Chat with us, powered by LiveChat

Vendor Security Risk Assessments Explained

Vendor Security Risk Assessments
Chris Adams
Chris Adams
April 1, 2022

Vendor Security Risk Assessments: A Cornerstone of the Risk Management Process

One of the major components of an effective whole enterprise vendor risk management program is the vendor security risk assessment. A failure at the very beginning stages of the risk management process could allow unsuitable vendors to proceed further along than they should, or even worse, this could allow high-risk vendors to escape detection and therefore not be subject to the appropriate levels of due diligence.

What Are Vendor Security Risk Assessments?

Risk Assessment Questionnaire

The risk assessment process frequently begins with a security questionnaire, but it should never end there. Your risk management team should already have conducted a basic evaluation of the criticality of the vendor's products or services to your business. Their answers to the provided questionnaire will then let your team begin assessing the security risk that your vendors pose. Even a presumed low-risk vendor with a low criticality rating should still have a limited level of vetting completed to verify the answers provided in the questionnaire.

For vendors with below low ratings in both risk and criticality, higher levels of assessment are then assigned based on the risk appetite of your agency as defined by the board or other stakeholders. This may entail activities as varied as an onsite audit, virtual audit, financial statement review, or other preliminary tasks. The final verdict then delineates what continuous monitoring and reporting will be required for the specific vendor. As you can see, this assessment sets the tone for the entirety of the relationship with your third-party vendors.

Areas of Concern

Risk Assessment Report

You can use these security questionnaires to evaluate a wide range of risk topics, but the most common are cybersecurity-related. Lax data security by your vendors can leave you open to civil liability, ongoing costs for credit monitoring or breach notification, civil and criminal penalties, regulatory fines, and significant reputational harm. That's why it's so important to determine the access to your data or your customers' data that your third and fourth parties will have and to get an accurate view of the security controls that they have in place.

There are numerous regulatory and industry standards that may apply given your field of business, and some of the most stringent are in the healthcare and financial services industries. While this may seem overwhelming at first glance, the existence of these standards in so many fields has allowed the creation of both shared questionnaire responses and large repositories of standard-specific questions for inclusion in a vendor security questionnaire.

Whether you're looking for HIPAA, NIST, ISO, or PCI DSS information, you can pull from literally thousands of questions to highlight the concerns that you may have with your potential vendor's data handling or security posture. Now, the availability of these questions also presents an additional risk; if everyone can see the questions, then vendors can tailor their responses to that which complies with the regulations and doesn't necessarily reflect their day-to-day business operations. That is precisely why even low-risk, low-criticality vendors should be subjected to at least verification of their answers by some means before the conclusion of the risk assessment process. Even if your team doesn't have the time or resources to complete this task for potential vendors prior to onboarding, there are vendor risk management specialists that offer risk assessment services and can provide an accurate and reliable security rating so that you can make an informed decision.

Periodic Reassessment

While risk assessment is one of the first steps of risk management, it remains an integral piece of ongoing monitoring as well. At least yearly, there should be a limited reassessment of your vendors. This is in addition to your standard continuous monitoring and compliance activities. Any sort of security incident should trigger an automatic reassessment of any vendor along the supply chain as well, even if it doesn't rise to the level of an actual data breach. Monitoring open-source news, social media, and dark web traffic can provide early warning of which vendors may be more at risk of targeting and therefore more in need of a reassessment.

Benefits of Automation

Woman using her mobile and technology for tracking

If you're taking advantage of a vendor management platform, there are AI options in some that allow for flagging incidents for personnel review. One of the more interesting features is the ability to actively track independent vendor security scorecard ratings from subscription sources. Changes in those scores can trigger the system to notify personnel, request vendor documents, send an updated questionnaire, or other custom responses. As technology progresses, the potential of automation in the risk management process increases. This can allow your employees or TPRM vendors to focus on the high-level reviews that are more reliant upon their expertise and less on routine data collection and monitoring.

Businesses of all sizes struggle with the vendor risk management process for a variety of reasons. Whether it's lack of capital, lack of experienced personnel, or simply not enough time in the day, many corporations have found success by outsourcing the process to experts in the field. Venture Lynk Financial offers a plethora of vendor risk management services from risk assessments, onboarding, continuous monitoring, and much more. All of these services can even be completed from within the confines of your own existing vendor management portal. Don't let inexperience or complacency leave you open to unnecessary liability.