Hiring a third-party vendor for products and services is not a new concept; businesses have done it for years. So why is vendor risk management suddenly a buzzword? Because cybersecurity, business continuity, and regulatory compliance all rely on it.
A robust vendor risk management (VRM) program and a capable team of cyber security consultants can help reduce your risk exposure and ensure you only work with high-quality vendors performing well.
With all the heightened regulatory expectations around vendor risk management processes, it’s essential to have your program in place to monitor vendors’ performance continuously and manage the risks they introduce.
Point 1: What Is VRM?
VRM is for managing risks associated with third-party vendors and service providers. In a nutshell, it mitigates the following:
- Cyber Security: These risks include cyber attacks, data breaches, or other security incidents resulting from onboarding new vendors or vendor contract management.
Due diligence with professional cyber security consultants can mitigate this risk when onboarding new vendors and oversight as the vendor progresses through its lifecycle.
- Operations: A third party is likely to disrupt the business operations that can be avoided through contractually bound service level agreements. This is standard practice for maintaining financial institutions.
- Legal and Regulatory Compliances: There is a risk that someone else will disrupt or endanger your organisation’s compliance with local legislation, regulation or agreements.
This is particularly dangerous in the financial industry, health care, government organisations, and companies that partner with these organisations.
- Reputation: The most damaging security incidents are those caused by third parties. Third-party data breaches are expensive and difficult to mitigate. In the case of Target’s data breach in 2013, the fallout resulted from poor security controls.
- Finances: The risk that a third party will negatively impact financial success. For instance, your organisation might not be able to sell a new product due to poor supply chain management, negatively impacting the organisation’s profits.
- Strategies: Vendors could cause your business to fail to meet its objectives because of poor performance.
Point 2: Why the Increased Focus?
As mentioned above, a VRM program reduces the frequency and severity of data breaches and cyber attacks that involve third-party vendors. In doing so, companies can protect sensitive data that could jeopardise their processes.
Despite this, many organisations neglect vendor management to their peril. Without cyber security consultants on their side, organisations suffer from the following:
- Resiliency: Lack of business continuity efforts and incident response plans.
- Solvency: Lack of third party solvency and financial capability.
- Security Monitoring and Management: Lack of data on whether vendors are compliant and compliant.
- Intellectual Property (IP) Protection: Lack of security from corporate espionage.
- Health and Safety: Lack of health protocols.
- Corporate-Social Responsibility (CSR): Lack of nurturing brand and CSR efforts.
Point 3: How Does It Help Businesses?
VRM, through competent cyber security consultants, aids companies in the following:
- Specialisation: Many businesses can benefit from outsourcing to a third party. This allows them to streamline their organisation, focus on core competencies, and provide the best service at the lowest risk.
- Cost-Efficiency: Vendors across multiple industries benefit from economies of scale and offer their goods or services for less than the cost you would be able to offer internally.
- Globalisation: As your international client base grows, it’s often necessary to use vendors on the ground since sales reps are not always knowledgeable about other countries or geographies. A good example would be legal services and translations.
Implement VRM Systems Now
Cyber security, business continuity, and regulatory compliance rely on vendor risk management. If you aren’t yet on the vendor risk management bandwagon, don’t fret. You can start by allocating an in-house resource or hiring an off-site team to handle it for you if you have the budget.
Contact Rabbon right now to work with proficient cyber security consultants from Sydney! We have a robust VRM system that leverages third-party and vendor relationships to create value across your organisation. Speak to an expert today!