What is Vendor Risk Management (VRM)?
Vendor risk management (VRM) is an area of risk management that deals with identifying and mitigating risks in vendor management. It helps ensure security for both parties by providing visibility on what vendors an organization works with, how they work with each other, and whether or not vendors have sufficient security controls in place. VRM helps address compliance, privacy, and business continuity challenges, which have become more commonplace in the “remote working age,“ where companies have the majority of their employees working from home. The objectives of VRM vary widely depending on several factors, including company size, industry, and applicable laws based on its jurisdiction. As more companies embark on a digital transformation, managing vendor risk becomes of utmost importance to companies in all industries.
Because minimizing business disruption is a main objective of vendor risk management, organizations use it to manage critical tasks and processes that are outsourced to third parties or vendors. It’s vital because disruption within the vendor’s business will lead to disruption in businesses that use said vendor’s services. Despite the risks involved, vendor risk management is still a necessary component of modern businesses. An effective VRM program can reduce an organization’s operational costs by outsourcing specific tasks and taking advantage of vendor expertise that the organization may not have in-house.
Aside from risk management, a proper VRM program helps in evaluating and onboarding new vendors, ensuring that they’re equipped to perform their tasks and achieve set goals. It also helps monitor vendor relationships as they progress, helping determine new risks as they arise and improving vendor performance. A VRM program also helps achieve the following:
- Identifying redundant vendors
- Ensuring compliance with industry requirements and global regulations
- Tracking security controls and risk mitigation efforts
- Data flow and access management
- Offboarding vendors and recordkeeping for compliance