Every third-party vendor introduces potential risk—from data breaches to compliance failures. That’s why vendor risk assessment is critical to protecting your business.
In this article, we’ll explain what a vendor risk assessment is, why it matters, and how tools like Splashtop can help you manage vendor risks in real time.
What is a Vendor Risk Assessment (VRA)?
Vendor Risk Management is the process of identifying, assessing, and managing the potential risks that third-party vendors may pose to an organization. These risks can affect everything from data security to regulatory compliance and overall business continuity.
A Vendor Risk Assessment (VRA) is a critical part of this process. It involves evaluating a vendor’s practices, systems, and security controls to determine the level of risk they may bring to your organization. A thorough risk assessment for vendor management helps organizations decide which vendors are trustworthy and what safeguards should be in place before or during a partnership.
Why is Vendor Risk Assessment Important?
Vendors often have access to sensitive data, systems, or infrastructure, making them a potential entry point for security threats, data breaches, or compliance violations. That’s why performing a vendor management risk assessment is crucial.
Conducting a vendor risk assessment helps organizations proactively identify vulnerabilities in vendor relationships before issues arise. By assessing risks early, businesses can improve compliance with industry regulations, safeguard confidential information, and avoid costly disruptions. Additionally, it reinforces trust with customers and stakeholders by showing that security and due diligence are a priority.
Without proper risk assessment for vendor management, companies may unknowingly work with vendors that pose hidden threats—whether due to weak cybersecurity measures, legal liabilities, or unstable financial standing. VRAs ensure that every vendor is evaluated through a consistent, structured lens, minimizing surprises and strengthening overall risk management strategies.
Types of Vendor-Related Risks
Vendor-related risks come in several forms, and each can impact your organization in different ways. Below are some of the most common types of risks to consider during a vendor risk assessment:
Cybersecurity Risks: If a vendor doesn’t have strong data protection practices, they could be vulnerable to cyberattacks. For example, a compromised vendor system could be exploited to access your organization’s sensitive data.
Compliance Risks: Vendors that don’t follow relevant laws or industry standards—like
GDPR or HIPAA—can put your organization at risk of fines or legal consequences. For example, if a vendor handles customer data without proper consent, your company could be held responsible.
Financial Risks: A financially unstable vendor might suddenly go out of business or fail to deliver services. This could lead to unexpected disruptions or increased costs.
Reputational Risks: Poor vendor behavior—such as unethical business practices or data breaches—can reflect poorly on your brand, especially if customers or the public associate your business with that vendor.
Understanding these risks through a structured vendor risk assessment process enables organizations to make informed decisions and apply risk mitigation strategies before engaging with third parties.
Key Steps in Conducting a Comprehensive Vendor Risk Assessment
A well-structured vendor risk assessment is essential for maintaining control over your third-party relationships. Whether you’re working with IT service providers, software vendors, or outsourced support teams, following a clear and repeatable process can help ensure you identify potential issues before they impact your business.
Here are the key steps involved in a thorough vendor management risk assessment:
1. Identify and Categorize Vendors
Start by creating a list of all vendors your organization works with. Categorize them based on their level of access to your systems, data, or operations. For example, a cloud storage provider likely carries higher risk than an office supply vendor. This step helps prioritize where to focus your assessment efforts.
2. Determine the Scope of the Assessment
Not all vendors require the same level of scrutiny. Tailor your assessment approach based on each vendor’s risk level. For higher-risk vendors, a more detailed analysis will be needed. Consider the services they provide, their access to sensitive information, and any past performance issues.
3. Collect Vendor Information
Gather essential documentation and insights from vendors, such as security policies, compliance certifications (e.g., SOC 2, ISO 27001), incident response plans, and business continuity strategies. This step can be streamlined using vendor risk assessment tools, which help standardize data collection and speed up the evaluation process.
4. Assess Risks and Rate Vendors
Analyze the vendor’s information to identify potential risks—cybersecurity vulnerabilities, non-compliance with regulations, financial instability, or reputational red flags. Many organizations use scoring systems or risk matrices to rate each vendor consistently. The goal is to determine how likely a risk is and what its potential impact might be.
5. Develop and Apply Risk Mitigation Strategies
Once risks are identified, create strategies to manage or reduce them. This might include adding contract clauses, requiring specific security controls, or scheduling regular audits. Risk mitigation is not about eliminating all risks but making them manageable within your company’s risk tolerance.
6. Document Findings and Decisions
Maintain clear records of all risk assessments, vendor evaluations, and decisions. This helps demonstrate due diligence and supports internal reviews or compliance audits. Good documentation is especially important when using risk assessment for vendor management in regulated industries.
