Vendor onboarding is the process of gathering and sharing the information and documentation necessary for starting a relationship with a new vendor. It involves a critical set of activities aimed at introducing a vendor to the organization’s processes, operational workflows, and vendor management systems.
A formalized onboarding process simplifies procurement and builds a solid foundation for fostering long-term, collaborative vendor relationships. Still, depending on an organization’s risk landscape, it can turn out to be a demanding effort that can take up to six months to complete. Growing organizations often need more time to master the intricate and collaborative nature of onboarding workflows, as well as the complexity of each vendor’s risk profile.
In this guide, you’ll learn how to develop a streamlined onboarding process that accounts for the most common vendor risks. Before exploring the best practices, though, it’s essential to understand why you need such a process in the first place.
Why risk-aware vendor onboarding matters
As an organization partners with new vendors, it gives access to a considerable amount of data that expands its risk surface. While basic due diligence and evaluation measures mitigate the risk of compromised data and disrupted processes, they may not be enough to ensure long-term security.
That’s why you need careful vendor onboarding—it helps you be proactive about vendor-specific risks and have something to revisit when unwanted incidents take place.
Risk-aware vendor onboarding also helps with the following:
- Customer and stakeholder trust: Your vendors impact the final outcome that your customers and stakeholders expect. Having a structured approach to onboarding breathes more trust into your ability to maintain a high standard of that outcome.
- Regulatory obligations: Effective vendor risk management (VRM) is required or recommended by many regulations or standards (SOC 2, HIPAA, etc.), and onboarding is its foundational component.
- Business continuity: An thorough onboarding process lets you proactively identify and resolve any vendor-related threats to your operations, enabling business continuity.
- Operational and strategic alignment: Vendor onboarding offers a standard process for determining whether your goals align with those of your vendors.
- Reputation management: A vendor’s operational or security incidents can negatively affect your organization’s public image, and clear communication of expectations during onboarding can prevent this.
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8 vendor onboarding best practices to minimize risks
Follow these best practices to leverage the full potential of successful vendor onboarding:
- Compile and verify the necessary documentation.
- Categorize vendors according to risk levels.
- Add vendors to a centralized inventory.
- Finalize terms and conditions.
- Ensure alignment with your team and goals.
- Map fourth-party relationships.
- Implement strict access controls.
- Outline and communicate your incident response plans.
1. Compile and verify the necessary documentation
Due to the lengthy evaluation and selection process, the vendor documentation you gathered through due diligence can change by the time onboarding starts. Timely updates are crucial for ensuring the vendor is still a good fit and uncovering any risks that may have surfaced in the meantime.
To stay confident about your procurement decisions, it’s good to double-check relevant documents from the following checklist:
- Insurance policies
- NDAs
- Relevant licenses and certifications
- Security review reports
- Credit history
- ACH forms
- Compliance audit reports
You’ll likely need to collect and re-assess numerous data points, in which case you can benefit from a dedicated platform that automates data collection and analysis. A trust management platform can be particularly useful here by providing a self-service portal that allows companies to host due diligence documents for their business partners.
2. Categorize vendors according to risk levels
Risk assessments typically precede vendor onboarding, so you should have detailed insights into a vendor’s risk profile by the time you’re ready to partner with them. The goal is to assign clear risk scores that reflect how well vendors meet your organization's security requirements. You can then specify risk levels and classify vendors to better understand your overall risk landscape.
Most organizations follow a questionnaire-based risk tiering, where a vendor is automatically assigned a risk level based on their security controls. However, you can also assign risk levels based on subjective criteria like reputation.
3. Add vendors to a centralized inventory
As you onboard each vendor, you should place information on them in a centralized inventory that enables effortless tracking and periodic reassessments. Without this unified system, you may need to scour scattered systems and spreadsheets for relevant data, which hinders your efficiency.
