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In the business ecosystem, third-party vendors have always played an integral role. They have become an essential part of organizations in today’s highly-competitive environment. However, when it comes to developing cybersecurity programs, companies often overlook the areas of vendor management. This can create a significant cybersecurity threat as vendors or third-parties have unprecedented access to sensitive data and systems across the supply chain.

If organizations cannot develop a significant cybersecurity strategy and cannot verify the security of its vendors, it will present the potential risk of a cyberattack.

Vendor Risks Assessment

Enterprises that rely heavily on third-parties but don’t have adequate visibility into their vendor networks can put them into high risks. Thus, a robust vendor risk management (VRM) program can assist them to envisage inherent risks instead of simply countering to adverse situations and incidents when they occur. Moreover, strategic vendor partnerships can also help organizations to accomplish their business objectives cost-efficiently.

However, with progressively compound vendor networks, increasing customer demands, and a rapidly changing regulatory environment, there is a huge pressure on business leaders to ensure that their vendors maintain steady compliance with internal policies and evolving regulations.

Furthermore, a vendor risk assessment must be performed in order to appropriately analyze and determine the risk posed to an organization. This should be acted during the vendor selection as well as enduring monitoring phases of the vendor lifecycle.

Risks Businesses Can Face

In today’s era where a single mistake can cost a big amount, organizations can face a host of risks with a vendor or a third-party by engaging them in business. Companies take a huge risk by consigning data to an outside entity, especially where confidential, proprietary, or classified information is involved. This can lead to a breach of legal or compliance regulations, particularly with governmental, financial-sector, and military contractors.

Poor vendor management can also pose huge risks, including breach of HIPAA regulations that require protected health information (PHI) to be secure; General legal issues, which can result in lawsuits, termination of relationships, loss of work, and more; Data security; and loss of intellectual property.

Deciphering Effective Vendor Risk Management

Any third-party or vendor that has access to systems or data is vulnerable to a company. Leveraging an effective vendor cyber risk management framework can define the processes that assess, supervise, and ease the third-party cyber risk.

Most organizations’ vendor risk management programs are extensively traditional. However, for risk management to be effective, there is a need to continuous vendor monitoring that will assist organizations to be prepared for unforeseen eventualities. The NIST (National Institute of Standards and Technology) cybersecurity framework delineates standards, guidelines, and best practices for defining controls and managing cybersecurity risk both within an organization and across third-party relationships.

In vendor management, certain sectors are subject to confine third-party cybersecurity risk management regulations. For instance, in healthcare third-party compliance with HIPAA, among other regulations, must be addressed by the framework a company created. This means the relationship between an organization and vendors must comply with the overall government entities that monitor this specific relationship.

So, to create an effective program for managing risks posed by vendors, businesses need to identify and interpret all challenges. They also must ensure that all third-party contacts address the right to audit, along with security requirements.