Most organizations are granularly attentive when onboarding new vendors. They focus on extensive due diligence and security reviews before allowing any vendor access to business data and systems. However, we typically don’t see the same level of due diligence when the partnership ends—and that tends to leave various third-party risks unattended.
According to a Gartner survey, 84% of risk executives claim that unchecked third-party risks can disrupt operations. This can be particularly true if you’re still connected to a former vendor that continues to expose your organization to leftover threats.
This guide offers detailed insights into the ideal risk-aware vendor offboarding process. We’ll explain:
- Risks and touchpoints to consider when offboarding a vendor
- Best practices to follow for a secure offboarding process
What is vendor offboarding?
Vendor offboarding is the process of formally terminating your business relationship with a vendor and removing associated third-party privileges from your organization. The end goal is to address residual contractual obligations and ensure the vendor can no longer impact your organization’s financial, reputational, or security standing in any way.
Vendor offboarding is carried out in collaboration across various teams, including procurement, IT, finance, and legal. The process may entail several admin and risk management activities, depending on the nature of the partnership.
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Types of vendor risks to cover during offboarding
One of the major challenges of vendor offboarding is the scattered visibility of potential risks. For every outgoing vendor, you should account for the following risk types:
- Data and cybersecurity risks: The likelihood of a former vendor accessing data they’re no longer authorized to obtain.
- Financial risks: The probability of your organization’s financial standing being damaged due to issues like overlooked claims or contract breach penalties.
- Legal risks: The potential of protracted legal cases stemming from violations of service-level agreements (SLAs) or disputes over intellectual property.
- Operational risk: The risk of your operations being significantly disrupted following a vendor’s departure. This is more common when you don’t have access to backup vendors.
- Reputational risk: The likelihood of facing negative reviews in industry circles due to a vendor’s unfavorable experience with your organization.
Ideally, you should plan mitigation strategies for the above risks before the vendor relationship officially ends—consider using a vendor risk assessment template to standardize the process.
Offboarding a vendor: Due diligence areas and touchpoints to consider
Besides tapping into risks, you should revisit the touchpoints between the vendor and your organization, as well as other due diligence areas you need to address. The goal is to enable a smooth transition to a modified workflow, with or without a new vendor.
Here are six areas of due diligence to consider:
- Data security and access points: Working with vendors expands your cybersecurity attack surface, so you need to reduce this exposure after offboarding.
- System dependencies: You need to review any processes and systems the vendor impacts and secure the stability of your operations.
- Intellectual property: For intellectual property shared during your partnership with the vendor, check what the contract says about preventing further access.
- Communication silos: Ensure your vendor-facing teams are aware of the contract termination to ensure there is no misalignment with operational or offboarding activities (e.g., sharing confidential documents).
- Contract deliverables: Conduct a final contract review to examine outstanding liabilities for either party.
- Potential for malicious intent: If the vendor relationship does not end on good terms, it’s a good idea to introduce SLAs that prevent any malicious action after offboarding.
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6 vendor offboarding best practices to mitigate business risks
To effectively offboard vendors without extensive manual work or oversight, follow these best practices:
- Plan and standardize your vendor offboarding process.
- Review the contract thoroughly.
- Revoke the vendor’s access to integrated infrastructure components.
- Review and address dependencies, including systems, business processes, and others
- Address related financial commitments and impacts
- Document the offboarding process.
1. Plan and standardize your vendor offboarding process
You shouldn’t wait for the contract to expire to start planning the offboarding process. While each vendor has a unique impact on your organization, there are a few standard steps you can outline to offboard any third party.
For instance, you can keep every vendor’s risk profile updated to stay on top of related threats. You can also maintain an inventory of assets accessed by vendors to identify severance points during offboarding.
It’s important to maintain a formal checklist for different categories of vendors to facilitate a straightforward and efficient offboarding process. Here’s a sample checklist of actions to be taken when offboarding a software vendor:
- Notify key stakeholders of service cancellation.
- Review and terminate application access points.
- Check the status of contractual terms.
- Compile information that the next vendor should inherit.
- Resolve open disputes (such as ownership of shared assets).