A vendor inventory should contain tailored data if you need to conduct regular vendor security reviews for specific frameworks and standards. For example, if you have a vendor delivering AI-enabled products and wish to stay compliant with the ISO 42001 standard, you may need regular audits to ensure there are no deviations from the applicable guidelines.
If you’re unsure what information to include in the inventory, focus on the following data points:
- Basic vendor information (name, business function, etc.)
- Risk score and profile details
- Pending or ongoing tasks (e.g., security reviews)
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4. Finalize terms and conditions
Before you start working with a vendor, you need to ensure everyone is on the same page regarding deliverables and expectations. Specifically, you should clearly communicate and finalize the following:
- Delivery timelines
- Task dependencies
- Penalties for contract violations
You should also clarify the preferred communication channel—it’s best to have a designated point of contact for vendors so that they know how and where to report any issues or important updates. Plus, your internal chain of communication should be defined so that each team member understands their responsibilities for communicating potential vendor issues and risks.
5. Ensure alignment with your team and goals
The onboarding process allows you to align vendors with your organization and proactively mitigate mapped operational and strategic risks. Besides communicating your expectations, you can ensure alignment through different forms of training that explain the vendor’s role in your organization.
To develop onboarding-friendly training programs, you can follow these tips:
- Create robust learning resources that explain how a vendor contributes to your operational and strategic goals.
- Leverage self-paced training to ensure flexibility in learning.
- Use easy-to-consume microlearning modules to make the training program digestible.
6. Map fourth-party relationships
Your vendors likely have various third parties working with them. They’re known as fourth parties from your organization’s perspective, and they can indirectly impact your operations by influencing the vendors’ performance and risk profile.
The issue here is twofold—you can’t control fourth parties as they’re not contractually bound to you, and you don’t have as much visibility into them as with your own vendors. This expands your risk landscape and requires additional steps to safeguard your organization.
The solution is to outline fourth-party relationships through questionnaires and security reviews you send out to vendors. Include questions about the nature and scope of outsourced or shared services, as well as the vendor’s approach to third-party risk management (TPRM). You can also define SLAs to limit fourth-party risks.
7. Implement strict access controls
Effective onboarding requires developing a solid vendor access management strategy that outlines what data each vendor can access and modify. It ensures that information is shared on a need-to-know basis and lets you retain full control over data shared in an interconnected environment.
The first thing you should do is classify your data according to sensitivity levels. The following table offers a brief example you can follow:
Outlining your data sensitivity levels helps shape your auditing and monitoring processes. You can also take the following steps to enforce strict access controls:
- Monitor and record login activity.
- Enable 2FA authentication.
- Avoid shared passwords.
- Take a zero-trust approach to remote access.
- Conduct ongoing security training and reviews.
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8. Outline and communicate your incident response plans
While organizations can take steps to protect themselves from vendor risks, incidents may still happen. Planning for the worst-case scenario is crucial for ensuring incidents don’t escalate.
That is why you should define your incident response plans as soon as you assess a vendor’s risk profile. You may want to communicate relevant parts of the plan to your vendor during onboarding to ensure both parties are on the same page when handling a joint risk event.
Simplify vendor onboarding and risk management with Vanta
Vanta is a trust management platform that supports your vendor onboarding process (and other aspects of your vendor relationships) through a comprehensive Vendor Risk Management solution. It leverages AI and automation to streamline your risk workflows through features such as:
- Centralized Vendors Page for streamlined onboarding
- Vendor risk auto-scoring
- Vendor and shadow IT discovery
- Automated security review tracking
With Vanta, you get a robust dashboard with all necessary vendor data (status, risk profile, category, etc.). Access up-to-date information on vendors at any point and navigate your supply chain more efficiently. Watch our webinar to see Vanta in Action or schedule a custom demo today.
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Vendor lifecycle management
What is vendor onboarding? Benefits and best practices
Vendor lifecycle management
Vendor onboarding is the process of gathering and sharing the information and documentation necessary for starting a relationship with a new vendor. It involves a critical set of activities aimed at introducing a vendor to the organization’s processes, operational workflows, and vendor management systems.
