There are a lot of factors at play when establishing a vendor risk management program such as the amount of time needed to set it up, the personnel involved and their respective expertise, and an updated knowledge of the regulations applicable.
If you’re new to the game, you might get overwhelmed by all the facets that you need to take into consideration, so we have compiled a simple step-by-step to get you started on a successful vendor risk management program.
6 Steps to a Thriving Vendor Risk Management Program
The steps outlined below will help you set up a vendor risk management program without any hiccups. You may have more ground to cover if you want to customize a few things but here is the basic plan:
Develop a Policy and Protocol
The first step you need to take in developing a vendor risk management program is to have well-documented and clear policy, protocol, and program details. This preliminary document will ideally detail everything about how vendor risk management will be handled by personnel. The policy will state explicitly how vendor risk management will be handled and the protocol will state what responsibilities will be assigned to what level of personnel on a daily basis.
Have an Explicitly Defined Vendor Selection Process
Having a well-defined protocol for vendor selection is important to ensure healthy relationships with vendors as well as security. A few things that you may want to consider for this step are:
- Issuing a request for proposal (RFP)
- Comparing the vendor to competitors
- Undertaking a risk assessment and other requirements stated in your policy
Outlining a selection process is crucial to your organization and should be used as a starting point for any vendor relationship.
Establish Contractual Standards
Managing different vendors means managing some unique amendments to a standard contract template. Given what each party is offering, you can add or subtract various clauses in your vendor contract and make sure that both parties understand their responsibilities before drafting the final contract. You should also ensure that you have included a negotiation process, a review process, and an approval process. In case anything needs fo be amended later, there should also be a protocol for that.
Keep Up Periodic and Diligent Monitoring
Even after a contract has been established, you need to continue to monitor on an ongoing basis in order to make sure that the vendor is behaving as agreed upon and that any changes on the vendor’s end don’t affect your organization. Monitoring and analysis is a vital part of a vendor risk management program. Here is what good due diligence would look like:
- Reviewing the vendor’s financials every time they are released
- Completing annual assessments such as risk assessments and performance assessments
- Evaluating the vendor’s SOC, disaster recovery and information security (these factors will, in turn, affect you)
Outline an Internal Vendor Risk Management Audit Procedure
Before an auditor arrives, it’s much better to schedule an internal audit yourself to catch any errors and fix them before the examiner does. Internal audits that are part of your vendor risk management program will help you identify correct controls in order mitigate risk.
Gain Access to a Comprehensive Method of Reporting
Even though Excel spreadsheets provide a variety of functions and reporting methods, they make reporting to senior management very difficult. You’ll find much more robust and comprehensive reporting methods which will help you present to the board and senior management.