Vendor Risk Management

Vendor Risk Management (VRM) addresses the reality that modern organizations rely on extensive networks of third-party vendors — cloud providers, SaaS platforms, managed service providers, consultants, and sub-contractors — each of which introduces potential security and compliance risks. A VRM program provides a structured approach to identifying these risks and managing them through vendor due diligence before engagement, contractual protections, ongoing monitoring during the relationship, and orderly offboarding at its conclusion. The goal is to ensure that third-party relationships do not undermine the organization's own security posture or compliance obligations.

VRM is addressed by multiple compliance frameworks. ISO 27001 Annex A controls A.5.19 through A.5.23 comprehensively address supplier relationships, covering information security policy for supplier relationships, addressing security within supplier agreements, managing the ICT supply chain, monitoring and reviewing supplier services, and managing changes to supplier services. SOC 2 evaluates vendor management as part of the organization's overall risk management program, with particular attention to how sub-service organizations are monitored. GDPR Articles 28 and 29 impose specific requirements on the relationship between controllers and processors, including written agreements, security guarantees, and sub-processor management. NIS2 explicitly identifies supply chain security as a required cybersecurity risk management measure.

A mature VRM program operates across the vendor lifecycle. During vendor selection, organizations assess the vendor's security posture through questionnaires (such as SIG or CAIQ), review their compliance certifications (ISO 27001, SOC 2 reports), evaluate their security architecture, and assess their financial stability. Contractual agreements should include security requirements, data processing terms, incident notification obligations, audit rights, and termination provisions. During the active relationship, organizations monitor vendor compliance through periodic reassessments, review audit reports, track security incidents, and evaluate service performance. At relationship end, organizations ensure secure data return or destruction, access deprovisioning, and orderly transition. Organizations should maintain a vendor inventory with risk classifications and calibrate the depth of assessment to the risk level each vendor represents.