The amount of vendors used by businesses each day is staggering. Walmart works with a vast network of more than 100,000 vendors to supply, run, and maintain their enterprise. Even smaller companies turn to outside third-party vendors to meet various needs, including software and technology providers. The more you rely on vendors, the more critical it becomes to establish a vendor security assessment process.
Failing to do so can have your company in the headlines for something other than being a resounding success. In a CyberRisk Alliance Business Intelligence survey, 60% of respondents say they've experienced a cybersecurity incident caused by a third-party vendor misusing their access.
In this guide, we'll break down vendor security assessments: what they are, why they're important, and what types of questions you should include.
Vendor security assessment questionnaires are sent to vendors to determine how much of a security risk your company would assume by doing business with them. It’s likely you already have enough to worry about when it comes to internal security, so you certainly don't want to drag in external security risks as well.
Getting answers to a vendor security assessment helps you identify a supplier’s vulnerabilities that might lead to a potential data breach in your organization. Think about how often you rely on software provided by a third party or exchange information through a shared portal. What happens if ransomware somehow makes its way into your company system?
The more you understand a vendor’s systems and security posture from a vendor security assessment questionnaire, the better your company positions itself to assess the security risk of establishing a business relationship. The last thing you want is for your contract with a software company to lead to customer data theft.
A good offense is the best defense, so organizations must take the initiative by gathering information about third- and fourth-party vendors. That’s right; it’s not just about the companies you contract directly. Your vendors have vendors, and likely have separate connections to handle transactions.
If your vendor contracts with a third-party administrator to handle healthcare benefits, what are they doing to prevent sensitive data from making its way into their systems? If you don’t have adequate protections set up on your end, you could find yourself in hot water with government regulators because you have information in your systems you shouldn’t have.
While this isn't an exhaustive list, here are just a few things that vendor security assessments cover:
Depending on the industry and country you operate in, there are likely mandated compliance standards you are obligated to follow. In the healthcare industry, no one wants to potentially run afoul of the Health Insurance Portability and Accountability Act (HIPAA) because of the severe penalties, including hefty fines and even jail time for criminal violations. And e-commerce companies taking credit card payments from a vendor who supplies SaaS platforms should know that laws around PCI DSS standards come into play.
You’ve also got to think about data privacy and the impacts of the European General Data Protection Regulation (GDPR). That’s just the tip of what you must worry about regarding compliance. It should be much more apparent why you can’t let your guard down when vetting the security ecosystem of a third-party vendor.
Kaspersky’s 2021 IT Security Economics report notes that 32% of large companies dealt with a data attack involving data shared with third-party suppliers. The impacts aren’t always flushed out right away.
Accellion, a file transfer service, suffered a data breach because of vulnerabilities in its file-sharing application. They kept discovering new victims of the data breach throughout 2021, including investment banking firm Morgan Stanley. The company ended up paying $8.1 million in a class-action lawsuit.
The above is an example of why companies need to put vendors through an assessment process to determine if they are high risk: You should understand everything about a business’s security controls before entering into a contract that could prove costly in more ways than one.
A security assessment questionnaire should also ask for information about the people and operational processes at play. What protections does a vendor have to keep them from experiencing downtime and impacting your business? Do they have disaster recovery strategies in place in case of an emergency?
Other operational risks to consider include:
No company operates in a vacuum. Maintaining high business standards while working with an outside supplier depends on your organization’s commitment to the importance of setting up vendor risk management processes.
Risk is inherent in doing business in today’s online world. With so many information systems, software, and other technologies supplied by outside providers, there’s more of an attack surface for potential hackers. Let’s look at how organizations benefit from assessing the security policies of a third-party vendor.
Knowing the risks of onboarding a new vendor helps your security team understand what it would take to deal with potential security issues. If they are too high, you can avoid going into business with a company that might ultimately drag down your organization’s profits and reputation.
Vendor due diligence is the screening performed by your organization before signing a contract. At the end of it, you should have a clear idea of how honest the vendor was in replying to your vendor security assessment. You should receive access to sensitive data to see how the provider’s information security controls operate.
Reporting is an essential element of a vendor security assessment. Reports provide a complete picture of where the vendor stands regarding security. A good report after your vendor review means that your company can feel comfortable moving forward with a partnership.
Don’t leave your vendor risk assessments to chance. Let HyperComply automate your vendor risk management processes in a centralized location. Learn more about how our technology works with an expert demo.