The role of vendor risk management in cybersecurity

As cyber threats continue to rise, businesses face significant risks from third-party vendors. The World Economic Forum's Global Cybersecurity Outlook 2024 reports that 41% of organizations that experienced a major cyber incident in the past year linked it to a third-party vendor. Additionally, 54% acknowledged gaps in understanding supply chain vulnerabilities, highlighting the urgent need for robust vendor risk management (VRM). By strengthening VRM practices, businesses can mitigate potential threats, enhance regulatory compliance, and safeguard their data and operations.

This article will delve into the benefits and components of effective vendor risk management and how organizations can implement measures to address cybersecurity risks associated with third parties like vendors, suppliers, and service providers. Read on to learn more:

Key components of a vendor risk management program

Vendor risk management is the process of identifying, assessing, and mitigating risks associated with third-party vendors or suppliers that an organization works with. These risks can be related to financial stability, business continuity, legal compliance, cybersecurity, reputational damage, or other potential threats that could affect the organization's ability to meet its objectives.

A robust vendor risk management program consists of several essential components:

• Vendor inventory and classification: Cataloging all vendors and classifying them based on the level of access they have to critical systems and data
• Risk assessment framework: Establishing criteria to evaluate and score vendor risks
• Compliance and contract management: Ensuring vendors adhere to relevant regulatory requirements and contractual obligations
• Incident response planning: Developing procedures to address potential breaches or cyber incidents involving vendors
• Ongoing monitoring and review: Continuously assessing vendor performance and identifying new risks as they arise

To start building your vendor risk management program, begin by identifying your vendors and other third parties as well as the data and assets they currently have access to in order to assess the potential risks they pose to your organization. 6clicks' Vendor Risk Management solution can equip you with a powerful Third Party module where you can assess and manage your vendors in one place. Categorize vendors according to their level of risk, customize vendor onboarding forms and assessment templates to streamline your workflow, and instantly create risks and issues identified from assessments to enable management and mitigation.

Conducting a vendor risk assessment

Effective VRM begins with a comprehensive risk assessment. This involves identifying vendors that have access to sensitive information, evaluating their cybersecurity measures, and determining the potential impact of a breach. The assessment process includes:

• Mapping vendor touchpoints: Understanding how vendors interact with internal systems and data
• Evaluating security policies: Reviewing the vendor's security policies and incident response protocols
• Quantifying potential risks: Assigning risk levels based on factors such as data sensitivity and vendor access scope

With 6clicks' integrated risk management capability, you can easily conduct risk assessments and create risk treatment plans using a comprehensive risk register. Configure custom fields such as likelihood and impact to automatically calculate risk rating and inform risk prioritization, ensuring thorough and consistent evaluations across all third-party relationships. Then, link risks to their associated third parties and assign tasks to team members to facilitate risk remediation.

Implementing vendor risk mitigation strategies

Once risks are identified, organizations must implement strategies to mitigate them. These include:

• Aligning with security standards: Implement security measures that align with specific cybersecurity frameworks like NIST CSF and ISO 27001. This could include requiring vendors to undergo regular risk assessments, allocating roles and responsibilities between vendors and the organization, and other compliance requirements for supply chain risk management.
• Limiting access: Restrict vendor access to only the systems and data necessary for their operations to minimize your attack surface.
• Encryption and data protection: Enforce encryption and data protection measures to safeguard the confidentiality, integrity, and availability of information.
• Regular audits and testing: Continuous monitoring is essential to proactively address risks. Conduct periodic audits and penetration testing to identify potential vulnerabilities.

6clicks offers customizable risk treatment workflows and robust functionality for implementing vendor management controls and other security measures to help you streamline risk mitigation.

Best practices for vendor risk management

Adopting the following best practices can help you strengthen your vendor risk management program:

• Vendor due diligence: Perform thorough background checks and security assessments before onboarding new vendors.
• Contractual safeguards: Include cybersecurity requirements and breach notification clauses in vendor contracts.
• Employee training: Educate internal teams on vendor risk management processes and best practices.
• Scenario planning: Include considerations for supply chain-related disruptions in your business continuity plan and simulate potential breach scenarios involving vendors to refine response strategies.
• Continuous monitoring: Vendor risk management is not a one-time task but an ongoing process. Continuous monitoring enables organizations to immediately detect anomalies, track vendor performance, and respond quickly to emerging threats. 6clicks' continuous control monitoring feature allows you to gain real-time visibility into the effectiveness of vendor management controls and get instant alerts for any security issues or incidents.

In conclusion, vendor risk management is vital for protecting data and ensuring business continuity. By adopting a comprehensive VRM program, businesses can reduce third-party risks, enhance compliance, and strengthen their cybersecurity posture.

Simplify vendor risk management with 6clicks

6clicks offers a suite of integrated tools and features, including seamless vendor assessment workflows, automated risk and issue identification, and continuous monitoring, to help you manage vendor risks with confidence and efficiency. Get started with 6clicks today.