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Business leaders often link a well-functioning risk management program to better efficiency outcomes. According to a 2023 PwC report, organizations with focused risk management strategies see significant cost savings, including a 30% and 25% reduction in compliance and personnel costs, respectively.

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The idea behind having a dedicated vendor risk management (VRM) program is also rooted in efficiency. With increased regulatory obligations and the complex nature of modern vendor ecosystems, having a defined VRM program is crucial for supporting overstretched security teams.

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When implemented well, a VRM program helps streamline scattered activities, such as collecting vendor documents, tracking data, and conducting security reviews. This guide will offer practical vendor risk management best practices to help you effectively manage vulnerabilities across vendor relationships.

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Prerequisites for a quality VRM program

To be able to implement the best practices for VRM, there are three key prerequisites:

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1. Suitable VRM solution: You cannot build an efficient VRM program if you rely too much on manual processes for vendor risk tracking and assessments. It’s crucial to have the right VRM software to automate tedious tasks, continuously monitor your attack surface, and get timely alerts.
2. Dedicated VRM team and program manager: Since VRM processes can get quite extensive, it’s worth defining dedicated team roles and responsibilities, as well as assigning a program manager to oversee the program.
3. Unified VRM strategy: Develop a core strategy to ensure all VRM decisions align with your organization’s risk appetite. It’s also a good idea to document vendor onboarding, risk assessment, and offboarding procedures for consistency.

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A handy checklist of 8 best practices for successful VRM

We’ve compiled a checklist of the top industry best practices you can use to build your VRM program. Let’s dive deeper into each:

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1. Establish your VRM scope within industry-specific frameworks.
2. Define due diligence and assessment processes comprehensively.
3. Identify scoring parameters and performance metrics.
4. Practice remediation-focused reporting.
5. Nurture collaborative vendor partnerships.
6. Train teams for effective VRM implementation.
7. Choose continuous monitoring over point-in-time checks.
8. Prioritize process efficiency with automation.

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1. Establish your VRM scope within industry-specific frameworks

Effective VRM requires an agile approach tailored to your organization's vendor ecosystem. The foundational best practice is to define the scope of your VRM program in a way that provides a flexible yet standardized decision-making framework for your team.

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The program's scope will depend on industry-specific frameworks and regulations applicable to your organization, as well as the size and complexity of your vendor network. Many organizations prefer to create a vendor management policy (VMP) to pinpoint specifics like:

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• Vendor risk types to look out for
• Vendor selection and RFP processes
• Potential risk monitoring and mitigation strategies
• Expected compliance requirements
• Cadence of risk reassessments

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You should identify key stakeholders within your procurement, legal, and IT teams to work on or review the scope document and ensure it caters to relevant security needs.

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2. Define due diligence and assessment processes comprehensively

Establishing effective vendor due diligence and risk assessment processes will help systemize your VRM program across different vendor lifecycle stages.

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For instance, you can specify criteria, such as financial health indicators and quality control standards, to profile and evaluate vendors during selection and onboarding. Organizations today also outline environmental, social, and governance (ESG) factors, such as environmental vulnerabilities, labor practices, and corporate governance standards, in advance so that they only partner with vendors that have shared values.

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Ideally, you should utilize standardized questionnaires to collect data that serves as a single source of truth about the vendor’s security controls and continuous monitoring workflows. 

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Another best practice here is to use a structured risk assessment template to standardize the information you monitor for each vendor. This will help you compare vendors and understand the scope of internal ongoing monitoring and reassessments.

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3. Identify scoring parameters and performance metrics

Consider having a model for profiling and tiering vendors according to their risk score—this will help shape a more sustainable VRM program. The standard process is to quantify vendor risks based on likelihood and impact, but you may want to add different weights to security, compliance, and operational incidents depending on your industry.

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Establishing clear vendor key performance indicators (KPIs) in a VRM program gives you a common baseline for detecting and prioritizing risks, as well as informing future vendor selection processes. The goal is to ensure your operational needs and risk tolerance levels are consistently met. Key metrics to consider include:

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• On-time delivery rates
• Incident response times
• User satisfaction scores

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A simple way to communicate your vendor KPIs is to integrate the desired performance standards into your service level agreements (SLAs).

