Vendor Risk Management encompasses a wide range of cybersecurity risk factors. As such, a VRM report design could range from highly detailed to concise, depending on the specific reporting requirements of stakeholders and the board. This list represents the most comprehensive scope of third-party risk management (TPRM) information to address the broadest range of VRM reporting use cases.
For a preview of the level of VRM reporting detail your stakeholders will likely be satisfied with, refer to UpGuard’s cybersecurity reporting page features.
1. Executive Summary
Regardless of which metrics and cyber risk categories your Vendor Risk Management program report focuses on, it should contain an executive summary. The executive summary is a critical addition for stakeholders and senior management, who expect to learn the details and findings of a cyber report as quickly and efficiently as possible.
In the context of a VRM report, an executive summary provides a high-level overview of an organization’s Vendor Risk Management performance and state of vendor risk exposure. Since most senior management staff are generally not well versed in the technical nature of cybersecurity, this section should present key insights about Third-Party Risk Management in a manner that the layperson can easily understand.
All Vendor Risk Management reports should include an executive summary.
With Third-Party Risk Management encompassing such a dense array of risk factors, deciding which third-party vendor risks to highlight in an executive summary could be daunting. To overcome writer’s block, keep in mind that when it comes to reporting on your cybersecurity posture, senior management is primarily interested in having the following questions answered:
- What is our risk of suffering a data breach?
- What is our risk of being impacted by a supply chain attack?
- What security measures are in place to mitigate these security incidents?
If your executive summary can effectively address these three primary concerns while remaining concise, it should be sufficient.
The following components could help address these primary information security queries. Remember that the executive summary is just that - a summary, so this outline should be regarded as a guide, not a complete template. For more information about what stakeholders expect from this report section, refer to our post about how to write the executive summary of a cybersecurity report.
If you ever need verification for your final choice of detail in the executive summary or any other component of a VRM report, remember that you can always run your draft report by your CISO, who serves as your technical cyber representative at the senior management table.
2. Summary of High-Risk Vendors
- Identification of high-risk vendors: An indication of the degree of high-risk service providers in the company’s vendor ecosystem,
- Critical vendor risk levels: Details of the specific risk levels and vulnerabilities associated with critical third-party vendors for existing and new vendors.
- Impact analysis: A brief analysis of the potential impact of high-risk vendors being compromised. This could include the impact of inadequate security controls resulting in regulatory violations (such as HIPAA for healthcare) or the impact of misalignment with cyber frameworks (such as NIST CSF 2.0, SOC 2, or ISO 27001).
When it comes to communicating security impact to the board or senior management, the clearest method is to use a language everyone is guaranteed to understand—the language of dollars and cents. Estimating the financial impact of a potential cybersecurity incident requires applying a methodology known as Cyber Risk Quantification.
While VRM reports are primarily associated with cybersecurity inherent risks, an impact analysis could also include a summary of the financial risks associated with critical third-party relationships, as calculated through Cyber Risk Quantification (CRQ).
Alternatively, a more efficient method of representing an organization’s state of risk exposure through its vendor relationships is with a vendor risk matrix. Here’s an example of a vendor risk matrix representing the number of vendors across three tiers of business impact, where risk levels are measured through a decreasing range of third-party security postures quantified as security ratings.
3. Notable third-party risk trends
A risk trends report provides advanced insight into global cybersecurity events that could potentially impact an organization. Given that each vendor relationship continuously dovetails into an additional cluster of business relationships, your business could be impacted by the ripple effects of any data breach event worldwide, as the infamous SolarWinds supply chain attack vividly demonstrated.
- Trend analysis highlights the most significant trends in the third-party risk landscape that could potentially impact your Third-Party Risk Management program. Since data breach impact extends to the fourth-party network, the most comprehensive trend analysis would consider fourth-party risk insights - intelligence that could also aid a dedicated Fourth-Party Risk Management program.
- Security posture improvement trend: An overview of the impact of vendor-related potential risks on an organization’s security posture over time, with security posture represented through quantification methods, such as security risk ratings, for efficient trend communication.
