ENHANCING VENDOR RISK MANAGEMENT THROUGH AUTOMATED PROCESSES

As your business expands with new employees and technology, the risk of potential issues grows too. Identifying, assessing, and managing these risks is crucial for keeping your organization financially secure, compliant, and reputable. To help organizations of all sizes establish a strong risk management program, SKELDUS is introducing a Risk Management process to offer quick, user-friendly ways to identify, assess, and manage risks so that our clients can move forward with confidence in their growth journey.

Abstract

This whitepaper outlines a comprehensive approach to Vendor Risk Management with a focus on scheduling, structuring processes, and automating tasks. The goal is to support clients in effectively managing risks associated with vendors, service providers, partners, and subcontractors. This process features four main components: Vendor Identification, Vendor Prioritization, Initial Security Review, and Regular review, with an additional focus on Security Patches and Data Breaches Monitoring.

Introduction

Vendor Risk Management is a critical aspect of ensuring the security and compliance of an organization. Managing vendors involves a systematic approach to identify, prioritize, and review vendors. It also focuses on reducing potential risks and enhancing overall security posture. This feature streamlines the write out acronym with “TPRM” in parentheses process through automation, providing clients with a centralized and efficient solution.

Risk Management

Understanding and managing risk is crucial for any strong security program. This is especially true when gaining compliance as many frameworks set specific requirements for risk management practices. Essentially, compliance frameworks want to see that organizations:

• Have clear visibility into their internal and external risk landscape. This includes identifying potential threats, vulnerabilities, and weaknesses that could compromise security.
• Proactively take steps to mitigate identified risks. This involves implementing appropriate security controls, policies, and procedures to minimize the likelihood and impact of security incidents.
• Can demonstrate their understanding of risk and the active measures taken to address it. This often involves documentation, reporting, and audits to showcase a comprehensive approach to managing risk and achieving compliance.

With effective risk management, organizations stay compliant and proactively protect their business, employees, and customers from potential harm.

What is Risk Management?

Vendor Risk Management (VRM)is a systematic approach employed by companies to recognize, handle, and continually observe potential risks linked to their vendors. As businesses frequently collaborate with external vendors, the exchange of sensitive information becomes inevitable. Therefore, organizations must engage in collaboration while upholding their internal security standards. VRM enables companies to gain insights into their working relationships, methodologies, and the security measures implemented by each vendor. The significance of VRM is explored in more detail below.

Why is Risk Management Important?

Vendor risk management holds significant importance in the face of increasing cyber threats, demanding that companies scrutinize external vendors' risk management practices as closely as their own. Several compelling reasons underline the need to establish or enhance processes for managing third-party risk:

• Minimize Risk: Collaborating with third parties exposes companies to elevated digital and enterprise risks. A robust vendor risk management plan is crucial for mitigating risk to an acceptable level. This, in turn, enables organizations to derive value from third-party relationships while preserving a positive public image.
• Prevent Data Breaches: While implementing a vendor risk management process involves initial investment, the absence of one can result in substantially higher costs, such as data breaches and disruptions in business continuity. In 2022, the average cost of data breaches amounted to $4.35 million.
• Comply with Regulations: Stringent industry regulations like the General Data Protection Regulation (GDPR) emphasize the need for robust and ongoing vendor risk management practices. Having a vendor risk management plan aids in identifying and managing vendors lacking a strong cybersecurity program to meet specified security standards for safeguarding customer data.
• Streamline Vendor Onboarding: While a vendor risk management plan may introduce additional steps to the vendor onboarding process, it inherently streamlines the process by establishing a systematic approach. This includes steps such as collecting information, creating vendor profiles, assigning risk categories, and fostering effective communication with vendors.
• Enhance Information Security: A vendor risk management program contributes to improved information security processes by providing insights into data flows, storage locations, and access management. This understanding is essential for maintaining robust information security practices within the organization.

Components of Vendor Risk Management

Vendor Identification

• Overview Dashboard: A centralized dashboard provides a comprehensive overview of vendor distribution, categorizing them by risk levels and highlighting upcoming reviews.
• Manual Vendor Setup: This phase allows for the manual setup of vendors, ensuring a structured approach to capturing vital information. Key attributes such as name, category, website, trust report, owner, contract start date, and vendor contact information are meticulously recorded. This step lays the foundation for a detailed understanding of each vendor's profile.
• Third-Party Application Scanning: To enhance security awareness, this phase involves scanning and identifying third-party applications used by employees through various channels such as Mobile Device Management (MDM), work email, or Single Sign-On (SSO). This proactive approach helps in recognizing potential vulnerabilities stemming from external applications.

