Key Takeaways

• A strong vendor management program gives you a structured way to choose, review, monitor, and offboard vendors without treating every vendor the same.
• Vendor risk should be managed across the full lifecycle: planning, due diligence, contracting, ongoing monitoring, and offboarding.
• Clear ownership matters. Each vendor should have an internal relationship owner, with risk, compliance, procurement, legal, security, and audit involved where their input is needed.
• Higher-risk vendors need deeper review because they may access sensitive data, connect to internal systems, support critical operations, or create regulatory exposure.
• Contracts should reflect vendor risk. For critical vendors, that often means clear terms around data protection, breach notification, audit rights, service levels, subcontractors, and offboarding.
• Ongoing monitoring keeps the program current. Vendor risk can change as services expand, reports expire, systems change, or new issues emerge.
• A vendor management program should create evidence. Teams need to show what was reviewed, who approved it, what risks were accepted or remediated, and when the next review is due.

Vendors are an essential component of your organization and many times now a true extension of your organization. They can provide all the tools, products, and services necessary to keep everything running, from supplies to supporting internal processes. And yet, those same third-party vendors you rely on may be putting your business at risk. 

So, how do you know whether your third-party vendors are leaving you exposed to threat? 

The simple answer: Create a Vendor Risk Management Program. 

This will help you safely get the most out of your supplier relationships, and taking the time to improve it goes a long way to building up your bottom line.

In this article, we’ll cover the basics of vendor management programs, what an effective one looks like, and some actionable tips to help you get started.

Why Third-Party Vendor Management Matters

Companies have expanded their reliance on vendors beyond the classic office supplies, travel, services and other goods. Most companies today rely on third-party suppliers for complex technology integrations and processes- all vital to the company. 

Soft skills and good communication are no longer enough to facilitate and maintain a safe robust working relationship with your vendors. Reducing vendor-related risks is more relevant than ever. We refer to this practice as enterprise vendor risk management since it’s ultimately a form of risk quantification and mitigation. 

With a risk management program, you will address decisions from all angles. For example, while a cheaper vendor might give you better revenue now, do those savings justify the additional risk you may be exposed to?

Many larger companies will refuse to do business with your organization if they believe that you or your vendors may be exposed to unnecessary risk. After all, no company wants to be associated with a major data breach or potentially find themselves in the middle of one.

Your choice of vendors can make or break the business, so it’s worth checking up with regular audits and full visibility into your vendors to ensure you’re getting the most from your vendor management processes.

Who Owns a Vendor Management Program?

A vendor management program works best when ownership is clear. In most organizations we see, vendor management involves three groups.

1. Most programs assign a vendor owner, sometimes called a business owner or relationship owner, for each vendor. This is the internal person or team closest to the relationship. They understand why the vendor is used, how the service supports the business, and whether the vendor is meeting expectations.
2. The risk, compliance, or vendor management team sets the process. This team defines what information must be collected, which vendors need deeper review, how often reassessments happen, and what evidence must be kept.
3. The internal audit or oversight function reviews whether the process is working. This does not mean the audit owns the vendor relationship.

The Components of a Successful Third-Party Vendor Risk Management Program

If you’re responsible for the vendor risk management in your organization, implement these steps, strategies and best practices to get the most benefit from the program.

Make Upper Management a Partner in  Your Plans

Getting business leadership sponsorship is key to ensuring effectiveness and long-term adoption of a program. Be ready to make your business case to the executive team. Being able to articulate why vendor risk assurance is critical, with compelling data to show the benefits of improved supplier relationships.

Appoint Dedicated Resources 

Appoint a dedicated team or resource to take responsibility for ensuring proper vendor risk management. The exact size of such a team depends on the needs of your business, and the amount of vendors you are trying to manage, that said the technology solutions you are using will impact the number quite drastically. Define their responsibilities considering the following:

• Vendor selection: Every new prospective supplier requires due diligence from the team. Choose the contractors and suppliers that are in line with your overall financial and business objectives.
• Transaction screening: Every purchase and contract made through an entity on the supplier list should also go through this vendor management team.
• Relaying communication: The team also acts as a liaison between other vendors and the stakeholders within the company, for example, between Human Resources and suppliers regarding professional services.
• Performance reviews: You need to make sure current vendors match up with your needs while keeping in mind how they will fit into your company in the future. Conducting regular performance reviews is another responsibility of this team.
• Auditing: Meticulous record keeping should be another responsibility of vendor risk management. Having a “paper trail” of documents, invoices, and purchase orders will help you audit your financial activity later down the line.

Categorize your Vendors

Not all vendors are created equal. Depending on the market each one serves, a supplier brings with it a unique set of risks, challenges, and benefits. It’s not an uncommon tactic to categorize vendors into groups depending on how they should be managed.

By doing so, you create a chance to focus your due diligence on the suppliers that need it the most, such as those providing mission-critical supplies and services, or those who result in the largest expenses. 

Aim For a Consistent Contracting Process

A new focus on vendor risk management will help you streamline the contracting procedures of your business. Contracts define the terms with which you work with suppliers. A consistent process for determining these terms ensures you minimize risk and set clear expectations for every new deal.

The signing of the contract is only the beginning. Incorporate vendor onboarding procedures so that any post-contract activities and responsibilities are properly accounted for. Ensure that both parties remain compliant with the contract so that you will continue to gain value from the relationship.

Don’t Forget About Risk Management

Like any business relationship, a degree of risk is involved that can compromise trust and confidentiality. You often share sensitive information with your vendors and vice versa, so don’t forget to protect the emails and other points of contact.

