perfectly accurate every time, making due diligence the cornerstone of an effective Vendor Risk Management program.

The cybersecurity challenges presented by new vendor relationships can be consolidated into four cybersecurity categories.

1. Data security and privacy risks

Service providers failing to implement standard data security measures, such as encryption, access controls, and data protection policies, have no security barrier between adversaries and any sensitive data you entrust them to process. Poor data security standards also directly violate customer data safety regulations such as the GDPR and PCI DSS, which result in a significant financial penalty if violated.

2. Data breach risks

A third-party vendor with security vulnerabilities introduces data breach attack vectors into your IT ecosystem. Third-party cyber risks don’t necessarily need to be complex exposures; they could be as simple as a misconfiguration, such as the type UpGuard researchers discovered in the Microsoft Power Apps portal, a leak that could have resulted in a data breach compromising up to 38 million records.

3. Third-party risks

Third-party vendor risks extend beyond the scope of vendor security. Third-party business relationships could also expose your organization to the following third-party risk categories:

  • Operational risks: Triggered by poor vendor performance leading to business continuity disruptions, which may result in service level agreement violations.
  • Supply chain risks: Potential risks surrounding procurement workflows ultimately impacting the quality of your services to customers.
  • Financial risks: Financial risks stemming from sourcing issues to data breach damages triggered by poor vendor performance.

4. Compliance risks

Because third-party vendors directly impact the health of your cybersecurity posture, third-party risks could be detrimental to your regulatory compliance efforts. Because of the direct correlation between third-party security risks and regulatory compliance, many standards and even cyber frameworks are increasing their emphasis on third-party risk management in their compliance requirements. Some notable examples include:

4-Step Guide: Securing the Vendor Onboarding Process in 2024

The discipline of Vendor Risk Management is primarily focused on mitigating and managing cybersecurity and compliance risks introduced by third-party vendors. The following framework will help minimize exposure to these inherent risks during the onboarding workflow.

Step 1: Clearly define your third-party vendor requirements

This step established a crucial precedent for a secure vendor onboarding process. Despite ongoing efforts by third-party solutions to streamline their onboarding integrations, your business should be very frugal when it comes to entering into new vendor partnerships, ideally, to the point of standardizing an attitude of hesitancy.

Allowing employees to sign up for any third-party solution without explicit IT approval—even at a corporate level—will result in a gaping exposure to unknown third-party security risks. Simply narrowing the entry point for new third-party relationships could instantly block a host of potential third-party security risks from the onboarding workflow. 

filter removing unecessary vendors

The foundation for such an ultra-fine onboarding filter is established with a clearly defined vendor onboarding policy, one addressing the following details:

  • Business objectives requiring third-party support: Clearly define your business objectives that necessitate engaging in a new third-party vendor. These metrics must be absolutely crucial to the success of your business objectives, to the point of risking losing new business opportunities if third-party services are not established.
  • Scope of required third-party services: Outline the minimum scope of third-party service required to meet your business objectives.
  • Level of sensitive data access: Your onboarding policy must stipulate the level of sensitive data access you’re willing to offer third-party services. Your decisions must be aligned with the Principle of Least Privilege and supported by security control strategies to mitigate the chances of these pathways being compromised. For ideas about how to bolster vulnerable pathways against compromise attempts, download our free guide on preventing data breaches.

Step 2: Conduct thorough due diligence

Collect cybersecurity data from reputable public-facing sources to form a preliminary picture of a vendor’s risk profile. If done well, this effort will not only ensure onboarded vendors align with your third-party risk appetite but also streamline the vendor risk assessment processes for each onboarded vendor. The data gathered during due diligence doesn’t just support the onboarding phase of the vendor lifecycle; it sets the context of all future TPRM tasks, including remediation, continuous monitoring, and even offboarding,

Vendor risk assessment workflow comprising of due diligence, risk assessments and risk mamagement strategy

Some common data sources that could contribute to a prospective vendor’s preliminary risk profile include:

  • Trust and security pages: Public-facing web pages conveniently summarizing a prospective vendor’s primary cybersecurity initiatives, such as achieved certifications and regulatory compliance efforts - here’s an example of a Trust and Security page.
  • Automated scanning results: Superficial attack surface scanning results identifying a vendor’s most obvious vulnerabilities across its public-facing assets.
  • Trust Pages: Public-facing pages hosting documentation for the purposes of streamlinling due diligence processes with new business partnerships. These pages could host completed security questionnaires, vendor assessments, real-time security ratings, and audit reports.

    Learn more about UpGuard’s Trust Page feature.
Vendor Trust Page on the UpGuard platform.
Vendor Trust Page on the UpGuard platform.
After completing due diligence, you should have an idea of which prospective vendors are safe to onboard.

UpGuard’s Trust Exchange product is a free tool designed to automate the consolidation of third-party security information to streamline due diligence processes and ongoing vendor assessments. Watch this video to learn more.

Sign up for Trust Exchange for free >

Step 3: Segment critical vendors

The due diligence process offers a good indication of which vendors should be classified as critical in your Vendor Risk Management program. At a high level, this tiering strategy should be based on whether a third-party vendor will require access to sensitive data, where those that do are flagged as "high-risk" and assigned the highest criticality tier.

Criticality levels could also be based on: 

  • Each vendor’s degree of importance for achieving key business objectives (as determined in step 1).
  • Stakeholder preferences.
  • The severity of potential impact on regulatory compliance efforts.
Vendor tiering on the UpGuard platform.
Vendor tiering on the UpGuard platform.

Step 4: Automate onboarding processes

To set the foundation for a scalable Vendor Risk Management program, automation technology should be integrated at crucial bottleneck points in the onboarding process. Some common areas that could significantly benefit from automation include:

  • Generation of risk assessment reports: These reports generated from initial risk assessments lay out a high-level risk management framework for each onboarded vendor. With stakeholders becoming more involved in risk management strategies, an automated report generation feature will elevate the administrative bottlenecks of having to continuously manually create these reports.
  • Notifications: Notification triggers for sudden security rating drops will indicate any significant security posture deviations that could impact risk management plans before implementation.
  • Security questionnaire templates: Security questionnaire templates that automatically map to cyber risks and regulatory compliance gaps will expedite initial vendor risk assessment completions, helping you establish risk profiles for onboarded vendors faster.

For an overview of some of the automation features streamlining VRM processes on the UpGuard platform, watch this video:

Ready to see
UpGuard in action?

Ready to save time and streamline your trust management process?