Your business needs a vendor management policy. Here’s how to create one.

What is a vendor management policy and why does your company need one?

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As your business works to ensure that it is effectively securing sensitive data and information, putting in place a vendor management policy is a key part of building a holistic compliance risk management strategy. It is a best practice for any organization working with sensitive data and customers’ personally identifiable information (PII) to develop a policy to review all vendors — every third-party, contractor, or associate with whom you do business — and to establish requirements for the level of information security that vendors should maintain.

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Vendor management and the path to compliance

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Building a vendor management policy will also help bring your company into regulatory compliance. As companies of all types outsource services to third and fourth parties and beyond — and as data breaches have become unfortunately common — regulators have expanded security and data management requirements in various sectors to ensure that companies are effectively and proactively managing supply chain risks. A vendor management policy is often a key component of demonstrating your company’s compliance with today’s regulations.

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Consider your security posture inside and out

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How does vendor management figure into your company’s overall cybersecurity? Your company may think first of cybersecurity as an internal matter — and your internal security posture is of key importance. But when your organization engages a wider network of vendors and partners in the delivery of services that access or manage sensitive customer data, the security of those external vendors — and the risk associated with their data and network access — become just as important as how you handle security internally.

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Policy begins with a cross-company team

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Where should your company begin to create a vendor management policy? Start by assembling a team with representatives from across your company. You will want to ensure that your vendor management team is populated by members from different departments, bringing different perspectives on your business. Your decision-makers should be represented, as should your IT security department, someone from your procurement team, a lawyer, and someone from your business unit. You may consider other team members as needed, depending on your particular business model. Your vendor management team will be tasked with building a comprehensive list of all the third-party vendors, contractors, partners, and associates with whom you work.