A formalized onboarding process simplifies procurement and builds a solid foundation for fostering long-term, collaborative vendor relationships. Still, depending on an organization’s risk landscape, it can turn out to be a demanding effort that can take up to six months to complete. Growing organizations often need more time to master the intricate and collaborative nature of onboarding workflows, as well as the complexity of each vendor’s risk profile.
In this guide, you’ll learn how to develop a streamlined onboarding process that accounts for the most common vendor risks. Before exploring the best practices, though, it’s essential to understand why you need such a process in the first place.
Why risk-aware vendor onboarding matters
As an organization partners with new vendors, it gives access to a considerable amount of data that expands its risk surface. While basic due diligence and evaluation measures mitigate the risk of compromised data and disrupted processes, they may not be enough to ensure long-term security.
That’s why you need careful vendor onboarding—it helps you be proactive about vendor-specific risks and have something to revisit when unwanted incidents take place.
Risk-aware vendor onboarding also helps with the following:
- Customer and stakeholder trust: Your vendors impact the final outcome that your customers and stakeholders expect. Having a structured approach to onboarding breathes more trust into your ability to maintain a high standard of that outcome.
- Regulatory obligations: Effective vendor risk management (VRM) is required or recommended by many regulations or standards (SOC 2, HIPAA, etc.), and onboarding is its foundational component.
- Business continuity: An thorough onboarding process lets you proactively identify and resolve any vendor-related threats to your operations, enabling business continuity.
- Operational and strategic alignment: Vendor onboarding offers a standard process for determining whether your goals align with those of your vendors.
- Reputation management: A vendor’s operational or security incidents can negatively affect your organization’s public image, and clear communication of expectations during onboarding can prevent this.
{{cta_withimage20="/cta-modules"}}
8 vendor onboarding best practices to minimize risks
Follow these best practices to leverage the full potential of successful vendor onboarding:
- Compile and verify the necessary documentation.
- Categorize vendors according to risk levels.
- Add vendors to a centralized inventory.
- Finalize terms and conditions.
- Ensure alignment with your team and goals.
- Map fourth-party relationships.
- Implement strict access controls.
- Outline and communicate your incident response plans.
1. Compile and verify the necessary documentation
Due to the lengthy evaluation and selection process, the vendor documentation you gathered through due diligence can change by the time onboarding starts. Timely updates are crucial for ensuring the vendor is still a good fit and uncovering any risks that may have surfaced in the meantime.
To stay confident about your procurement decisions, it’s good to double-check relevant documents from the following checklist:
- Insurance policies
- NDAs
- Relevant licenses and certifications
- Security review reports
- Credit history
- ACH forms
- Compliance audit reports
You’ll likely need to collect and re-assess numerous data points, in which case you can benefit from a dedicated platform that automates data collection and analysis. A trust management platform can be particularly useful here by providing a self-service portal that allows companies to host due diligence documents for their business partners.
2. Categorize vendors according to risk levels
Risk assessments typically precede vendor onboarding, so you should have detailed insights into a vendor’s risk profile by the time you’re ready to partner with them. The goal is to assign clear risk scores that reflect how well vendors meet your organization's security requirements. You can then specify risk levels and classify vendors to better understand your overall risk landscape.
Most organizations follow a questionnaire-based risk tiering, where a vendor is automatically assigned a risk level based on their security controls. However, you can also assign risk levels based on subjective criteria like reputation.
3. Add vendors to a centralized inventory
As you onboard each vendor, you should place information on them in a centralized inventory that enables effortless tracking and periodic reassessments. Without this unified system, you may need to scour scattered systems and spreadsheets for relevant data, which hinders your efficiency.
A vendor inventory should contain tailored data if you need to conduct regular vendor security reviews for specific frameworks and standards. For example, if you have a vendor delivering AI-enabled products and wish to stay compliant with the ISO 42001 standard, you may need regular audits to ensure there are no deviations from the applicable guidelines.
