8 Best practices for vendor management
August 24, 2020

8 Best practices for vendor management

As your business grows, you may outsource more and more work to vendors. With the rise of SaaS, outsourcing is a regular part of doing business today. By that same token, the companies where you outsource elements of your business may be outsourcing work themselves. Outsourcing work also means outsourcing access to data: as you engage more vendors, it becomes evermore important to monitor where and with whom your company’s data is being stored, and how your vendors are managing their security. In this post we’ll walk you through 8 vendor management best practices for maintaining security and protecting data.

Stay secure with these vendor management best practices 

As companies engage wider and more complex networks to deliver services — and subsequently extend wider access to relevant customer and internal data — cybersecurity becomes increasingly important. This list of best practices will help your company ensure that as you outsource work, you’re staying in touch with where your data resides and how it’s being protected. At the end of the day, the security of your customers’ data is your responsibility, no matter where it travels. 

  1. Clearly understand the landscape of your company’s current vendor relationships

Gather basic information about how your company currently handles vendor relationships: How does your company manage vendor contracts and their life cycles? Where is vendor relations data stored? How are vendor relationships currently being quantified, tracked, and measured? At what level is your company allocating resources to each of your vendors? Which vendors are most essential to your business? Gathering this information is a good start to building a vendor management policy if your business doesn’t yet have one

  1. Assess each vendor individually

Your company may utilize a range of vendors providing services to keep your business moving and growing. You’ll want to build a comprehensive list of all the vendors, contractors, and partners with whom you work, then review and assess these vendors individually. Your company should pay particular attention to those vendors who have access to sensitive data, and those who have access to your company’s network. In addition to categorizing vendors in this way, it is also important to assess each individual vendor based on the risk posed by their supply chain — the vendors with whom they are working.

  1. Understand any and all vendors your vendors are using

It is essential to understand not only how your vendors manage security, but how your vendors’ vendors — and their vendors! — are managing data and information security. Your company is ultimately responsible to your customers, clients, and users for the security of their data; extending data access to third- and fourth-party clients is a clear business convenience, but these access paths must be closely monitored in order to ensure that customer data is as safe with your vendors as it is with you.

  1. Define clear security standards and metrics for all vendors

Establish vendor key performance indicators (KPIs). Building and agreeing upon a system of concrete measurements will help your vendors operate from benchmarks, understand your expectations, and have the opportunity to make improvements.

  1. Detail security agreements in your vendor contracts

When you take on new vendor relationships, your vendor’s supply chain becomes a part of your supply chain. Your vendor contracts should define your risk tolerance in this regard. Agreeing upon security performance indicators with your vendors and working these agreements into your contracts gives your company recourse should your vendors not meet expectations. Your vendor contracts should also describe notification protocols in the event of a breach.

  1. Vet your vendors up front and on an annual basis

Establishing regular rhythms for vendor reviews at the start of your business partnership and going forward will help ensure that all parties are clear on expectations. Regular reviews create the opportunity to quantify and assess how your vendors’ services are meeting those expectations. Your goal is to ensure that vendors are protecting your data — and that you are maintaining relationships with those vendors who demonstrate that they are meeting agreed-upon security standards over time.

  1. Establish risk management and mitigation strategies before risks escalate to problems

Your business faces unique and variable risks based on the industry in which you operate. You will want to shape a risk management strategy that considers possible scenarios that your business may confront with its particular vendors and service providers. Articulating how problem scenarios might unfold and working backward from those risk situations will help you build better metrics into your vendor management and review processes. 

  1. Prioritize communication and collaboration

Building a positive working relationship and establishing clear and open lines of communication with your vendors will position you to gain the clearest picture of how your vendors work, to develop a shared understanding and approach regarding security best practices, and to remedy any issues or blind spots before they escalate into larger problems like data breaches.

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Determine Your PCI Compliance Level

If your organization processes, stores, or transmits cardholder data, you must comply with the Payment Card Industry Data Security Standard (PCI DSS), a global mandate created by major credit card companies. Compliance is mandatory for any business that accepts credit card payments.

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