Vendor Prioritization

• Assessment of Risk Attributes: An in-depth evaluation of risk attributes is conducted, focusing on the data processed and the business criticality associated with each vendor. This assessment forms the basis for determining the frequency and depth of subsequent vendor reviews, allowing for a tailored risk management strategy.
• Scheduling of Initial Review and Frequency: Building on the risk attributes, this phase involves scheduling the initial review and establishing the frequency of ongoing reviews. Timely and regular assessments are crucial for maintaining an adaptive risk management approach aligned with the dynamic nature of vendor relationships.
• Determining Depth of Review: This phase, yet to be determined, aims to establish the intensity of the review based on evolving risk attributes. Flexibility in determining the depth of the review ensures a responsive and scalable risk management process.

Initial Security Review

• Upload of Required Documents: In this phase, clients are required to upload necessary documents requested by SKELDUS for each vendor. These documents could include contracts, certifications, insurance policies, and other relevant paperwork. In industries like finance and healthcare, compliance with regulatory standards such as GDPR, HIPAA, or ISO 27001 may be crucial, necessitating specific documents to be uploaded.
• Upload File/Evidence: Clients have the option to provide further evidence or documentation for each vendor. This could include additional compliance reports, audit findings, or evidence of security controls implemented by the vendor.
• Manual Assessment of Report Findings: A summary of findings from various reports or certificates is documented to determine the risk level associated with each vendor. This assessment may include evaluating the vendor's financial stability, compliance with industry standards, and security posture.
• Send Customized Questionnaire: If required documents are missing or if clients need more information, a customized questionnaire can be sent to the vendor.
• Manual Scoring of Vendor Risk Level: Clients determine the risk level associated with each vendor based on collected documents and risk attributes. This involves assigning a risk score and documenting it along with comments or rationale.

In addition to assessing risk based on document collection and risk characteristics, two key factors should also be considered in assigning vendor risk ratings: exposure and cyber reliability. Exposure is calculated by multiplying the organization's dependency on the vendor's services and the extent of his access (depth of vendor penetration) to the organization's systems or services. Cyber reliability, on the other hand, is determined by the level of trust the organization has regarding a vendor multiplied by the vendor’s cyber maturity level.

• Creation of Task: Tasks are created based on findings and risk levels to mitigate identified risks.
• Adjusting Frequency and/or Date of Next Vendor Risk Review: Clients have the flexibility to adjust the frequency or schedule of the next vendor risk review based on evolving risks or changes in business priorities. This allows for proactive risk management and ensures ongoing compliance with regulatory requirements.
• Linkage of Trust Page and Information Import: Facilitating compliance and risk assessment, vendors are prompted to manually upload necessary documents. This phase ensures that essential documentation is readily available for review, forming the basis for subsequent risk evaluations.
• Automatic Assessment of Report Findings: Leveraging a customized Large Language Model (LLM) automates the compilation and analysis of findings from various reports. The integration of AI enhances the accuracy and efficiency of the assessment, allowing for quicker and more informed decision-making.
• Auto-Scoring of Vendor Risk Level: Automation extends to the calculation of vendor risk levels based on collected documents, reports, and known data breaches. This automated scoring system provides a standardized and objective measure of risk, facilitating a more streamlined risk management process.

Regular Reviews

Following the same standards as the initial review, regular reviews maintain the monitoring of vendor risks. This cyclical process allows for continuous adaptation to evolving risk landscapes and the dynamic nature of vendor relationships.

Security Patches and Data Breaches Monitoring

• Overview of New Security Patches/Updates by Vendor: Owners are informed about new security patches/updates. This empowers them to make informed decisions on the implementation and enhances the organization's proactive stance in addressing potential vulnerabilities introduced through updates.
• Overview of Recent Data Breaches by Vendor: Owners receive notifications about recent data breaches and gain visibility into potential risks associated with vendors. This phase contributes to a proactive risk management strategy, allowing for timely responses to emerging threats.
• Automatic Task Creation for Update: Automation extends to task creation for security patch/update implementation which ensures that updates are promptly implemented across the organization, minimizing the window of vulnerability.

Conclusion

This feature introduces a robust and automated approach to Vendor Risk Management, enhancing the overall security posture of organizations. By integrating various phases and leveraging automation, clients can efficiently identify, prioritize, and review vendors, ultimately reducing risks and ensuring compliance with security standards. The outlined components provide a comprehensive framework for organizations to strengthen their vendor risk management strategies in an increasingly dynamic and interconnected business environment.