What is Vendor Risk Assessment – Download Checklist

December 19, 2023. Comcast, a U.S. telecom giant acknowledged that the data of 36 million Xfinity customers had been stolen because of a third-party breach. The third-party supplied security patches in October, but not all customers applied them. 

Unaddressed third-party risks are often the loose ends that threat actors focus on to infiltrate organizations. Continuous vendor risk assessment and the implementation of corrective actions are, therefore, vital to sealing vendor vulnerability gaps.

A Gartner study states that 60% of organizations work with over 1000 third parties and will only expand in the future. Given the soaring numbers, organizations that haven’t considered maintaining a solid vendor risk management solution will need to shift to an iterative approach.

A vendor risk assessment checklist (VRA checklist) comes handy here and ensures meticulous vendor assessments to minimize the risk of data breaches, compliance issues and service disruptions. This blog has a 55-question VRA checklist that you can use to lay the foundation of an effective third-party risk management program.

What is vendor risk assessment?

A vendor risk assessment is the identification and evaluation of potential risks associated with third-party vendors. The types of risks analyzed in the risk assessment include cybersecurity threats, financial stability, security practices etc.

A vendor risk assessment checklist is a structured form or list or questionnaire that is designed to assess the risks associated with vendor relationships to minimize security threats and third-party breaches.

How is the vendor risk assessment different from vendor due diligence?

Vendor risk assessment and vendor due diligence are interconnected concepts that aim to evaluate whether the vendor’s services are secure and reliable to support broader business objectives. Larger organizations usually include both assessments in their vendor risk management program. However, the assessments differ in scope, purpose and level of detail.

A vendor due diligence is conducted before the risk assessment process to evaluate the vendor from a broader perspective. It covers areas such as financial evaluation, regulatory compliance, vendor reputation, references etc. This information works as a preliminary screening for the vendor and is used to perform a further and detailed risk assessment.

Vendor risk assessment dives deeper to identify the level of risk associated with financial, security, legal areas etc. For low-risk vendors, often the due diligence is skipped and the vendor assessment process can be directly performed. Additionally, vendor risk assessments can be an ongoing practice throughout the lifecycle of a vendor.

How to conduct a vendor risk assessment?

Several regulations mandate vendor risk assessments to minimize risks related to third-party breaches. Vendors often have access to an organization’s sensitive data that can be an easy target for the attackers. You must therefore identify all your critical vendors and perform regular assessments to ensure a secure environment.

Here are 7 steps to conduct a vendor risk assessment:

Define objectives and assessment criteria

Define the purpose of the assessment and the types of risks that you aim to identify through this assessment, such as strategic, compliance, technical, operational risks, etc. Next, outline the depth of the assessment whether it is basic security checks or a deep dive into vendor’s security practices.

Catalog vendors

Create a catalogue listing of your vendors and identify the critical ones. The classification is based on the type of services they extend, the type of data they access, the impact on business functions and other related criteria. It is crucial to keep updating this list for future vendor assessments.

Gather necessary information

Gather the required information to perform the third-party risk assessment. Various methods for this step will include:

• Vendor questionnaires: The questionnaire is a self-assessment where the vendor answers objective-type questions about procedures, compliance certification, security practices etc.
• Documentation and evidence: These are relevant documents and evidence pieces such as certifications, financial reports, business continuity plans, disaster recovery plans etc.
• On-site visits: On-site visits help understand vendor security practices and the overall organizational culture.
• Engage in a conversation: Such discussions help understand the overall operations, implemented controls, management review practices, etc. and the vendor’s way of dealing with clients.

Also check: Best vendor risk management tools in 2024

Risk scoring and analysis

Use the gathered information to identify and score risks. The vendors are usually scored as high, medium, or low risk depending on the criticality of information and business impact. You can additionally use a risk matrix to understand the severity of risks. It will help you discover high-impact vendors that must be prioritized. Additionally, analyze the residual risk scores that will remain after you apply mitigation strategies.

Documentation

Create detailed documentation and reports of the vendor risk analysis, including the questionnaire, evidence pieces submitted, and risk analysis report. The management will then take a call on going ahead with the vendor or ask the partnerships team to look for other alternatives. Vendor selection is largely influenced by residual risk scores and the organization’s overall risk tolerance.

Mitigation plan

The next step is to create a mitigation plan consisting of vendor risk response strategies. Low-severity risks are usually deprioritized or accepted. For other risks, you can engage in a dialogue with the vendor to implement any additional security measures or compensating controls to minimize cyber incidents.

Ongoing monitoring

Monitor the vendor throughout the relationship cycle to ensure the effectiveness of previously implemented security measures and identify any new risks. Regular risk reviews are crucial to make necessary policy changes and minimize third-party data breaches.

Vendor Risk Assessment Checklist for 2024

A handy vendor risk assessment checklist provides a structured way to evaluate the vendor on various grounds and covers a range of risk dimensions. It typically includes inquiries for financial health, cybersecurity practices, infrastructure, performance, and other key areas. It would help if you however tailored the vendor risk assessment questionnaire to specific business requirements and business objectives.

Here are 55 questions to include in your Vendor Risk Assessment Checklist for 2024:

Vendor information and References

The section includes basic details about the vendor and reference checks to ensure the vendor’s credibility.

• Basic vendor information such as name, location, point of contact etc.
• Vendor product/service description
• Names and contact information of the references

Governance and organizational structure

Governance and organizational structure questions help you understand accountability and responsibility and communication channels. The information is crucial to establish an effective collaboration.

