Vendor risk management without the overhead

Every compliance framework you'll encounter—SOC 2, ISO 27001, PCI DSS, HIPAA—has a section on vendor risk management. They all want to know: do you know who has access to your data, and are you making sure they're handling it responsibly?

The problem: you don't have a dedicated vendor risk team. You probably don't even have a dedicated compliance team. You're a small security or ops team juggling a dozen priorities, and "build a vendor risk management program" has been on your list for months.

Here's how to build a vendor risk management program that actually works without consuming all your time.

What vendor risk management actually means

Vendor risk management (VRM) is the process of identifying, assessing, and monitoring the security risks that third-party vendors introduce to your organization. When you share data with a vendor, connect them to your systems, or rely on them for critical services, their security posture becomes part of your security posture.

If your cloud provider gets breached, your data is exposed. If your payroll processor has weak controls, your employee information is at risk. If your SaaS tool stores customer data and has no encryption, you have a compliance problem.

VRM isn't about eliminating vendors—modern businesses can't function without them. It's about understanding which vendors pose the most risk and making sure those vendors meet your security requirements.

Minimum viable VRM program

You don't need a six-month initiative and a dedicated platform to start. Here are the four essentials.

Vendor inventory

You can't manage risk if you don't know who your vendors are. Start with a simple list:

• Vendor name
• What service they provide
• What data they access (if any)
• Who owns the relationship internally
• Contract renewal date

Pull this from your accounts payable records, software subscriptions, and by asking department heads what tools they use. You'll be surprised what you find—shadow IT is everywhere.

Don't overthink the format. A spreadsheet works fine. The goal is visibility, not perfection.

Risk tiering

Not all vendors are equal. Your cloud infrastructure provider is not the same risk as your office snack delivery service. Treating them the same wastes time you don't have.

Tier your vendors based on two factors: data access and criticality.

Most companies find that 10-20% of their vendors are Critical or High risk. Focus your energy there.

Assessment questionnaire

Once you've identified your high-risk vendors, you need to assess them. This means asking questions about their security practices—and actually reviewing the answers, not just filing them away.

For your Critical and High tier vendors, you want to understand four main areas. Start with security fundamentals: do they have a SOC 2 Type 2 report or ISO 27001 certification? If they do, request a copy and actually read it. Ask about encryption practices—both for data moving across networks and data sitting in storage. Understand how they handle access control and authentication.

Data handling matters a lot. Where is your data stored geographically? This matters for compliance reasons. How long do they retain data, and what happens to it when you end the contract? Do they share data with sub-processors (and if so, who)?

Incident response tells you whether they'll be a partner or a liability when something goes wrong. How would they notify you of a security incident? What's their breach notification timeline? Do they carry cyber insurance?

Finally, business continuity. What uptime SLA are they committing to? How do they handle disaster recovery? Can they show you documentation?

You don't need to create this questionnaire from scratch. The Shared Assessments SIG Lite questionnaire is free and industry-standard. Or build your own simplified version based on what your compliance framework specifically requires.

For Medium tier vendors, keep it simpler—focus on data handling and basic security. Don't waste everyone's time with a 200-question assessment for a vendor that stores nothing sensitive.

Ongoing monitoring

Assessment isn't a one-time event. Things change. Vendors get acquired, have breaches, or let their certifications lapse.

Build these into your process:

Annual reviews – Reassess Critical and High tier vendors every year. This can be as simple as requesting updated certifications and confirming nothing has changed.

Trigger events – Some things should prompt immediate review:

• Vendor reports a security incident
• You expand what data you share with them
• Vendor is acquired or has major leadership changes
• Vendor's certification expires

Continuous monitoring – For your most critical vendors, consider automated monitoring tools that alert you to breaches, certificate expirations, or negative security news. This is optional for smaller programs but valuable as you scale.

Tools: spreadsheet vs. dedicated platform

Here's the honest answer on tooling, without the sales pitch.

A spreadsheet works fine for most organizations. Seriously. If you have fewer than 50 vendors, 10 or fewer are high-risk, you don't have dedicated VRM staff, and budget is a concern, a well-organized spreadsheet does the job. Track your vendor inventory, tiering, assessment status, and review dates. Use filters and conditional formatting to flag upcoming reviews. Google Sheets or Excel—doesn't matter.

When should you consider a dedicated VRM platform? When you hit 100+ vendors and managing the spreadsheet becomes a part-time job. When multiple people need access and version control becomes a nightmare. When you're sending so many questionnaires that manual tracking breaks down. When auditors start asking for reporting that's painful to produce from a spreadsheet.

Tools like Vanta, Drata, OneTrust, or specialized VRM platforms like Prevalent and ProcessUnity can automate a lot of this. They'll distribute questionnaires, track responses, remind vendors to complete them, and generate the reports auditors want. But they cost real money and require setup time. Don't buy a platform because it seems professional—buy it when your spreadsheet process is actually breaking down.

