Vendor risk management (VRM) is a comprehensive plan for identifying and decreasing potential business uncertainties and legal liabilities regarding the hiring of 3rd party vendors for information technology (IT) products and services.
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When an enterprise outsources business processes to an external vendor, sensitive data may be transmitted, stored and processed on both company and vendor networks. Regulations such as the Sarbanes-Oxley Act (SOX), Payment Card Industry Data Security Standard (PCI DSS) and the Health Information Portability and Accountability Act (HIPAA) mandate that risk management policies extend to third-party vendors, outsourcers, contractors and consultants.
A solid vendor risk management strategy should include:
- A contract outlining the business relationship between the organization and the business.
- Consistent monitoring of vendor performance to ensure that contract stipulations are being met.
- Guidelines regarding who will have access to what information as part of the vendor agreement.
- Stipulations to ensure that vendors meet regulatory compliance guidelines for your industry, and a method to monitor this compliance.