2. Review the contract thoroughly
A final contract review is essential to successful offboarding. If you’re the one initiating the termination, map out the related legal provisions in the contract to do so. This can include the preferred communication channel and the parties you need to address.
Regardless of which party initiates the offboarding, the termination communication should clarify the following:
- Clear intent to end services with the vendor, including an effective date
- Updates to contract terms (if any)
- Pending deliverables or service obligations
- Vendor KPIs governed by the contract (e.g., uptime rate)
- Asset ownership
- Premature termination penalties
Reviewing and communicating these elements of your contract prevents disputes and creates a more streamlined offboarding workflow. It also proactively reduces the likelihood of unmet deliverables caused by the termination.
3. Revoke the vendor’s access to integrated infrastructure components
Most vendors have at least some level of access to your data. The more critical and sensitive this data is, the greater the need for strict access management. By the time a vendor officially leaves, they should ideally have no access to your infrastructure or data.
The best way forward is to conduct thorough access reviews and pay special attention to the following areas:
- Systems and databases
- Physical access areas (if applicable)
- Residual data in the vendor’s systems
If there are any shared credentials, they should be removed or replaced to ensure only your internal team can log into your platforms. The vendor should also return any organizational equipment within a prescribed time frame.
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4. Review and address dependencies
A vendor’s departure can create gaps in your workflow and disrupt your operations, especially if the work relationship ends abruptly. This is why you should regularly review operational dependencies and keep your vendor portfolio diverse. It’s also a good idea to have contingency plans and backup vendors to ensure uninterrupted operations.
As the vendor relationship comes to an end, perform a final review of process and system dependencies to spot any weak links. It’s prudent to start planning your transition to a new vendor or an alternative plan well in advance, ideally before the termination.
Many organizations also plan an exit strategy for vendors in a critical- or high-risk tier. This strategy outlines the additional task responsibilities and budgeting considerations necessary to ensure smooth operations when a key vendor leaves suddenly.
5. Sort out your finances
After you’ve made sure both parties honored the contract terms, it’s time to get the financial aspect of your relationship in order. The best practices are to:
- Perform a final settlement of any outstanding invoices.
- Assess credits and returns so that they’re sorted out before official offboarding.
If your vendor supplied physical products, this might also be a good time to check for defects, warranties, and/or insurance, as they can impact your cash flow after the vendor has stopped working with you.
Make sure to involve your finance team here, as they may need to perform their own reviews before clearing the remaining payments.
6. Document the offboarding process
Maintain a documented process for standardized vendor offboarding. This should be done for two reasons:
- Reduced miscommunication: Without clear documentation, there’s a higher risk of unnoticed data leaks or process inaccuracies.
- Future references: If any disputes or issues arise after a vendor’s departure, you’ll want to have a record of relevant due diligence and communication flows.
Documenting the offboarding process shouldn’t be challenging if you have a software solution that lets you keep track of each vendor. All you have to do is update their profile in your system and access the following data as needed:
- Confirmation of final payments
- Report of the last access review
- Termination correspondence
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Ensure smooth vendor offboarding with Vanta
If you need a centralized, automated way of managing vendors at any stage of their lifecycle—Vanta can help. It offers an all-in-one Vendor Risk Management suite, as well as dedicated access management functionality, to support vendor offboarding processes. Here are some of the features that can help your team:
- Centralized vendor inventory: Brings all your vendors together into a unified hub from which you can manage them with a few clicks.
- Comprehensive vendor dashboard: Provides insights into your vendor’s risk profile and status.
- Simplified risk assessments: Lets you perform ongoing or final reassessments and auto-score vendor risk based on configurable criteria.
- Shadow IT discovery: Uncovers any software your team uses to ensure there aren’t any unidentified security vulnerabilities.
- Automated access reviews: Offers pre-built reviewer workflows to manage access controls for internal and external users.
To see how Vanta streamlines end-to-end vendor management, schedule a custom demo today.
