Vendor risk management (VRM) is a data-driven process that heavily relies on security reviews and the tracking of several risk metrics and KPIs, all of which have to be presented in cohesige reports to facilitate decision-making. Additionally, risk managers have to justify the time and effort spent on risk mitigation activities, which also calls for a proactive reporting culture.

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This guide will introduce you to the critical components of a useful vendor risk assessment (VRA) report. Whether you’re performing an initial security assessment or a reassessment of an existing vendor, we’ll provide detailed insights into the range of information you can utilize. 

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Before diving into such specifics, let’s understand what a VRA report is and why you need one in the first place.

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What is a vendor risk assessment report?

A vendor risk assessment or VRA report summarizes the key risk data identified and evaluated during the vendor risk assessment process. It gives you an easy-to-navigate snapshot of a vendor’s risk profile, highlighting the likelihood, impact, and overall risk ratings. The end goal of a well-established VRA reporting process is to help you shape your vendor relationships and negotiate deals based on your risk appetite.

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VRA reports are tailored to make vendor risks visible to the right executives, who are typically members of the procurement, security, or IT teams. They use it to make procurement decisions, initiate internal controls, and outline steps for effective VRM.

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VRA reports are particularly handy if an organization is maturing its security and risk management program and is also expanding its vendor network. The data in the report serves as the baseline for risk-aware growth in a complex business landscape.

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What are the benefits of vendor risk assessment reports?

Some of the main benefits of comprehensive risk reports are:

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• Proactive risk mitigation and threat adaptation: VRA reports help you uncover numerous vendor risk types, including operational, financial, and strategic risks. They inform your vendor-specific risk mitigation strategies.
• Fortified cybersecurity: Many vendors today are SaaS providers—they expand your organization’s potential attack surface as they connect to your systems. VRA reports help uncover these vulnerabilities so that you can patch them adequately.
• Demonstrable transparency and trust: VRA reports can be used to demonstrate your security posture to stakeholders. Doing so reinforces your organization’s ability to navigate vendor risks effectively.
• Simplified compliance: External auditors often review your vendor risk management procedures to ensure they align with applicable standards. VRA reports serve as a trail of evidence to prove that you’re proactively managing vendor risks.
• Better strategic decision-making: The report ultimately tells you whether you should onboard a vendor, which can have a long-term impact on your performance and security posture. It also justifies risk prioritization and allocation of more resources and efforts toward high-risk vendors.

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7 components to include in a vendor risk assessment report

The content of a VRA report can vary slightly according to the intended user, but it typically features the following seven components:

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1. General vendor data and assessment outline
2. Service description
3. Financial data
4. Cybersecurity posture
5. Data collection, use, and protection practices
6. Operational dependencies
7. Risk observations and recommendations

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1. General vendor data and assessment outline

This section requires you to give an overview of the vendor’s background and provide context for the assessment by outlining its scope. The documentation should be brief and cover basic vendor information, including the following:

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• Name and contact data
• Industry
• Size
• Location
• Market position
• Business model

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You may want to offer a concise overview of the vendor’s operations that were assessed—such as their compliance procedures, internal controls, and security measures. If necessary, you can also include material aspects that weren’t assessed alongside the reasons for it.

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2. Service description

Your VRA report should provide a concise and informational overview of the services your vendors will provide. Doing so will shift attention to the business function impacted by the service, indicating its general risk considerations. For instance, if you’re assessing a payroll software provider, your IT and finance teams would generally know what risk areas to expect.

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For certain third-party assessments, it may make sense to outline how your organization will use the product or service to identify potential threats promptly.

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For example, if your vendor is a SaaS company offering a time-tracking platform, you can describe how employees will access it and what data they will be sharing. This will prompt risk managers to look into the types of data the software will collect.

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3. Financial data

A vendor’s financial stability can impact the quality of products and services they provide, which ultimately affects your operational stability. This is why you should dedicate a section in your VRA report to review a vendor’s financial standing and proactively identify potential red flags.

