What is a vendor risk assessment?
A vendor risk assessment is an evaluation of the cyber risk associated with or posed by an organization’s relationship with a vendor, supplier, service provider, or partner.
What are the benefits of vendor risk assessments?
As the business world grapples with seismic changes and digital transformation in IT environments and how employees work, companies must pay close attention to how they manage third-party risk. Businesses are bringing on vendors faster than ever before, yet third-party risk management (TPRM) teams are under tremendous pressure to do more with less. Streamlining vendor risk assessments can help onboard third parties more efficiently while continuing to monitor and mitigate risk.
Assessing risk associated with individual vendors is an essential part of managing risk within the vendor portfolio and strengthening an organization’s security posture. By understanding the level of risk that each potential vendor represents, organizations can more easily mitigate risk when selecting and onboarding new vendors. Risk assessments also enable risk teams to identify which vendors require help to remediate cyber risk, and which vendors should be assessed more frequently.
How to conduct an efficient vendor risk assessment
Your IT vendor risk management program must balance two competing priorities: the need to onboard new vendors quickly and the need to protect your organization from risk originating in third parties. A more efficient and effective vendor risk assessment process can help to achieve both objectives. Here’s how to accomplish this in three essential steps.
1. Identify a risk threshold
Begin by identifying the level of risk you’re willing to accept for each vendor.For instance, a vendor who handles highly sensitive company data and operations – such as a payroll provider or cloud service provider – may need to be held to a higher cybersecurity (and risk evaluation) standard, requiring a more extensive or more frequent risk evaluation. One of the most effective ways of determining risk thresholds is with Bitsight Security Ratings, which provide a trusted, data-driven view of a vendor’s security performance. Ratings range from 250 to 900 and are updated daily to provide unprecedented visibility into a vendor’s security posture.
Use these insights to establish acceptable risk thresholds for vendors in each tier and develop language, such as cybersecurity SLAs, to ensure they meet these thresholds. By tiering vendors into groups based on their risk and criticality to your business, you can perform more efficient vendor risk assessments and focus resources where they’re needed most.
2. Ask the right questions
During a vendor risk assessment, some questions are more critical than others. Your baseline set of questions should ideally be based on industry-standard security assessment methodologies such as the NIST Framework and the CIS Critical Security Controls. The most important questions should touch on key governance and structural issues, such as how each vendor protects customer information, whether they outsource IT or security functions, and how cyber incidents are reported. Other critical questions should provide insight into a vendor’s cybersecurity controls and technology, such as how they manage access privileges, how they monitor remote connections, and how they prevent data exfiltration of sensitive customer information.
To help you develop a baseline set of questions, we’ve compiled a list of the 40 Questions You Should Have in Your Vendor Security Assessment.
3. Trust, but validate
Although risk assessment questionnaires are a best practice in vendor risk assessment, they represent a point-in-time understanding of cyber risk and can’t quickly reveal changes in security posture. They also rely on the vendor’s self-reporting cybersecurity updates, which can sometimes be inaccurate or unclear.
Rather than taking vendors at their word, your risk teams can use transparent Bitsight Security Ratings to quickly validate each response in a vendor questionnaire, as well as gain historical context into responses. Bitsight cybersecurity data can also help your teams investigate risky areas of your vendor’s digital infrastructure, such as malware infections or their history of cyber incidents. You can also share Bitsight’s findings with your vendors so that you can work together to reduce risk.
Remove inefficiencies in your vendor risk assessment program
Vendor risk assessment is a top priority for your organization. But are there parts of your program that you are having a hard time adjusting to meet new needs? Are you following processes the way you are because they’re proven to be the best, or because that’s just how they’ve always been done? Download our guide to learn about three ways in which you can increase third-party risk management efficiency.
