Why Your Business Needs a Vendor Management Policy
To conduct business and boost operational efficiency, most organizations work with third-party contractors, suppliers, and vendors. Because these third parties often have access to an organization’s critical computer systems and data, they pose cybersecurity risks that must be monitored continuously to limit potential cyber-attacks and data breaches.
Developing a vendor management policy is an effective way to address these risks. A vendor management policy is a set of guidelines and procedures that an organization uses to manage the risks associated with working with third parties.
Let’s take a closer look at how to set up a robust vendor management policy and how a small or mid-sized company can identify vendors who may be putting its data at risk.
The Purpose of a Vendor Management Policy
A vendor management policy provides an organization with a reliable process for controlling and monitoring the interactions between its own IT systems and those of external parties. It identifies the risks that third-party vendors pose and specifies how a vendor can access, manage, and use an organization’s systems, networks, and data.
A vendor management policy should specify how each vendor must handle an organization’s sensitive data. It must be applied consistently to all third parties, and an organization must monitor all vendors continuously. The policy must also delineate the roles of every employee involved in managing vendor risk, including senior and operational management.
Benefits of a robust vendor management policy and process include:
- Providing better insight into vendor performance
- Identifying vendor security issues at earlier stages
- Improving compliance and risk management efforts
How to Identify Vendors Who Put Your Data at Risk
To discover whether existing or potential vendors pose risks, determine the answers to the following questions:
- If vendor access is necessary, what level of access does each vendor need?
- Can you monitor each vendor’s access?
- What are the vendor’s internal security policies and procedures?
- What type of user authentication and access controls does the vendor use?
- Does the vendor require regular data privacy and security training for its personnel?
- Does the vendor segment data to ensure data is not mixed between its customers?
- Does the vendor use data encryption?
- Does the vendor have backup systems, as well as business continuity and recovery plans?
When selecting vendors, keep cybersecurity risks and data privacy in mind.
How to Protect Your Business
Making a comprehensive list of your third-party vendors is the first step in setting up a vendor management policy that will help protect your business from third-party data breaches and cybersecurity risks.
Next, identify the risks that each of these vendors poses. Specify whether each vendor has access to your systems and data and to what extent. Assign a risk score for each vendor, with an emphasis on third parties who have access to your sensitive business information.
The next step is to draft your vendor management policies, which should include the following:
- Requiring all vendors to sign a service level agreementthat includes security due diligence requirements, as well as remedies and penalties in case of a security breach
- Establishing internal vendor controls to monitor vendor compliance with security protocols
- Setting up oversight requirements for senior management and employees who interact with vendors
- Ensuring that security controls are periodically evaluated and updated to address new threats
- Spelling out disaster and business continuity procedures
Security provisions that are critical to your business should be non-negotiable.
Addressing Third-Party Cybersecurity Risks
Because cybercriminals now target companies of all sizes, small and mid-sized businesses need to develop a vendor management policy. It may seem like a daunting task to plan and implement these security measures, but it’s the most effective way to reduce a wide range of operational, strategic, compliance, financial, and reputational risks posed by your interactions with third parties.
To help organizations address these risks, we provide end-to-end IT and cybersecurity solutions. For a free security assessment of your business, contact us today.
