B2B organizations face more challenges in 2024 than they have in years past — budgets are getting cut, competitors are popping up left and right, hiring is more challenging than ever… and the list goes on. If you want to rise to meet these challenges, you’re likely relying on third-party vendors, and with good reason. Third-party vendors can provide essential services and products, allowing you to scale without using in-house resources.
Third-party engagements can drive efficiency and innovation, but they can also introduce significant risks if you aren’t proactively addressing potential problems, especially if vendors engage with customer or lead data. Vendor risk management (VRM) helps organizations reduce the threat of risks vendors may introduce. If your vendors provide or access personal data, you need to ensure they’re following processes and standards that align with yours.  When you establish an effective VRM plan, your organization will be equipped to minimize third-party risks and efficiently de-escalate issues when they do arise.

What Is Vendor Risk Management?

Vendor risk management is the process of identifying, assessing, monitoring, and mitigating risks associated with third-party vendors. VRM policies and procedures safeguard organizations from taking on undue risk by ensuring vendors meet your organization’s security and performance standards.
Typically, vendor risk management involves:
  1. Identifying areas vulnerable to vendor risk
  2. Creating a repeatable set of processes for evaluating new vendors
  3. Establishing KPIs so you can hold vendors accountable
  4. Launching a vendor management plan
These steps aren’t all-encompassing, but by following this loose framework, you’ll have all the essentials covered for a VRM strategy that can reduce third-party vulnerabilities.

The Business Case for a Vendor Risk Management Plan

Effective VRM helps organizations stay ahead of potential cybersecurity threats. As the saying goes, an ounce of prevention is worth a pound of cure — a VRM plan allows you to anticipate vendor-related problems before you’re dealing with them in reality.
A robust data security VRM plan helps organizations:
Protect Sensitive Data: Vendors often have access to sensitive information, making them potential targets for cyberattacks. A VRM plan ensures that vendors implement adequate security measures to protect this data.
Ensure Compliance: Regulatory requirements such as GDPR, CCPA, and HIPAA mandate that organizations manage third-party risks. A VRM plan helps organizations comply with these regulations and avoid penalties.
Maintain Business Continuity: Vendor failures can disrupt business operations, costing you precious time and resources. A VRM plan ensures that vendors have the necessary controls and processes to deliver services reliably.
Safeguard Your Reputation: Vendor-related incidents can damage an organization’s reputation, especially if the vendor is publicly representing your business. A VRM plan helps mitigate reputational risks by ensuring vendors adhere to high standards.
Enhance Decision-Making: A VRM plan provides valuable insights into vendor performance and risks, enabling better vendor selection.
If you’re using vendors and they interact with personal data, by identifying and cultivating leads, for example, it’s your responsibility to hold them to the same standards you would if they were an in-house team. A vendor risk management plan provides a framework for you to follow so you can responsibly step back and let them render the services you hired them for.

Vendor Risk Management Best Practices

Establishing vendor risk management processes is a necessary, if overwhelming, undertaking. A solid VRM plan starts with evaluating and selecting vendors, monitoring third parties once they’re onboarded, and rolling out an action plan to address a potential breach.

Set Standards for Selecting Vendors

One of the best ways to mitigate risk is to be highly selective when choosing vendors to partner with. When you partner with a third party, you assume partial responsibility for their actions as they affect your customers and other people your brand engages with. By selecting vendors that align with your standards, you reduce risk of issues bubbling up throughout your partnership.
Regulatory Compliance 
When choosing your vendors, they must be compliant at minimum, or you may be liable for their shortcomings. To start, verify that vendors comply with industry-wide regulations such as GDPR, CCPA, HIPAA, and New York SHIELD, then drill down into more tailored compliance requirements based on your industry and processes.
Security Certifications 
When it comes to vendor management, data security certifications such as SOC-2 and ISO 27001 serve as benchmarks for assessing a vendor’s commitment to data security. These certifications are not merely badges to display but are indicators of a vendor’s adherence to recognized data security practices and compliance standards. A vendor with these certifications demonstrates an understanding of the importance of protecting customer data and the ability to manage it responsibly.
Data Sourcing Process 
Understanding how your vendors source data is critical to ensuring they’re compliant, especially if they’re providing you lead information or account insights. Ask questions about how they collect first-party data, who they partner with, and how they store data once it’s been captured. Each answer should indicate they follow ethical and legal practices in data collection and handling. If you aren’t comfortable with their responses, move on, and start evaluating a different vendor.

