What is a VRM policy template?
A Vendor Risk Management (VRM) policy template is a formal, structured document that standardizes how a company assesses, monitors, and manages the risks introduced by its third-party vendors throughout the entire vendor lifecycle.
Rather than starting from scratch, a VRM policy template gives CISOs, security managers, and compliance teams a ready-made document aligned with best practices and regulatory expectations. The template can be tailored to fit any organization size, industry, and risk profile, and serve as a foundational tool for building a robust Vendor Risk Management program.
By using a VRM policy, a risk management program benefits by:
- Improving Operational Efficiency: It establishes clear, repeatable processes for vendor evaluation and management, which helps in optimizing resource allocation.
- Enhancing Quality Management: The policy ensures that vendors are selected based on their ability to meet specific quality and security standards.
- Ensuring Compliance: It helps adhere to regulatory requirements by embedding compliance checks within the vendor management process.
- Standardizing security management practices: A VRM policy provides a clearly articulated, organization-wide standard that governs every step of the vendor lifecycle in a format that accommodates easy updating as threats, regulations, and business needs evolve.
Why is a VRM policy important?
A Vendor Risk Management (VRM) policy is crucial because it provides a structured and proactive approach to managing security risks in your supply chain.
Vendors and third-party service providers often require access to your systems, data, or business processes, which increases your attack surface. Without a formal Vendor Risk Management policy, oversight of your external attack surface is limited at best, leaving your sensitive data housed in vendor assets unprotected and vulnerable to cyberattacks.
A VRM policy closes this visibility gap, establishing a systematic approach to identifying and managing external cyber risks. It enables your team to identify potential security gaps, operational weaknesses, and compliance risks before they lead to a breach, reducing your likelihood of facing the financial and reputational damage following a vendor-related security incident.
Some key benefits of a VRM policy include:
- Regulatory compliance: Many frameworks and laws, such as GDPR, HIPAA, and ISO 27001, require organizations to demonstrate that they have assessed and mitigated third-party risks. A VRM policy may provide supporting evidence of this effort.
- Cyber risk exposure reduction: Standardizing vendor due diligence and monitoring processes reduces the chance of costly incidents like data breaches, service disruptions, or compliance violations.
- Operational consistency: Without a policy, vendor risk activities may vary between teams or departments, leading to gaps in oversight.
- Audit readiness: A VRM policy provides a central reference point for internal and external audits, ensuring your vendor management process is transparent and defensible.
- Stronger vendor relationships – Clear expectations and accountability foster better collaboration and performance from vendors.
Who should use a VRM policy template?
A VRM policy template is designed for organizations of all sizes that rely on third-party vendors, contractors, or service providers. While every business benefits from stronger vendor oversight, the template is especially valuable for teams that need to implement a standardized, defensible approach quickly without building a policy from the ground up.
Key beneficiaries of a VRM policy template include:
- Chief Information Security Officers (CISOs): To establish clear governance over vendor-related risks and ensure consistent practices across the enterprise.
- Security and compliance managers: To operationalize vendor risk assessments, due diligence, and monitoring within an approved policy framework.
- Procurement and sourcing teams: To integrate risk considerations into vendor selection and contract negotiation.
- IT and operations teams: To understand the security requirements vendors must meet when accessing systems or handling data.
- Legal and risk officers: To ensure the organization meets its regulatory obligations and can defend its vendor oversight program in case of an audit or incident.
Every business can benefit from a VRM policy, since every company is vulnerable to supply chain attacks and third-party breaches.
Components of a VRM policy template + examples
A Vendor Risk Management (VRM) policy template is designed for internal use by security, risk, and procurement teams to standardize how vendors are evaluated and managed throughout their lifecycle. However, it can also be shared with new vendors to clearly communicate your security standards and expectations at the start of your engagement.
Each of the key components below is based on our VRM policy template, which is available to download. These nine sections cover all of the essential aspects of risk management required in an effective VRM policy.