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Vendor lifecycle management
Vendor offboarding: Best practices for reducing risk
Vendor lifecycle management
Most organizations are granularly attentive when onboarding new vendors. They focus on extensive due diligence and security reviews before allowing any vendor access to business data and systems. However, we typically don’t see the same level of due diligence when the partnership ends—and that tends to leave various third-party risks unattended.
According to a Gartner survey, 84% of risk executives claim that unchecked third-party risks can disrupt operations. This can be particularly true if you’re still connected to a former vendor that continues to expose your organization to leftover threats.
This guide offers detailed insights into the ideal risk-aware vendor offboarding process. We’ll explain:
- Risks and touchpoints to consider when offboarding a vendor
- Best practices to follow for a secure offboarding process
What is vendor offboarding?
Vendor offboarding is the process of formally terminating your business relationship with a vendor and removing associated third-party privileges from your organization. The end goal is to address residual contractual obligations and ensure the vendor can no longer impact your organization’s financial, reputational, or security standing in any way.
Vendor offboarding is carried out in collaboration across various teams, including procurement, IT, finance, and legal. The process may entail several admin and risk management activities, depending on the nature of the partnership.
{{cta_withimage5="/cta-modules"}}
Types of vendor risks to cover during offboarding
One of the major challenges of vendor offboarding is the scattered visibility of potential risks. For every outgoing vendor, you should account for the following risk types:
- Data and cybersecurity risks: The likelihood of a former vendor accessing data they’re no longer authorized to obtain.
- Financial risks: The probability of your organization’s financial standing being damaged due to issues like overlooked claims or contract breach penalties.
- Legal risks: The potential of protracted legal cases stemming from violations of service-level agreements (SLAs) or disputes over intellectual property.
- Operational risk: The risk of your operations being significantly disrupted following a vendor’s departure. This is more common when you don’t have access to backup vendors.
- Reputational risk: The likelihood of facing negative reviews in industry circles due to a vendor’s unfavorable experience with your organization.
Ideally, you should plan mitigation strategies for the above risks before the vendor relationship officially ends—consider using a vendor risk assessment template to standardize the process.
Offboarding a vendor: Due diligence areas and touchpoints to consider
Besides tapping into risks, you should revisit the touchpoints between the vendor and your organization, as well as other due diligence areas you need to address. The goal is to enable a smooth transition to a modified workflow, with or without a new vendor.
Here are six areas of due diligence to consider:
- Data security and access points: Working with vendors expands your cybersecurity attack surface, so you need to reduce this exposure after offboarding.
- System dependencies: You need to review any processes and systems the vendor impacts and secure the stability of your operations.
- Intellectual property: For intellectual property shared during your partnership with the vendor, check what the contract says about preventing further access.
- Communication silos: Ensure your vendor-facing teams are aware of the contract termination to ensure there is no misalignment with operational or offboarding activities (e.g., sharing confidential documents).
- Contract deliverables: Conduct a final contract review to examine outstanding liabilities for either party.
- Potential for malicious intent: If the vendor relationship does not end on good terms, it’s a good idea to introduce SLAs that prevent any malicious action after offboarding.
{{cta_simple17="/cta-modules"}}
6 vendor offboarding best practices to mitigate business risks
To effectively offboard vendors without extensive manual work or oversight, follow these best practices:
- Plan and standardize your vendor offboarding process.
- Review the contract thoroughly.
- Revoke the vendor’s access to integrated infrastructure components.
- Review and address dependencies, including systems, business processes, and others
- Address related financial commitments and impacts
- Document the offboarding process.
1. Plan and standardize your vendor offboarding process
You shouldn’t wait for the contract to expire to start planning the offboarding process. While each vendor has a unique impact on your organization, there are a few standard steps you can outline to offboard any third party.
For instance, you can keep every vendor’s risk profile updated to stay on top of related threats. You can also maintain an inventory of assets accessed by vendors to identify severance points during offboarding.
It’s important to maintain a formal checklist for different categories of vendors to facilitate a straightforward and efficient offboarding process. Here’s a sample checklist of actions to be taken when offboarding a software vendor:
- Notify key stakeholders of service cancellation.
- Review and terminate application access points.
- Check the status of contractual terms.
- Compile information that the next vendor should inherit.