7. Monitor Vendors Continuously
Vendor risk assessment isn’t a one-time task. Regularly review and update assessments as vendor relationships evolve or new risks emerge. Ongoing monitoring can be supported by vendor risk assessment tools and Remote Monitoring and Management (RMM) solutions to ensure real-time oversight.
Top 5 Major Challenges in Vendor Risk Assessment
While vendor risk assessments are essential for protecting your organization, they’re not always easy to execute. Many companies—especially those managing multiple vendors—face a range of challenges that can make the process time-consuming, inconsistent, or incomplete.
Here are five of the most common hurdles organizations encounter when conducting vendor management risk assessments:
1. Incomplete or Inconsistent Data Collection
Gathering accurate and complete information from vendors is often one of the biggest obstacles. Some vendors may hesitate to share sensitive documentation, while others might provide incomplete or outdated data. Without consistent inputs, it's difficult to assess risks fairly or draw accurate conclusions.
2. Lack of Standardized Evaluation Criteria
Many organizations struggle with evaluating vendors consistently, especially when different departments or teams are involved. Without a standardized process or scoring framework, vendor risk assessments can vary widely, making it harder to compare results or identify high-risk relationships.
3. Managing a Large and Diverse Vendor Base
As companies grow, so does their vendor list. Managing dozens—or even hundreds—of vendors across different categories and risk levels can become overwhelming. Smaller IT teams may lack the resources or tools needed to stay on top of assessments for every third-party relationship.
4. Keeping Assessments Up to Date
Vendor risk is not static. A vendor that was low-risk last year might now be using outdated security practices or facing financial issues. However, many organizations conduct vendor risk assessments only once—often during onboarding—and fail to revisit them regularly, leaving the door open for emerging risks to go unnoticed.
5. Limited Use of Automation or Risk Assessment Tools
Without the help of vendor risk assessment tools, the process often relies heavily on manual tracking, emails, and spreadsheets. This not only slows things down but increases the chance of human error. Lack of automation also makes it harder to maintain real-time visibility into vendor risks.
Recognizing these challenges is the first step in overcoming them. In the next section, we’ll outline best practices organizations can adopt to strengthen their vendor risk management strategies and stay ahead of potential issues.
Best Practices for Managing Vendor Risks: An Essential Checklist
Effectively managing vendor risks requires more than just a one-time assessment. It involves ongoing communication, monitoring, and continuous improvement. Below is a practical checklist of best practices organizations should follow to build a strong and resilient vendor risk management process.
Establish clear vendor selection criteria |
Define risk-based guidelines based on the services each vendor provides and the level of access they will have to your systems or data. Prioritize vendors who align with your organization’s security, compliance, and ethical standards.
Perform thorough vendor risk assessments
Each vendor should be evaluated using a standardized framework that considers cybersecurity measures, financial stability, regulatory compliance, and past performance. This ensures consistency and transparency in how vendor risks are measured.
Utilize vendor risk assessment tools
Automated tools can streamline the evaluation process, reduce human error, and centralize documentation. They also make it easier to update assessments and maintain an audit trail.
Maintain open and transparent communication
Set expectations early and encourage clear, ongoing communication with your vendors. This includes reporting procedures for incidents, updates to policies, or compliance status.
Establish comprehensive vendor contracts
Include key clauses in vendor agreements, such as data protection requirements, service-level expectations, audit rights, and termination terms if risk thresholds are exceeded.
Conduct ongoing monitoring and periodic reassessments
Vendor risk is not static. Schedule regular reassessments and use real-time monitoring tools to stay updated on vendor performance and any emerging threats.
Develop a structured vendor offboarding process
When a vendor relationship ends, ensure access is revoked, data is recovered or deleted appropriately, and any potential security gaps are closed.
Train internal teams on vendor risk awareness
Educate relevant departments—such as procurement, IT, and compliance—on how to identify vendor risks and follow internal procedures. Cross-functional awareness is key to a strong risk posture.
Mitigate Vendor Risk with Splashtop Secure Workspace
Managing vendor risk doesn’t stop at onboarding, it requires ongoing control over who accesses your systems, how they access them, and what they can do once inside. Splashtop Secure Workspace is purpose-built to help organizations extend Zero Trust principles to their third-party vendors, contractors, and external collaborators.
With Splashtop Secure Workspace, you can:
Enforce least-privilege access to internal apps, desktops, and resources
Eliminate the risks of VPNs and lateral movement
Set up context-aware policies to control vendor access based on role, location, and device posture
Enable granular audit trails and session monitoring for full accountability
Simplify vendor offboarding with easy policy removal and access revocation
Whether you're evaluating new vendors or tightening controls on existing ones, Splashtop Secure Workspace helps ensure your third-party access is always secure, compliant, and under your control.
Learn more about how Secure Workspace supports secure vendor access.
