TECHNOLOGY
Navigating vendor risk management: your top questions
Vivek Valmiki, business development manager, C2 RISK, invites you to review the most frequently asked questions on vendor risk management (VRM) to help you understand its significance and introduce an effective, flexible solution for your organisation
H ere, we dive into the most popular questions our experts get regarding VRM. The increasing reliance on external partners, suppliers and service providers
l compliance: failing to comply with regulations can lead to hefty fines and significantly impact a company’s valuation / share price l operational continuity: vendor risks can disrupt your organisation’s ability to operate efficiently, or in some cases, at all. This downtime incurs costs, losses and redirection of resources to investigate and recover l reputation management: data breaches can be devastating to an organisation’s reputation. News travels fast, and can be challenging to reverse. Customers value their personal data and if organisations fail to demonstrate secure and responsible data protection, they’ll look elsewhere l cost effectiveness: effective VRM can help you identify cost-saving opportunities and optimise relationships, while reducing resources internally with automated processes and risk analysis. What’s a VRM framework? A VRM framework is a structured set of policies, processes and procedures which guide your organisation in managing and mitigating risks associated with third parties. It typically involves: l identifying and categorising vendors based on importance and risk “Essentially, any business relationship which involves a transfer of resources or data should be considered as a vendor when assessing risks”
l evaluating risks associated with vendors l implementing risk mitigation strategies and controls to reduce threats l continuous monitoring of each vendor to ensure they meet your risk and compliance standards l preparation for, and responding to, any incidents / issues related to a vendor. How to avoid a data breach? To avoid data breaches through vendor relationships, best practices are: l data encryption: ensure data transferred to and from vendors is protected and cannot be breached by any unauthorised parties l access controls: limit access to sensitive data and systems internally and externally l regular audits: conduct regular security audits and assessments of vendor systems l incident response plan: have a robust incident response plan for swift action in case of a breach l contractual safeguards: include security clauses and compliance requirements in vendor contracts. How do I assess my suppliers / vendors / third parties? Assessing vendors involves the following steps: l identifying critical vendors: determine which vendors have the most significant impact on your business l risk assessment: evaluate each vendor’s risk based on factors like data access, industry regulations and past performance l due diligence: conduct due diligence through questionnaires, audits and reviews l continuous monitoring: implement ongoing monitoring to detect changes in vendor risk profiles. n
means it’s crucial to ensure these relationships don’t compromise your company’s security, compliance or reputation.
What is VRM? VRM is often also referred to as third-party risk management, and it’s a structured approach to assessing and mitigating potential risks associated with your business’s relationships with external suppliers. This includes anyone who collaborates with your business to deliver products or services. The goal of VRM is to proactively identify, evaluate and manage associated risks, ensuring that third party activities and business processes align with your own organisation’s strategic objectives, while minimising potential threats. What counts as a vendor? A vendor, in the context of VRM, encompasses any external entity which provides goods, services or technology solutions to your organisation, such as suppliers, contractors and service providers. Essentially, any business relationship which involves a transfer of resources or data should be considered as a vendor when assessing risks. Why is VRM so important? VRM is paramount in any business managing third-party relationships for the following reasons: l security: third-party data breaches can have detrimental consequences for an organisation, such as operational downtime and loss of sensitive data
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| Professional in Payroll, Pensions and Reward |
Issue 94 | October 2023
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