Vendor Risk Management (VRM): How to Establish Trust
Many organizations, small to large, have outsourced IT and other vital business functions to third-party vendors. Outsourcing various functions to third-party vendors allows organizations to focus on core functions and areas of expertise, while reducing business costs and maximizing profits and operational efficiencies. While there are many benefits to utilizing third-party vendors, it is also important to consider the risks. The cost of maximized profits and efficiencies is access to information, with third parties requiring access to sensitive company data. Considering the state of each vendor’s cybersecurity is crucial so that the benefits do not create a vulnerability to the principal organization. But how can trust be established when your company’s reputation is on the line?
It is important to ensure all cybersecurity measures practiced by vendors match the caliber of the principal organization’s own practices. When IT is outsourced to a third-party, it can be difficult to determine if the IT vendor is appropriately keeping up with security patches, outdated hardware, vulnerabilities, and more. Managing IT is more than responding to issues of broken computers experienced by end users. IT ensures that devices are patched and anti-viruses are functioning properly. IT also alerts owners and leadership to old servers and workstations. Essentially, effective IT must also support and enhance security.
Vendor Risk Management Best Practices
How can you reap the benefits of outsourcing IT and ensure the vendor does not pose a vulnerability? The best practice would be to have a security team or security advisor who can validate how secure the vendor organization is. This could be another third-party or an in-house team or position. Another beneficial practice is standardizing the principal organization’s protocol for vendor vetting. Unfortunately, in today’s cybersecurity environment accepting a vendor’s self-attestation of security is not enough, making the vetting of vendors necessary. Vendors need to be on high-alert and aware that a breach can occur at any second. They should be utilizing preventative measures and detections, and closely following protocols to ensure that a breach does not happen. By having a security team or advisor validate vendors and strengthening vendor vetting protocols, organizations can experience the benefits of outsourcing IT without increased risk.
How to standardize vendor vetting:
Verify Vendor Performance
Ensure the vendor complies with the relevant industry standards (e.g., HIPAA, PCI-DSS, NIST, ISO 27001) by asking for evidence of certifications, recent audit results, or other relevant validations. This establishes a baseline of operational maturity and ensures that the vendor meets the minimum technical and procedural thresholds to handle your data responsibly.
Obtain Vendor Information Security Policies
Reviewing a vendor’s information security policies provides insight into how they manage key areas such as data protection and encryption, access control and user authentication, vulnerability management, incident response protocols and more. This establishes that the vendor aligns with security best practices, maintains up-to-date documentation, and enforces those policies internally.
Conduct Third-Party Audits
Where possible, obtain copies of independent third-party assessments or certified audits. This could include SOC2 reports, ISO 27001 certification audits, external penetration testing results, or results from other risk assessments. These evaluations provide visibility into the vendor’s security posture and whether remediation plans are in place for any known issues.
Verify Vendor Continuity and Disaster Recovery Plans
This ensures that the vendor has a plan of action and can respond in a timely manner should a security incident arise, as third-party downtime, data loss, or uncoordinated incident response can directly impact your operations.
Review Existing or Upcoming Vendor Confidentiality Agreements
Confidentiality agreements (NDAs) help establish legal boundaries around data sharing and usage. Reviewing current agreements—or drafting them if they don’t exist—ensures that sensitive data is protected and there’s legal recourse if mishandled. For vendors already under contract, reassess whether existing NDAs still align with current risk levels and data exposure.
Examine Past or Upcoming Mergers and Acquisitions
Changes in ownership or structure can significantly impact vendors’ security posture. If a vendor is being acquired or merging with another entity, it’s crucial to understand how that affects data protection, access permissions, and operational controls. Even a vendor you trust today may introduce new risks tomorrow under different leadership or policies.
Note Inherent Vendor Risks
Consider the vendor’s broader operational environment. Do they rely on legacy systems? Are they resource-constrained? Have they experienced frequent service outages? These factors can signal underlying weaknesses that may impact their ability to respond to and recover from a security incident.
Vendor Management Ensures Business Success
The era of simple vendor risk management has passed. Today, organizations are increasingly intertwined with a growing number of third-party vendors, who require more access to the primary organization’s data assets and are also working with their own third-parties. This has multiplied the size and complexity of third-party networks, changing the scope and complexity of vendor risk management with it. Security teams and advisors are great resources available to check and mentor both principal organizations and vendors on missed vulnerabilities and other areas of security concern. Security is now a foundation of all organizations and vendors must view it as a major concern, for the success and longevity of themselves and their partners.