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4. Practice remediation-focused reporting

Effective VRM decision-making relies on insights derived from comprehensive reports. Quality reports enhance risk visibility across your vendor portfolio. They also highlight remediation measures and contingency plans to swiftly address identified risks and minimize potential disruptions.

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To enhance accountability in reporting and remediation, the ideal solution is to implement a centralized incident management system. You can specify processes to generate periodic reports on documented vendor risks and set up remediation actions triggered by performance deviations from KPIs.

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5. Nurture collaborative vendor partnerships

For your VRM efforts to be fruitful, you need to foster collaborative vendor relationships by aligning on shared risk objectives and mitigation strategies. The goal is to have transparent discussions on performance, ethical standards, and management of fourth- or nth-party vendors.

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Maintain open lines of communication with vendors to clarify mutual expectations and enable prompt adjustments to risk management strategies. For example, you can have regular check-in meetings with key vendors or assign a point of contact (POC) to facilitate ongoing dialogue about changes that may impact service delivery or compliance.

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6. Train teams for effective VRM implementation

Effective VRM hinges on the collaboration between internal stakeholders from procurement, IT, legal, and compliance teams. However, their readiness can be impacted by information silos, technical challenges like poor risk visibility, and even resource constraints.

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The good news is that you can foster a culture of vigilance and preparedness with role-specific training guides or workshops. Tailor sessions that define VRM workflows and responsibilities for different teams. If you’re using VRM software, having a standard orientation or onboarding manual may also be helpful.

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7. Choose continuous monitoring over point-in-time checks

VRM teams may be torn between point-in-time and continuous risk monitoring. Point-in-time checks offer a snapshot of your vendor security posture at a particular moment. This reduces the awareness of emerging threats until the next scheduled check, which may leave you vulnerable to significant damage from potential cybersecurity incidents.

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With continuous monitoring, you get ongoing, real-time assessment of your security posture. The idea is to drive alerts as issues arise so that you can respond to evolving risks faster. 

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Continuous monitoring may require more resources than point-in-time checks, but it can greatly enhance the level of trust you demonstrate to your stakeholders. It can also attract high-value partners and customers—and this adds up when you’re calculating the ROI of your VRM program.

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8. Prioritize process efficiency with automation

Most security teams would agree that their capabilities remain underutilized because they spend most of their time on repetitive tasks like gathering and analyzing vendor data and tracking risk assessments through spreadsheets. Risk management automation can significantly reduce the operational overhead and task overload typically associated with manual processes in a VRM program.

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Automation can save time and ensure consistency, relative accuracy, and objectivity in your VRM workflows. It typically leverages AI and integrations to expedite vendor assessments, risk scoring, and compliance checks. Automation becomes non-negotiable for maturing VRM programs specifically. 

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Integrating VRM into enterprise risk management (ERM)

VRM often works as a standalone function but can eventually integrate with the enterprise risk management (ERM) framework. The objective is to align vendor risk oversight with your broader organizational practices for risk identification, assessment, mitigation, and reporting.

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You can start by adjusting your ERM policy to accommodate vendor risks that require broader awareness. Senior members from VRM and ERM teams can work together to outline common objectives, due diligence processes, and reporting mechanisms. They can also leverage available analytics data to pinpoint any correlation between VRM and ERM work. 

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Elevate your VRM with Vanta’s comprehensive solutions

VRM best practices are in a state of constant flux because of evolving vendor risk profiles and mitigation workflows. Vanta’s Vendor Risk Management solution is designed to help you align with industry best practices with minimal effort.

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With Vanta, you can leverage AI and automation across the board to streamline vendor risk assessments, auto-scoring, and more. You’ll benefit from pre-built workflows, guides, and resources to customize your VRM program according to industry standards. Your VRM team can get miles ahead with features like:

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• Customizable risk rubrics with configurable parameters to score vendors easily
• 300+ integrations to streamline your scattered VRM tasks
• Pre-built questionnaires for consistent vendor evaluations
• Built-in dashboards with insightful metrics for reporting

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With Vanta, you can also leverage dedicated checklists to manage compliance with frameworks like ISO 27001 and SOC 2.

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Check out our webinar to see Vanta in action. Or schedule a custom demo today.

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