What is vendor risk management in IT?

The importance of VRM in the context of IT

In today’s world, companies are increasingly relying on third-party vendors for key areas of their IT operations. These suppliers may have access to a company’s sensitive data, infrastructure, systems or intellectual property. Problems on the supplier’s side – such as security incidents, service failures, financial problems or regulatory non-compliance – can have a direct and serious impact on a customer’s business, reputation and security. Therefore, systematic management of the risks associated with these suppliers is essential.

Types of risks associated with IT suppliers

Working with IT suppliers carries a variety of risks, including:

• Cybersecurity risk: The possibility that customer data could be leaked, that customer systems could be attacked through the vendor’s infrastructure, or that vulnerabilities exist in the vendor’s software.
• Operational risk: The possibility of service interruptions by the provider (e.g., failures) that disrupt customer operations. Poor quality of services provided.
• Compliance risk: The risk that a supplier fails to comply with applicable laws (e.g., RODO), industry regulations (e.g., PCI DSS) or standards, which could expose the customer to penalties and sanctions.
• Financial risk: The possibility of bankruptcy or financial problems for the supplier, which could jeopardize the continuity of service delivery.
• Reputational risk: Negative impact on a customer’s reputation as a result of an incident or unethical actions on the part of a supplier.
• Strategic risk: Over-reliance on a single vendor (vendor lock-in) or the risk that the vendor will not be able to support the customer’s future technology needs.

Vendor risk management (VRM) process

An effective VRM program typically includes the following steps:

• Identify and categorize suppliers: Create a registry of all IT suppliers and assess their criticality to the company’s business.
• Risk Assessment (Due Diligence): Conduct a risk assessment for each key supplier prior to and periodically during the relationship. This includes analysis of their security policies, certifications, financial stability, business continuity plans, etc. (e.g., through audits, questionnaires).
• Negotiating contracts: Include appropriate security, compliance, service level agreement (SLA), audit rights and liability clauses in contracts with suppliers.
• Continuous monitoring: Regular monitoring of supplier performance, SLA adherence, emerging risks, and changes in the supplier’s risk profile.
• Incident response planning: Develop plans to deal with a security incident or vendor-side failure.
• End of relationship management: Securely end the relationship with the vendor, including ensuring that data is returned and accesses are revoked.

VRM in the context of body leasing

VRM principles are fully applicable to body leasing providers. The client should assess risks related to data security, quality of professionals, legal compliance (e.g., regarding B2B contracts) and stability of the provider. An audit of the body leasing provider is one of the tools used in the VRM framework.

Summary

Vendor risk management is a key component of the security strategy and operational management of any company relying on third-party IT vendors. A systematic approach to identifying, assessing and monitoring risks helps minimize potential risks and build secure and stable relationships with technology partners.