What is vendor risk management, and why should you care?

What is vendor risk management, and why should you care?

Did you know that nearly half of all the data breaches businesses suffer occur at the hands of their vendors? With small businesses having dozens of vendors and large enterprises having hundreds, it’s even more important now for companies to manage the risks across the supply chain.

Indeed, one of the biggest data breaches of all time involved the loss of millions of customer records belonging to US retailer Target. Hackers exploited a vulnerability in Target’s heating, ventilation, and air conditioning (HVAC) supplier, which left the doors wide open for criminals to steal data from up to 40 million credit and debit cards of shoppers.

Even if a data breach in your company is due to vendor negligence, you’ll still be held accountable as far as regulatory compliance is concerned. That’s why it has never been more important to carefully assess and manage risk along the supply chain.

What are vendor risk management solutions?

Vendor risk management solutions give administrators complete visibility into their vendor portfolios and allow them to keep track of where their data lives and who has access to it. Risk management is often included as part of vendor relationship management software, which provides broader oversight of relationships across supply chains and is usually hosted in the cloud to provide centralized access and control. Together, these solutions will help you define and enforce your vendor management policies and, in doing so, reduce risk across the organization.

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Assessing your vendor risk landscape

A vendor is any business or individual who provides a product or service to an organization. These third parties may include manufacturers and suppliers, service providers, and short- or long-term contractors. Notably, the IRS has regulations governing vendor relationships that go beyond a specific timeframe, so even the length of a contract can have a direct influence on risk.

The vendor life cycle spans the entire process from determining needs to ending the relationship. Throughout the process, vendor management solutions serve to establish and uphold the rules of engagement starting with the vendor selection process, and they help define contractual terms. And all the while, companies need to monitor the relationship for performance and risk.

It’s also important to understand who oversees which relationship. Vendor management varies widely depending on the industry and who you’re doing business with. For example, anyone working for the US government needs to comply with the rules laid out by the Federal Acquisition Regulation. Vendors handling physical or digital information on behalf of a healthcare provider must be fully compliant with the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and have a signed business associate agreement with them. Those working with vendors based abroad have to ensure compliance with international trade laws and regulations of the countries with which they do business, such as the General Data Protection Regulation (GDPR) in the European Union.

How choosing the right solution can help

Vendor risk management solutions help streamline compliance by providing templates that pertain to industry-specific regulations, as well as those enforced by various governing bodies around the world. However, ensuring regulatory compliance is only the first step.

It’s also in the interest of your brand reputation and the security of your employees and customers that you make sure to minimize the risk of both internal and external data breaches. Given the global scale at which so many companies, including small businesses, operate today, it’s never been more important to have a dependable and scalable way to manage risk.

The biggest challenges facing vendor risk management include increasingly complex supply networks, unstructured monitoring processes, a lack of clear policy and training, and increased regulatory pressure. These challenges highlight the need for a risk management solution that provides real-time information and insights, and at the same time is hosted in the cloud so that it’s easily scalable.

Our experts at Online Computers help businesses manage risk by providing proactive vendor maintenance and compliance solutions. If you’re in or around Hanover, Morristown, and Madison, and you’re looking for intelligent, hassle-free IT solutions and managed services, contact us today to learn more.

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