How to Perform Vendor Security Assessment? | 6 Steps

Key Takeaway:

‍

• Approximately 62% of network intrusions come from external parties, including vendors. Therefore, it is essential for businesses to evaluate vendor security practices regularly to mitigate cyber threats.
• Vendor security assessments help organizations evaluate risks associated with third-party vendors, ensuring their security measures align with the organization's risk tolerance.
• Effective vendor assessments support business continuity by identifying potential vulnerabilities helping prevent supply chain disruptions and compliance violations.
• Regularly reassessing vendor security and maintaining compliance with regulatory standards (like GDPR and HIPAA) is crucial for vendor-related risk management and a secure environment for sensitive data.

‍

‍

‍

According to Verizon's research, nearly two-thirds (62%) of network intrusions originate from external parties, including vendors. As businesses increasingly rely on these vendors for critical functions, cyber threats can emerge.

‍

Therefore, companies should have a process in place to evaluate the security practices of their vendors to create a secure environment and minimize potential disruptions.

‍

This blog highlights the significance and procedures of conducting a vendor security assessment to assist organizations in the effective management of their vendors.

What is a Vendor Security Assessment?

A vendor security assessment is a systematic process used to evaluate a third-party vendor's capacity to protect sensitive data and minimize risks arising from potential exposure. This process ensures that vendors adhere to necessary regulations and standards and create a secure environment for sharing and exchanging sensitive information.

Importance of Vendor Security Assessment

Recent data shows that 98.3% of organizations globally work with third parties that have experienced a data breach in the past two years. Not understanding a vendor's security situation can leave organizations vulnerable to attacks, resulting in significant financial losses.

‍

Here are the key reasons why organizations need to prioritize vendor security assessments:

‍

Helps Evaluate Risks and Decide Risk Appetite

‍

Every organization has a risk appetite, which reflects its tolerance for different types of risks. Therefore, a vendor's risk profile should match this appetite. Vendor risk assessment gives a clear picture of the risks involved, including compliance, financial, operational, and data security risks. It helps organizations understand how likely these risks are and their potential impact.

‍

Better Vendor Selection Process

‍

When you share your information assets, consider several factors such as the security measures they have in place, their security practices, their compliance with laws, and their financial stability.

‍

‍

Better Defense for Business Continuity

‍

Vendor due diligence is essential for effective business continuity management (BCM). Organizations want to avoid lawsuits and supply chain disruptions that can arise if a third party fails to meet requirements.

‍

Vendor assessments help organizations understand a vendor’s security abilities, allowing them to fit these into their overall security measures.

‍

Supports Compliance Reporting Efforts

‍

Vendor security assessments are necessary for regulatory frameworks such as GDPR and HIPAA. Although these assessments may not be required in all cases, having them shows that an organization is taking steps to manage vendor risks and meet compliance standards. It's a good idea to include these reports in compliance reporting to provide a clear and transparent view of the organization's efforts.

How to Perform Vendor Security Assessment?

Vendor security assessments involve vendor evaluation by:

‍

• Assessing their risks
• examining their security practices
• Creating strategies to address risks
• Regularly reviewing improvements

‍

These assessments occur at every stage of the vendor relationship, from before contracts are signed to onboarding, ongoing partnerships, and offboarding. Each stage presents unique risks that need to be managed appropriately.

‍

Below is a step-by-step guide to assist you in conducting vendor security assessments:

‍

Define Security Assessment Criteria

‍

The assessment criteria provide the basis and guidance for the evaluation process. They outline the compliance requirements against which the vendor will be measured and identify the elements included in the assessment. 

‍

Items within the assessment scope include the vendor's risk management practices, security controls, incident management plans, business continuity plans, and technical capabilities.

‍

Identify High and Low-Risk Vendors

‍

The next step is to create a list of all your vendors, including the types and levels of services they provide. This inventory will help you classify vendors as high, medium, or low risk. To identify the most critical vendors, consider these questions:

‍

• Which vendor has the greatest access to sensitive information?
• Which vendor's loss would most impact my business operations?
• Is my vendor compliant with relevant regulations and standards?
• How developed is the vendor's security infrastructure?

‍

Your primary attention should be on the high-risk vendors, but organizing this information can also be shared with auditors to show that due diligence was conducted.

‍

‍

Assessment Methodology

‍

A reliable method for understanding the nature, impact, and likelihood of risks includes using a combination of these approaches:

‍

Evidence from Vendor: This approach depends on the documents provided by the vendor, such as security policies, incident response plans, and certifications like SOC 2 and ISO 27001. It also includes answers to vendor security questionnaires that offer additional insights.

‍

Security Ratings: Security ratings are determined using data collected from various sources, such as public information and threat intelligence feeds, and are analyzed with algorithms and other methods. 

‍

Relying only on vendor documentation and security questionnaires can be risky, as they may provide limited insight, potentially biased self-assessments, and only capture a moment. Security ratings are an effective way to assess a vendor's security posture accurately.

‍

Third-Party Evidence: This approach includes reviewing publicly available information and independent audits or assessments to confirm the vendor's security position further.

‍

Evaluate Risks and Define Tolerance Levels

‍

Once you have collected the assessment data, improve your analysis with these steps to enhance clarity and support informed decision-making:

‍

1. Identify the risks: Operational, data security, and financial.

2. Use a risk matrix for better understanding: Risk = Likelihood X Impact.

3. Evaluate the severity levels (on a scale from 1 to 10, a score above 6 indicates high risk).

4. Define acceptable residual risk: This refers to the risk levels an organization is prepared to accept after putting mitigation plans in place, as the benefits are considered greater than the costs.

‍

The risk matrix is an effective way to analyze the likelihood and impact of various risks visually.

‍

Develop Risk Mitigation Plans

‍

You can consider two options based on the vendor risk profiles and acceptable residual risk scores.

‍

Firstly, if a vendor exceeds the acceptable residual risk score, the partnership may need to be terminated and alternative vendors sought.

‍

Alternatively, if a vendor falls within the acceptable risk range, you should develop a tactical mitigation plan to address the identified risks. This plan should outline specific actions to mitigate risks, such as:

‍

• Enabling multi-factor authentication (MFA)
• Implementing backup mechanisms
• Using encryption measures
• Other relevant risk mitigation strategies

‍

This plan will form the basis of ongoing communication with the vendor to ensure the risks are effectively managed.

‍

Monitor and Reassess Periodically

‍

Residual risk scores change over time due to the complex and interconnected nature of the business environment. Similarly, a vendor’s stability and viability can also fluctuate. Therefore, it is essential to monitor mitigation plans' progress regularly and determine if any adjustments in security practices are necessary. 

Vendor Security Assessments with ioSENTRIX

While vendor security assessment is a key part of risk management, it can be complex and time-consuming. It can be overwhelming to keep track of vendors, understand what data they access, and maintain records of due diligence reports.

‍

ioSENTRIX aims to simplify this process, making it easier to manage vendor security effectively. Contact our experts today to improve the efficiency of your vendor management and ensure it aligns with security compliance.

‍