1. Overview
The opening section introduces why the policy exists and frames vendor management as a balance of opportunity and risk. It makes clear that the organization’s approach covers the entire vendor lifecycle.
Example:
[COMPANY NAME] partners with third-party vendors to enhance operational efficiency and deliver high-quality services. While vendors provide essential support, they also introduce risks that must be managed. This policy establishes a standardized approach to assess, monitor, and manage vendor-related risks throughout the vendor lifecycle.
2. Purpose
Here, the policy defines its core objectives, establishing a clear framework for onboarding, assessing, monitoring, and offboarding vendors. It sets baseline due diligence principles, ensuring risk is managed in line with the company’s appetite.
Example:
The purpose of this policy is to define the framework for onboarding, assessing, monitoring, and offboarding vendors, and to ensure that risk associated with vendor relationships is managed in alignment with [COMPANY NAME]’s risk appetite.
3. Scope
This section specifies who and what the policy applies to, covering all employees, contractors, and departments involved in vendor selection and management.
The scope also includes definitions of terms associated with Vendor Risk Management to ensure consistent language across the organization.
Typical terms include:
- Vendor
- Vendor matrix
- Risk personnel
- Compliance risks
- Reputation risks
- Operational risks
- Due diligence
- Risk assessment
- Relationship questionnaire
4. Roles and responsibilities
Clear accountability is vital. This section of a VRM policy outlines who owns which part of the process, covering key players and their specific responsibilities.
Example:
- Risk personnel: Conduct vendor risk assessments, assign tiers, and track remediation.
- Business owners: Initiate review requests, validate scope, support ongoing evaluations.
- Executive committee: Govern escalated risk decisions for critical vendor engagements.
5. Policy components
This is the operational heart of the VRM policy, detailing the four core processes your organization will follow.
5.1 Program setup
Outlines the foundational work before onboarding any vendor, establishing a risk tiering system, defining risk appetite and thresholds, creating vendor inventories, standardizing questionnaires, and ensuring complete documentation.
Example:
All vendors must be classified using the Vendor Risk Tiering system, aligning tiers to business criticality, data sensitivity, and operational impact.
5.2 Vendor due diligence
Covers how to assess a vendor’s ability to meet security requirements before engagement. The depth of review depends on the vendor’s tier, ranging from basic public checks for low-risk vendors to detailed assessments for critical ones.
Example:
Tier 1 vendors require in-depth due diligence, including review of SOC 2 or ISO 27001 reports, incident response plans, and penetration test results.
5.3 Vendor risk assessment
Explains the formal process for identifying, analyzing, evaluating, and treating vendor risks, as well as documenting them in a risk register. Specifies assessment frequency by tier and defines risk treatment options.
Example:
Critical and high-risk vendors are reassessed at least annually, with interim reviews triggered by material changes.
5.4 Vendor monitoring
Details the continuous oversight of vendors, including SLA performance reviews, periodic risk posture checks, security rating monitoring, and reassessment triggers such as incidents or certification expirations.
Example:
Significant drops in a vendor’s security score or detection of a critical vulnerability will trigger an out-of-cycle assessment.
6. Vendor offboarding
Defines the formal process for securely ending a vendor relationship, covering communication, contract reviews, access revocation, data return or destruction, and updating records.
Example:
Upon termination, all access to systems and data must be revoked, and data must be securely destroyed with certification where applicable.
7. Vendor scoring and risk tolerances
Explains how security ratings or other scoring frameworks are used alongside qualitative assessments, and sets reference thresholds for each tier to guide prioritization.
Example:
[COMPANY] may utilize a security rating or scoring framework (either internally developed or from a third-party service) to provide a quantifiable measure of a vendor's externally observable security posture or overall risk level. This score serves as one input into the broader risk evaluation process.
8. Policy review and maintenance
Commits the organization to regularly review and update the policy to keep it aligned with regulatory requirements, risk management tools, and the evolving threat landscape.