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You must first outline the documents you requested, which can be:

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• Annual financial statements (balance sheet, income statement, cash flows, etc.)
• Credit report
• Tax filings
• Schedule of financed assets
• Debt disclosures (if applicable)

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After listing these documents, describe the findings in the report so that the risk executive can assess the vendor’s financial health. If there are any notable complications, it’s a good idea to ask your finance department to weigh in on the report.

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4. Cybersecurity posture

This is one of the most important sections of your VRA report, especially if you’re partnering with SaaS vendors. The cybersecurity reporting should ideally be detailed—the overarching aim is to identify the potential attack surface and reduce the risk of incidents, such as data breaches or leaks.

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In terms of VRA reporting, you need to specify the measures you’ve used for cybersecurity due diligence—for example, security questionnaires, vendor interviews, vulnerability scans, and penetration testing reports.

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Based on the outcomes of your assessment, you can outline the following details in your VRA report:

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• Cybersecurity governance
• Endpoint security, including computers, tablets, phones, etc.
• Infrastructure security, including servers, databases, containers, etc.
• Technical controls (firewalls, encryption, etc.)
• Process controls (development lifecycle, recurring vulnerability scanning, etc.)
• Access management configurations and mechanisms
• Incident response plans
• Business continuity and disaster recovery plans
• Physical security

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It’s best to have your internal cybersecurity team vet this section of the report so that all identified threats are clearly explained alongside fitting conclusions.

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5. Data collection, use, and protection practices

Your VRA report must clarify which data a vendor will collect and store, as well as how their data protection measures fare. The section will help risk managers decide if a vendor’s security measures and practices are up to organizational standards.

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If possible, classify the sensitivity levels for the data points a vendor will collect. In our time-tracking software example from before, the platform might only log basic data like employees’ names and tasks. Since no sensitive data is shared, standard protective measures like encryption should suffice.

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However, if your report is about a payment processor that can access personally identifiable information (PII) and maintains cardholder data, you may want to specify additional security details, such as specific authentication flows using multi-factor authentication and PCI DSS compliance.

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6. Operational dependencies

This section will elaborate on the business functions and activities that the vendor can impact. Reporting this data is essential for factoring in potential disruptions that can occur if a vendor fails to provide the agreed-upon deliverables.

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Your VRA report should also account for the fourth (and Nth) parties—they are essentially third parties a vendor uses to deliver a product or service. Due to the vendor’s dependency on them, you should consider any related concerns detected during the VRA process.

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You can report on the vendor’s third-party risk management practices to allow your risk managers to determine if the security measures are sufficient and whether you need to add any nth party to your inventory for closer tracking.

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7. Risk observations and recommendations

The final section of your VRA report should summarize the findings and highlight the most notable risks that require action. You can also attach granular risk assessment documents to give the risk executive a better perspective of a vendor’s risk profile.

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To ensure clarity and make extensive assessments more digestible, you can also assign risk scores to vendors. Doing so may allow the person reading the report to prioritize threats based on severity.

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After highlighting the most pressing risks, the report should suggest the right course of action. It can outline potential remediation plans or mitigation acceptances and make final recommendations on how to proceed with a vendor.

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Evaluate vendor risks and simplify reporting cycles with Vanta

Vanta provides a Vendor Risk Management solution with built-in features for security reviews and decision tracking, such as:

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• Auto-scoring vendor risks with configurable parameters
• Centralized vendor inventory management and integration-based shadow IT discovery
• Comprehensive dashboard for real-time security tracking
• Vanta AI to summarize data from security reviews and reports

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Additionally, you can also leverage Vanta’s Risk Management suite to set up a comprehensive risk register to simplify your risk assessment workflows. You can track your identified risks, mitigation actions, and assigned task owners—all from one place.

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The platform’s automated workflows can support risk assessments for several pre-built risk scenarios. The best part is that you can instantly access risk assessment reports that present both qualitative and quantitative data in an industry-standard format. 

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Watch our webinar to see Vendor Risk Management in action. Or schedule a custom demo today.

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