What is Vendor Risk Management and Why is it Important?

Big and small companies rely on third-party vendors to perform legal, HR and payroll, marketing, and logistics services. Any vendor connected to your network and company and client data is a potential risk. From data breaches to reputational risks, third-party vendors can inflict significant damages.  

Vendors can be grouped into the following categories.

Services Providers offer various goods and services to their partners, including financial, cleaning, components, and logistics. Industry Specialized vendors provide highly specific services. For example, drone manufacturers need a very different list of vendors than food or retail companies may need. Geography-Based vendors typically assist companies in gaining a foothold or outsourcing functions overseas where language, cultural, and political factors need to be considered. Cost Savings vendors fulfill the essential business tasks and processes cheaper than in-house.

Large corporations can have tens of thousands of vendors. That number could range from the dozens or hundreds for small and medium-sized businesses.

What Exactly is Vendor Risk Management?

Vendor Risk Management (VRM) is the practice of evaluating vendors for potential risks that an organization faces before establishing a contract. No matter how much vendors can help a company gain success, they can also be a risk.

For this reason, companies need to have a modern, straightforward, and rock-solid method for VRM — also referred to as Third-Party Risk Management (TPRM) — to manage and remediate the risks associated with third-party products and services before they create problems. 

Managing multiple vendors can quickly become a tangled web. As

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