- Resolve open disputes (such as ownership of shared assets).
2. Review the contract thoroughly
A final contract review is essential to successful offboarding. If you’re the one initiating the termination, map out the related legal provisions in the contract to do so. This can include the preferred communication channel and the parties you need to address.
Regardless of which party initiates the offboarding, the termination communication should clarify the following:
- Clear intent to end services with the vendor, including an effective date
- Updates to contract terms (if any)
- Pending deliverables or service obligations
- Vendor KPIs governed by the contract (e.g., uptime rate)
- Asset ownership
- Premature termination penalties
Reviewing and communicating these elements of your contract prevents disputes and creates a more streamlined offboarding workflow. It also proactively reduces the likelihood of unmet deliverables caused by the termination.
3. Revoke the vendor’s access to integrated infrastructure components
Most vendors have at least some level of access to your data. The more critical and sensitive this data is, the greater the need for strict access management. By the time a vendor officially leaves, they should ideally have no access to your infrastructure or data.
The best way forward is to conduct thorough access reviews and pay special attention to the following areas:
- Systems and databases
- Physical access areas (if applicable)
- Residual data in the vendor’s systems
If there are any shared credentials, they should be removed or replaced to ensure only your internal team can log into your platforms. The vendor should also return any organizational equipment within a prescribed time frame.
{{cta_withimage5="/cta-modules"}}
4. Review and address dependencies
A vendor’s departure can create gaps in your workflow and disrupt your operations, especially if the work relationship ends abruptly. This is why you should regularly review operational dependencies and keep your vendor portfolio diverse. It’s also a good idea to have contingency plans and backup vendors to ensure uninterrupted operations.
As the vendor relationship comes to an end, perform a final review of process and system dependencies to spot any weak links. It’s prudent to start planning your transition to a new vendor or an alternative plan well in advance, ideally before the termination.
Many organizations also plan an exit strategy for vendors in a critical- or high-risk tier. This strategy outlines the additional task responsibilities and budgeting considerations necessary to ensure smooth operations when a key vendor leaves suddenly.
5. Sort out your finances
After you’ve made sure both parties honored the contract terms, it’s time to get the financial aspect of your relationship in order. The best practices are to:
- Perform a final settlement of any outstanding invoices.
- Assess credits and returns so that they’re sorted out before official offboarding.
If your vendor supplied physical products, this might also be a good time to check for defects, warranties, and/or insurance, as they can impact your cash flow after the vendor has stopped working with you.
Make sure to involve your finance team here, as they may need to perform their own reviews before clearing the remaining payments.
6. Document the offboarding process
Maintain a documented process for standardized vendor offboarding. This should be done for two reasons:
- Reduced miscommunication: Without clear documentation, there’s a higher risk of unnoticed data leaks or process inaccuracies.
- Future references: If any disputes or issues arise after a vendor’s departure, you’ll want to have a record of relevant due diligence and communication flows.
Documenting the offboarding process shouldn’t be challenging if you have a software solution that lets you keep track of each vendor. All you have to do is update their profile in your system and access the following data as needed:
- Confirmation of final payments
- Report of the last access review
- Termination correspondence
{{cta_testimonial5="/cta-modules"}}
Ensure smooth vendor offboarding with Vanta
If you need a centralized, automated way of managing vendors at any stage of their lifecycle—Vanta can help. It offers an all-in-one Vendor Risk Management suite, as well as dedicated access management functionality, to support vendor offboarding processes. Here are some of the features that can help your team:
- Centralized vendor inventory: Brings all your vendors together into a unified hub from which you can manage them with a few clicks.
- Comprehensive vendor dashboard: Provides insights into your vendor’s risk profile and status.
- Simplified risk assessments: Lets you perform ongoing or final reassessments and auto-score vendor risk based on configurable criteria.
- Shadow IT discovery: Uncovers any software your team uses to ensure there aren’t any unidentified security vulnerabilities.
- Automated access reviews: Offers pre-built reviewer workflows to manage access controls for internal and external users.
To see how Vanta streamlines end-to-end vendor management, schedule a custom demo today.
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