Vendor Risk Management: Ensuring Your Partners Don’t Become Your Weak Link

Safeguard Your Business from Third-Party Risks

In today’s connected business world, Australian organisations rely on third-party vendors for everything from IT support to cloud services. While these partnerships drive efficiency and innovation, they also open the door to new information security risks. Without effective vendor risk management (VRM), your partners could become your weakest link.

What is Vendor Risk Management?

Vendor risk management is the process of identifying, assessing, monitoring, and mitigating risks that arise from working with third-party vendors and service providers. It ensures your sensitive data and business operations stay protected—even when external partners are involved.

Why Vendor Risk Management Matters for Australian Businesses

• Regulatory Compliance: Meet the requirements of the Australian Privacy Act, APRA CPS 234, and other local standards by managing third-party risks.
• Supply Chain Security: Prevent a single vulnerable vendor from compromising your entire supply chain.
• Reputation Protection: Avoid damaging data breaches that could erode customer trust and harm your brand.
• Business Continuity: Minimise disruptions to your operations and revenue caused by vendor incidents.

Key Steps for Effective Vendor Risk Management

1. Identify and Classify Vendors

• Build a complete inventory of your third-party vendors.
• Classify them based on the type and sensitivity of information they access and their role in your operations.

2. Conduct Due Diligence and Risk Assessments

Before onboarding any new vendor, perform a thorough due diligence and risk assessment. Ask:

• Do they hold up-to-date security certifications (e.g., ISO 27001, SOC2)?
• Are their security policies documented and regularly reviewed?
• How do they handle data breaches or incidents?
• Do they use subcontractors or fourth parties?

3. Set Clear Contractual Controls

• Ensure contracts include strict information security requirements, data protection clauses, and audit rights.
• Define responsibilities for incident notification, data handling, and compliance with Australian laws.

4. Monitor and Review Regularly

• Continuously assess your vendors’ security posture through regular reviews, questionnaires, and audits.
• Stay alert to business or threat landscape changes that may impact your risk exposure.

5. Prepare for Incidents and Exits

• Develop an incident response plan for vendor-related breaches, including clear communication channels.
• Have an exit strategy to securely terminate relationships and ensure all data is returned or destroyed.

Best Practices for Australian Businesses

• Centralise VRM: Assign responsibility for vendor risk management to a dedicated team or role.
• Use Technology: Leverage VRM platforms or GRC solutions to automate assessments and reporting.
• Educate Your Team: Train staff involved in procurement and vendor management on security risks and best practices.
• Foster Collaboration: Work openly with your vendors to address risks and improve security together.

How ISC Can Help

At Information Security Consultants (ISC), we specialise in helping Australian businesses establish and maintain robust vendor risk management programs. Our experienced consultants provide:

• Comprehensive vendor risk assessments
• Tailored policies and procedures
• Ongoing compliance support with ISO 27001, SOC2, and Australian standards