Example:
This policy will be reviewed annually or upon significant changes to regulations, tools, or [COMPANY NAME]’s risk appetite.
VRM policy implementation strategy
Implementing your Vendor Risk Management policy requires a strategic, phased approach that embeds risk-awareness into your company culture. A successful rollout ensures the policy is understood, adopted, and consistently enforced across all departments.
Here is a proven strategy to implement your VRM policy effectively:
1. Secure executive buy-in and form a team
First, obtain sponsorship from executive leadership. Their support is essential for securing resources and enforcing the policy. Then, a cross-functional implementation team with members from key departments like IT, Security, Legal, Finance, and Procurement should be formed to ensure all perspectives are considered.
2. Create a centralized vendor inventory
You cannot manage risks for vendors you don’t know you have. Compile a comprehensive inventory of all third-party vendors your organization uses. This single source of truth should include details like the service provided, the internal business owner, and the types of data the vendor can access.
3. Classify vendors by risk tier
Not all vendors pose the same level of risk to your organization. Use the tiering system defined in your policy (e.g., Critical, High, Medium, Low) to segment your vendor inventory. This allows you to prioritize your resources by focusing the most intensive due diligence and monitoring efforts on high-risk vendors.
Vendor tiering also simplifies compliance monitoring, helping security teams readily identify vendors with the greatest impact on your compliance efforts.
4. Develop a communication and training plan
Proactively communicate the new VRM policy across the organization. Conduct training sessions tailored to different roles, especially for business owners and employees responsible for selecting and managing vendor relationships.
The goal is to ensure everyone understands the policy, their specific responsibilities, and the process for onboarding new vendors.
5. Phase the rollout and start with critical vendors
Instead of applying the policy to all vendors at once, begin with your most critical relationships — which should be your Tier 1 vendors (see step 3).
Start by performing full risk assessments on this vendor group. This phased approach allows you to refine your processes and demonstrate early wins to stakeholders before expanding the program to lower-risk vendors.
6. Leverage technology to automate processes
Managing VRM on spreadsheets is not scalable. Implement VRM software or a GRC platform to automate and streamline workflows like vendor onboarding, risk assessments, and continuous monitoring.
Automation reduces manual effort, improves consistency, and provides real-time visibility into your vendor cyber risk landscape.
7. Monitor, measure, and refine
VRM is a continuous cycle, not a one-time project. Regularly monitor vendor performance against contracts and SLAs. Track key metrics to measure the effectiveness of your program. Be prepared to review and update the policy over time to adapt to new threats and business objectives.
How to use this VRM policy template
This VRM policy template is designed to be both comprehensive and adaptable. It allows your organization to customize it to your unique requirements while preserving best-practice structure.
Here's how to get started:
Step 1: Review the template
Read each section to understand its purpose and how it aligns with your organization’s existing vendor management processes. Identify areas that require clarification or expansion based on your internal risk framework.
Step 2: Customize for Your organization
Replace placeholders with your organization’s name, department titles, and approval roles. Adjust terminology, workflows, and vendor classification criteria to reflect your industry, operational environment, and regulatory obligations.
Step 3: Align with regulations and standards
Map the policy’s requirements to the regulations, frameworks, and contractual obligations you must follow — such as GDPR, HIPAA, ISO 27001, or NIST standards — to ensure compliance from the outset.
Step 4: Integrate with existing processes
Embed the policy into procurement, onboarding, and IT security workflows so it becomes part of daily operations rather than a stand-alone document. Ensure procurement, legal, IT, and security teams use the VRM policy as a reference point.
Step 5: Train stakeholders
Brief relevant staff on their roles and responsibilities under the policy. Provide practical guidance on carrying out vendor risk assessments, managing incidents, and documenting compliance.
Step 6: Keep It up to date
Review the policy at least annually or after significant changes to regulations, business strategy, or vendor landscape. Update procedures and classifications as needed to address emerging threats and evolving compliance requirements.