Deploy Vendor Risk Assessments

A vendor risk assessment (VRA) is a crucial tool for organizations to identify, evaluate, and mitigate potential risks associated with third-party vendors. The primary benefits of conducting a VRA include enhanced security, regulatory compliance, and operational efficiency. By systematically assessing vendors, organizations can ensure that their partners adhere to necessary security protocols, thereby protecting sensitive data and reducing the likelihood of data breaches.
Select Your Assessments 
Vendor risk assessments evaluate various risk factors, including data security, financial health, regulatory compliance, and reputational impact, which helps organizations proactively address potential issues and maintain robust vendor relationships. Choose appropriate assessments based on the type of vendor and the services they provide. Assessments should cover various risk categories, including operational, financial, compliance, and cybersecurity risks.
Review Internally 
Typically, selecting a vendor involves more than one person. In many cases, a committee is established to review and approve each vendor prior to contracting with them. Once you’ve evaluated each vendor, conduct internal reviews of the assessment results to identify potential risks and areas of concern. You may need to involve stakeholders from different departments to ensure your evaluation is thorough.
Assign Threat Levels 
Categorize vendors based on their risk levels. High-risk vendors may require more frequent assessments and stricter controls, while low-risk vendors may need less intensive monitoring. As you assign threat levels, you may even find that a vendor you’ve selected doesn’t fully meet your standards — and the search for a new vendor begins again.

Monitor and Assess Vendor Security Risks

Auditing vendor data handling processes is an integral part of vendor management. Routine assessments provide a clear picture of a third party’s compliance with data management and security practices. Through these audits, your organizations can identify compliance gaps and highlight areas for improvement, ensuring that even third-party processes align with the organization’s data security standards.
Continuously Audit Vendors
Regular audits and ongoing monitoring of vendor practices are crucial for maintaining the security of customer data and managing any associated risks you’ve previously identified. Adhering to compliance requires ongoing effort, and conducting independent evaluations with minimal notice can encourage vendors to remain vigilant in upholding their security and compliance standards. High-risk vendors may warrant more in-depth and frequent audits, but lower-risk vendors may allow you to be more hands-off.
Request and Review Reports 
Request and review reports from vendors on their security practices, compliance status, and any incidents. If your vendors offer a dashboard to view insights into their activity, take them up on it for daily monitoring. You should also consider if automated reports are right for you and at what frequency you’d like to receive and review them. These reports may be compiled at an established cadence or at your request based on events you identify as being high-risk.

Establish a Vendor Data Breach Plan

A data breach is the worst case scenario, and chances are, if you’ve been diligent in deploying vendor risk management tactics, it’s unlikely you’ll need to address a leak. But if one of your vendors is compromised, you need to be prepared to act quickly and appropriately to protect your customers and your reputation. A vendor data breach plan should include:
  • Communication Strategies: Develop clear communication strategies for notifying stakeholders, including internal teams, affected customers, and regulatory authorities, in the event of a data breach.
  • Evaluating and Terminating Contracts: Establish criteria for evaluating the impact of a data breach and deciding whether to terminate the vendor contract. Consider the severity of the breach, the vendor’s response, and the potential impact on your organization.
  • Financial Reparations: Define financial reparations for data breaches, including penalties and compensation for damages. Ensure that these terms are included in vendor contracts to hold vendors accountable for breaches.

Navigate Vendor Relationships with Confidence

Vendor risk management is a critical component of an organization’s overall risk management strategy. By implementing a comprehensive VRM plan, organizations can protect sensitive data, ensure regulatory compliance, maintain business continuity, and safeguard their reputation. We hope these best practices provide a roadmap for establishing an effective VRM program that addresses the diverse risks associated with third-party vendors. By proactively managing vendor risks, organizations can build stronger, more resilient partnerships and achieve their strategic objectives.

Concerned about Your Intent Data Provider? Make the Switch to Predictiv

Choosing the right vendor for your intent intelligence is a tall order. Here at Predictiv, we take compliance seriously. We routinely audit our data for accuracy and cleanliness, plus, we meet ISO 27001 and SOC 2 security standards.