• Do you have a Chief Information Security Officer?
• Who is responsible for the organization’s cybersecurity?
• Do you have a dedicated risk management committee?
• What is the minimum and maximum experience of the security staff appointed?
• Are any of your IT functions outsourced?
• How frequently do you arrange for security team training?

Financial health

Financial health information ensures the vendor has enough stability to meet contractual obligations.

• Can you share a copy of the audited financial statement for the previous assessment year?
• What portion of the budget is allocated to cybersecurity?
• Do you have insurance cover to deal with costs associated to an incident?
• How would you describe your organization’s overall financial health?

Information Security practices

Questions about vendor’s information security practices provide clarity on the overall security posture and their commitment to resilience.

• Do you have a formalized information security policy in place?
• How often are risk assessments conducted?
• Is sensitive information classified? What controls are in place to protect it?
• How often are vulnerability scans and penetration tests performed? Can you share the previous report?
• How do you ensure secure configurations?
• Do you have removable media policies in place?
• How do you assess third-party vendor risks?
• What authentication and authorization measures are in place?
• Describe access control measures in place
• How often are internal audits conducted?
• Do you have business continuity and disaster recovery plans in place?

Security Infrastructure

Security infrastructure questions help you gain insights on the deployment of appropriate technology to protect your data and systems.

• What type of firewalls are installed?
• Do you have endpoint detection systems deployed?
• What is the frequency of security patch updates?
• Are security events logged?
• Do you employ encryption methods as per industry standards?
• Do you have anyone to test infrastructure security?

Performance

Performance-related questions give you a sense of the reliability of vendor services which is necessary to ensure a long-term association.

• What is the percentage of on-time delivery consistency?
• What Service Level Agreements (SLAs) are in place?
• What is your average response time for requests raised?
• How do you ensure downtime minimization?

Cloud Configurations

Clarity on cloud configuration management is essential to minimize cloud security risks and protect critical data.

• Are cloud configurations regularly reviewed?
• Do you have encryption measures for data at rest and in motion across the cloud environment?
• Are there appropriate access control mechanisms in place for cloud resources?
• Are there network segmentation measures in places within the cloud environment?
• Describe data backup procedures for cloud-hosted assets

Physical Security

Physical security inquiries are a key component of overall risk management and help mitigate risks related to unauthorized access.

• Do you have physical security measures in place to protect critical assets?
• Are you situated in the vicinity of any sensitive facilities such as chemical plants?

Compliance 

Vendor compliance is essential to ensure the security of operations as well as to minimize compliance-related risks.

• Are you SOC 2 compliant?
• Are you ISO 27001 certified?
• What other regulatory requirements are you subject to?
• Do you have any history of lawsuits? Can we proceed with criminal and background checks?

Incident response

Incident response questions give you a fair idea of an organization’s capabilities to handle security events and overall preparedness.

• Do you have any tools and technologies in place to detect security incidents?
• When was the last time you experienced a security incident?
• Have you ever had a severe incident with a significant impact on business operations?
• Do you have an incident response plan in place?
• How frequently is the incident response reviewed and updated?
• Do you arrange for tabletop exercises to train the staff for a cybersecurity incident?
• What is the reporting process to communicate about security incidents?

Asset management practices

Questions related to asset management practices help understand how vendors safeguard crucial assets to minimize security risks proactively. 

• Do you maintain a detailed inventory of all information assets to be used under the contractual obligation?
• How frequently is asset inventory updated?
• Is there a formalized process for asset disposal?

How Sprinto enables vendor risk assessment?

Sprinto is a compliance automation platform that helps you get compliant across 15+ security frameworks. Vendor risk assessment is a crucial aspect of minimizing compliance violations and Sprinto facilitates third-party management within the platform.

Here’s how Sprinto enables vendor risk assessment:

• Add vendors manually from the library or use auto-discovery to find vendors from Google Workspace. The platform will automatically create a vendor catalogue based on this.
• Go to the vendor section in the security hub and click on start vendor risk assessment. Use a standardized nomenclature to name the assessment.
• Sprinto has an in-built list of data types that vendors usually have access to. Once you select the data type, the platform automatically suggests if it’s a high, medium or low-risk vendor.
• For high-risk vendors, it is mandatory to attach a due diligence report on Sprinto. You can centrally manage them with the tool.
• You can also mark a vendor as not-in-scope if you wish to exempt the vendor from the assessment
• Click on finish risk assessment once you are done. You can set up an automated workflow for periodic vendor risk assessments.

You can also expand the scope of your compliance program with other capabilities of Sprinto such as in-built policy templates, training modules, integrated risk management, 100+ integrations with cloud services, automated evidence collection and more. As opposed to traditional methods, Sprinto helps you reach the certification stage in weeks and achieve a state of continuous compliance.

FAQs

How does the vendor risk assessment checklist help minimize risk?

A vendor risk assessment gives you a bird’s eye view of the vendor’s security maturity. It is a systematic approach to identify operational challenges, financial stability, and cybersecurity risks and plan mitigation measures accordingly.

When and how frequently should vendor risk assessments be carried out?

Conduct a vendor risk assessment before onboarding the vendor. Next, conduct monthly, quarterly or annual vendor risk assessments depending on the criticality of services and the organization’s size. Vendor risks must be assessed throughout the vendor lifecycle.

How can we monitor vendor performance?

You can monitor vendor performance by establishing KPIs such as percentage of on-time deliveries, time taken to resolve issues, incident response time, SLA adherence etc. Next you can engage in regular dialogue and feedback sessions.