If you’re unsure what information to include in the inventory, focus on the following data points:
- Basic vendor information (name, business function, etc.)
- Risk score and profile details
- Pending or ongoing tasks (e.g., security reviews)
{{cta_webinar4="/cta-modules"}}
4. Finalize terms and conditions
Before you start working with a vendor, you need to ensure everyone is on the same page regarding deliverables and expectations. Specifically, you should clearly communicate and finalize the following:
- Delivery timelines
- Task dependencies
- Penalties for contract violations
You should also clarify the preferred communication channel—it’s best to have a designated point of contact for vendors so that they know how and where to report any issues or important updates. Plus, your internal chain of communication should be defined so that each team member understands their responsibilities for communicating potential vendor issues and risks.
5. Ensure alignment with your team and goals
The onboarding process allows you to align vendors with your organization and proactively mitigate mapped operational and strategic risks. Besides communicating your expectations, you can ensure alignment through different forms of training that explain the vendor’s role in your organization.
To develop onboarding-friendly training programs, you can follow these tips:
- Create robust learning resources that explain how a vendor contributes to your operational and strategic goals.
- Leverage self-paced training to ensure flexibility in learning.
- Use easy-to-consume microlearning modules to make the training program digestible.
6. Map fourth-party relationships
Your vendors likely have various third parties working with them. They’re known as fourth parties from your organization’s perspective, and they can indirectly impact your operations by influencing the vendors’ performance and risk profile.
The issue here is twofold—you can’t control fourth parties as they’re not contractually bound to you, and you don’t have as much visibility into them as with your own vendors. This expands your risk landscape and requires additional steps to safeguard your organization.
The solution is to outline fourth-party relationships through questionnaires and security reviews you send out to vendors. Include questions about the nature and scope of outsourced or shared services, as well as the vendor’s approach to third-party risk management (TPRM). You can also define SLAs to limit fourth-party risks.
7. Implement strict access controls
Effective onboarding requires developing a solid vendor access management strategy that outlines what data each vendor can access and modify. It ensures that information is shared on a need-to-know basis and lets you retain full control over data shared in an interconnected environment.
The first thing you should do is classify your data according to sensitivity levels. The following table offers a brief example you can follow:
Outlining your data sensitivity levels helps shape your auditing and monitoring processes. You can also take the following steps to enforce strict access controls:
- Monitor and record login activity.
- Enable 2FA authentication.
- Avoid shared passwords.
- Take a zero-trust approach to remote access.
- Conduct ongoing security training and reviews.
{{cta_withimage5="/cta-modules"}}
8. Outline and communicate your incident response plans
While organizations can take steps to protect themselves from vendor risks, incidents may still happen. Planning for the worst-case scenario is crucial for ensuring incidents don’t escalate.
That is why you should define your incident response plans as soon as you assess a vendor’s risk profile. You may want to communicate relevant parts of the plan to your vendor during onboarding to ensure both parties are on the same page when handling a joint risk event.
Simplify vendor onboarding and risk management with Vanta
Vanta is a trust management platform that supports your vendor onboarding process (and other aspects of your vendor relationships) through a comprehensive Vendor Risk Management solution. It leverages AI and automation to streamline your risk workflows through features such as:
- Centralized Vendors Page for streamlined onboarding
- Vendor risk auto-scoring
- Vendor and shadow IT discovery
- Automated security review tracking
With Vanta, you get a robust dashboard with all necessary vendor data (status, risk profile, category, etc.). Access up-to-date information on vendors at any point and navigate your supply chain more efficiently. Watch our webinar to see Vanta in Action or schedule a custom demo today.
{{cta_simple5="/cta-modules"}}
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Introduction to TPRM
Vendor lifecycle management
Vendor risk assessment
Running a VRM program
Regulatory compliance and industry standards
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