Related: How UpGuard calculates its security ratings.
When faced with a series of provocative upward-turning third-party security risk trends, stakeholders will likely expect your Vendor Risk Management process to be capable of scaling alongside the expanding cyber threat landscape. Outdated methods of managing vendor risk assessments with spreadsheets will not present a comforting case for scalability. If you’re still drowning beneath a sea of manual Vendor Risk Management processes, consider implementing a VRM solution like UpGuard, developed with scalability as a core objective.
Case study: How UpGuard helped Open-Xchange upgrade from spreadsheets in its questionnaire processes.
4. Vendor inventory report
A Vendor Inventory Report documents an organization’s most up-to-date list of third-party vendors. Such a report would benefit stakeholders wanting complete transparency about the state of their third-party attack surface and the security of onboarding, procurement, and offboarding workflows.
Details commonly included in a vendor inventory report:
- Vendor directory: Basic information about each vendor, such as name, contact details, and the nature of their services.
- Operational criticality: An indication of how integral each vendor’s services are to the organization’s primary strategic objectives - information that could indicate each vendor’s business continuity risks.
Classification by Risk Tiers (Critical, High, Medium, Low)
A vendor inventory report could also organize vendors into criticality tiers based on their potential impact on the organization if they become compromised in a security incident. A vendor tiering methodology could be based on multiple factors. A basis tiering framework is outlined below:
- High-risk vendors: The minimum requirement for a high-risk attribution should be sensitive data access. All third-party vendors requiring access to some degree of sensitive data during. their lifecycle must be classified as Critical. Segregating critical vendors will also streamline the vendor risk assessment process, allowing vendors requiring a full risk assessment to be readily identified in a TPRM program. High-risk vendors will need the most frequent risk assessments and the highest degree of continuous monitoring.
- Medium-risk vendors: Vendors that don’t require access to sensitive data and are not likely to cause significant operational disruption to the business if they’re compromised. Period risk third-party risk assessments are likely sufficient for these vendors.
- Low-risk vendors: Third-party vendors that don’t require sensitive data access and will pose a negligible impact on an organization if they’re compromised. Basic due diligence and monitoring efforts - such as monitoring vendor risk scores in VRM dashboards - are likely sufficient for these vendors, in place of full risk assessments.
Stakeholders and senior management will be most interested in the number of critical vendors in your inventory and how their unique risk profiles are managed.
Determining a vendor’s risk classification should occur as early as possible in each vendor relationship lifecycle, ideally during the due diligence process.
A vendor due diligence tool such as Trust Exchange by UpGuard streamlines the process of determining a new vendor’s risk classification by consolidating multiple sources of security posture information, such as certifications and completed security questionnaires.
Watch this video for an overview of Trust Exchange by UpGuard, available to anyone for free.
Sign up to Trust Exchange for free >
5. Initial vendor assessment report
The initial risk assessment report lays the groundwork for a risk management strategy for newly onboarded vendors. Completed after the due diligence phase of the vendor risk assessment process, these initial reports benefit stakeholders and senior management who want to be involved in strategizing each new vendor’s risk management plan.
Critical vendors usually initiate such a deep level of involvement up the management chain. The following risk assessment details will be most helpful for making strategic risk management decisions for high-risk vendors:
- Regulatory requirements: Any regulations the vendor is bound to and all internal regulations that could be violated due to poor vendor performance, either in terms of cybersecurity or general service availability. Popular regulations of note include GDPR, PCI DSS, and HIPAA.
- Security control gaps: An overview of any misalignment from applicable cyber frameworks that could result in a data breach or security incident.
- High-level remediation plan: Broad remediation and risk mitigation suggestions by the cybersecurity team to set the context for valuable strategic discussions
To save Vendor Risk Management teams from having to devote their limited resources to yet another reporting task, a VRM platform should automate a significant portion of this workflow by instantly generating editable risk assessment reports for stakeholders.
Watch this video to learn how UpGuard’s risk assessment report generation feature increases the speed and scalability of a TPRM program.