What auditors actually look for

When auditors assess your VRM program—whether for SOC 2, ISO 27001, or another framework—they're looking for evidence that you've thought this through and are actually doing the work, not just checking boxes.

First, they want to see a defined process. Is there a written policy or procedure? Do you have clear criteria for how you decide which vendors are high-risk? Is your assessment methodology documented somewhere?

Second, they want proof you're actually doing what you say you do. Show them a completed vendor inventory with tiering. Pull out assessment records—questionnaires you've sent, SOC 2 reports you've reviewed. Demonstrate that you're reassessing periodically, not just doing initial due diligence and forgetting about it.

Third, they'll look at your critical vendors specifically. Have your most important vendors been assessed? Did you actually obtain and review their SOC 2 reports (or equivalent)? If you accepted risk somewhere—decided a vendor's security gaps were acceptable for business reasons—is that decision documented?

Finally, contracts matter. Do your vendor agreements include security requirements or right-to-audit clauses? Are data processing agreements in place where GDPR or other regulations require them?

Here's what auditors don't expect from most companies: perfect coverage of every single vendor, fancy real-time monitoring dashboards, or a dedicated VRM team. They want to see a risk-based approach where you're focusing your limited resources on the vendors that matter most.

Scaling your program

As your company grows, your VRM program needs to grow too. Here's when to add more process:

Add automated questionnaire workflows when you're sending more than 20 questionnaires per year manually.

Add a VRM platform when spreadsheet management takes more than 4 hours per week.

Add continuous monitoring when you have vendors that would cause significant damage if breached and you need faster awareness.

Add dedicated VRM staff when compliance requirements demand it or when vendor management is blocking business deals.

Add fourth-party risk management (monitoring your vendors' vendors) when you're in a heavily regulated industry or have very high-risk vendors.

Start simple. Add complexity only when you need it.

Common mistakes

Trying to assess every vendor equally. This burns out your team and provides no additional value. A tiered approach is essential.

Collecting SOC 2 reports but not reading them. A SOC 2 report sitting in a folder isn't risk management. Review it. Look at the system description. Check for exceptions. Document your review.

One-time assessment only. Vendors change. Annual reviews for critical vendors aren't optional.

No clear ownership. If nobody owns VRM, it doesn't happen. Assign someone—even if it's only 10% of their job.

Overcomplicating the questionnaire. A 500-question assessment scares vendors and takes forever to review. Focus on what matters for your risk profile.

Ignoring the response. If a vendor reveals a significant gap, you need to decide: accept the risk, require remediation, or find another vendor. Documenting that decision matters.

FAQ

How often should I reassess vendors?

Critical and High tier vendors should be reassessed annually at minimum. Medium tier vendors every 2 years. Low tier vendors generally don't need formal reassessment unless their tier changes. Trigger events (breaches, acquisitions, scope changes) should prompt immediate review regardless of schedule.

What if a vendor has a SOC 2 report?

A SOC 2 Type 2 report from a reputable auditor covers most of your assessment needs for that vendor. Review the report rather than sending a questionnaire. Focus on: the system description (does it cover what you're using?), the audit period (is it current?), and any exceptions or findings. You still need to document that you reviewed it.

Do I need to assess every vendor?

No. Focus on vendors that access sensitive data or are critical to your operations. Low-risk vendors like office supplies or tools that don't touch your data don't need security assessments. Document your tiering rationale so auditors understand why certain vendors weren't assessed.

What should be in a vendor risk assessment template?

A practical template includes: vendor identification (name, service, data access), tiering determination with justification, assessment method used (questionnaire, SOC 2 review, etc.), key findings or risk areas, risk acceptance or remediation requirements, review date, and next review due date. Keep it to one page per vendor.

What if a vendor refuses to complete a questionnaire?

First, check if they have a SOC 2 report, ISO 27001 certification, or standard security documentation they can share instead. Many established vendors have a security page or trust center. If they refuse to provide any security information, that's a red flag—document the risk and escalate to business stakeholders. For critical vendors with no transparency, consider alternatives.

Need help with vendor questionnaires?

Here's the irony: while you're sending questionnaires to your vendors, your customers are sending them to you. We help with both sides.

Our vendor questionnaire service handles the questionnaires your customers send you. $990, 5 business days, done.

If you're building out your VRM program and need help with templates, processes, or assessing your critical vendors, reach out. We do this work every day.

The bottom line: Vendor risk management doesn't require a dedicated team or expensive tools. Start with a vendor inventory, tier by risk, assess what matters, and review annually. A spreadsheet and a few hours a month gets most small teams through audits. Build more process only when you need it. The goal is managing risk, not checking boxes.