Likewise, check with government regulators regarding risk management compliance, which can range from strategic risk to reputation risk and cybersecurity.

Know When To Quit

Think of vendors as employees; if one fails to provide the value you expect, then it’s time to assess and reconsider. Regular awareness of how much you are gaining or losing from each vendor is key to digging out problematic contracts.

If you do find it necessary to break up a relationship, develop a formal process for off-boarding. Most contracts have terms in place regarding the handling of sensitive information and assets during a termination.

Empower Yourself With Automation

With sourcing and vendor management becoming more complicated by the day, businesses are turning largely to software and other related technologies to address some of the challenges.

The power of automation is a game changer in vendor risk management. Automating your vendor risk program can allow you to reach many more vendors with less resources and at the same time improve both the vendors cooperation and accuracy of their responses. On top of this, collecting automated external data sources can help validate many of the self attested items the vendor provides, all this leading to a much more robust and data driven vendor risk management program. 

The data from B2B purchases can come from a wide variety of sources like emails, documents, digital files, scans, and others. Orchestrating all this disparate data together in a consistent format matters when it comes to efficient auditing and recordkeeping. 

Vendor risk management solutions specialize in automating the data collection process, and turning that data into actionable insights that highlight a vendor’s adherence to basic governance, risk and compliance, while giving the organization the tools to identify the highest risk vendors at a click of a button. Quantifying what level of impact a vendor has on the organization alongside what the likelihood of an attack them is will help you establish a  vendor risk score in effort to prioritize those high risk vendors.  

The Vendor Management Lifecycle

Vendor management is easier to understand when you look at it as a lifecycle, not a one-time review.

1. Planning

Before a vendor is selected, the organization should understand why the vendor is needed, what function it will support, what data or systems it may access, and whether the relationship introduces material risk.

2. Due diligence

This is where the organization reviews the vendor’s security, privacy, financial stability, compliance posture, business continuity practices, and overall ability to meet expectations. The depth of the review should match the vendor’s risk level.

3. Contracting

The contract should reflect the risk of the relationship. For higher-risk vendors, this may include breach notification timelines, data protection requirements, audit rights, service-level expectations, subcontractor requirements, and termination obligations.

4. Ongoing monitoring

A vendor that looked safe during onboarding can change over time. Security reports expire. Insurance certificates expire. Services change. Subprocessors change. Business dependency grows. Ongoing monitoring helps the organization keep the vendor profile current.

5. Offboarding

When a vendor relationship ends, the organization still needs to remove access, confirm data return or deletion, close out open obligations, and document the end of the relationship.

This lifecycle view keeps vendor management from becoming a one-time checkbox. It turns it into a repeatable process that follows the full relationship from selection to exit.

Create a Winning Vendor Risk Management Program With Centraleyes

Effective risk management is a winning strategy for any company. That’s why it’s more important than ever to ensure your vendors are practicing the same level of risk management.

Centraleyes’s 3rd party solution allows you to automate and orchestrate your vendor risk program. Through the platform you can easily onboard, assess and visualize vendor risk at scale. Through powerful automation you can leverage preloaded frameworks, which combine self attestation by vendors together with automated cutting edge threat intelligence the Centraleyes platform collects from the Dark Web, Public and vendor perimeter. With intuitive functionality managing vendor risk has never been easier and more efficient.

Are you interested to see how top companies leverage the Centraleyes platform to measure their vendor risk book a meeting today to learn more.

FAQs

1. What should we do with long-standing vendors that were never formally reviewed?

Start with a backfill process. Don’t try to recreate years of history perfectly. Identify the vendors that are still active, determine which ones are critical or high-risk, and review those first.

For each high-risk legacy vendor, collect the basic facts: owner, service provided, contract status, data access, system access, current evidence, known issues, and renewal date. Then decide whether the vendor needs a full reassessment, contract update, remediation plan, or simple documentation cleanup.

2. How do you handle vendors that refuse to complete security questionnaires?

This happens often, especially with large vendors. Start by checking whether they already provide standardized assurance materials, such as a SOC 2 report, ISO 27001 certificate, trust center, penetration test summary, security whitepaper, or standard data processing terms.

If the vendor will not complete your exact questionnaire, document what they did provide and compare it against your key requirements. For high-risk vendors, any gaps should be reviewed as part of the risk acceptance process instead of being ignored.

3. What should happen when a vendor has a poor risk score but the business still wants to use them?

A poor score should not automatically mean the vendor is rejected. It should trigger a decision. The team should understand which risks are driving the score, whether those risks can be remediated, whether compensating controls exist, and whether the business benefit justifies accepting the remaining risk.

The important part is documentation. If the organization chooses to move forward, the decision should show who approved the risk, what conditions were attached, and when the vendor will be reviewed again.

4. What metrics should vendor management teams report?

Useful metrics show whether the program is working, not just whether forms were completed. Examples include the number of critical vendors, percentage of high-risk vendors with current assessments, overdue reassessments, open vendor risks by severity, average time to complete onboarding review, vendors with missing evidence, upcoming renewals, and unresolved remediation items.

The best metrics help leadership answer two questions: where do we have the most vendor risk, and are we doing anything about it?

The post How To Create an Effective Vendor Management Program appeared first on Centraleyes.

*** This is a Security Bloggers Network syndicated blog from Centraleyes authored by Yehuda Raz. Read the original post at: https://www.centraleyes.com/how-to-create-an-effective-vendor-management-program/