A vendor can be defined as a person or a company that offers some service or product for a fee. Many companies hire third-party vendors to help get jobs done in certain areas. Outsourcing comes with some benefits, such as expertise knowledge, without the hassle of hiring and training within, saving money and increased efficiency. However, hiring vendors to do work for you should be a decision that is proceeded with caution, as it comes with several risks, too. Here are five of the biggest vendor risks we see:

1.Upstream Compliance

Complying with the many standards, regulations and laws that are out there today can be tricky alone. Trusting and ensuring that another company is being compliant when doing work for you is ever trickier. We advise you to discuss compliance beforehand to ensure the vendor is familiar with the standards and regulations that you need to comply with and that they are compliant with all their own industry standards and applicable regulations.


The world of cyber risk is growing, and more cyber threats are occurring due to the increasing popularity of cloud systems. It is crucial to protect any data you store, whether it be for the customer or the company. Trusting a third party to store your data is a huge risk. It’s important to analyze the vendor to ensure it is taking the proper measures to encrypt and protect your data.


The geographical location of your vendors can have a big impact on your business. Especially if you conduct business abroad and are forced to comply with foreign standards and regulations that the vendor may or may not be familiar with. A great example of this is GDPR, which can affect any organization that does business with customers in the European Union. On the other side, if the vendor you are working with is in a different country, your organization will be responsible for complying to the laws of that country. You also run the risk of the vendor’s country being in a poor economic or political state, which could impact the vendor’s ability to meet your requirements. It’s wise to familiarize yourself with a vendor’s where about before working with them.


Another vendor risk is the loss of financial assets. With any critical business decision, there is always a risk of losing money. Any of the vendor risks from above can lead to financial loss. When deciding which vendor to use, do your research on previous projects they have worked on to decipher if you will get what you pay for and if operations are done correctly. Additionally, assess their financial stability to ensure they will be able to continue to provide their services to you for the full length of your contract.


Finally, when handing over any of your business functions to another company, you are risking your company’s entire reputation. If something goes wrong with the vendor that you chose, and critical operations and/or transactions can’t be performed, you are held responsible and your customers will most certainly blame you instead of the vendor. Ultimately you are losing consumers’ trust. When your reputation gets sabotaged, you risk losing it all—financial stability, customer loyalties, credibility, and your dignity.

A sustainable solution to all your vendor risks is our trusted platform, SecureWatch. SecureWatch:

  • Maintains a catalog of all your vendors and the services they provide.
  • Manages a security review survey.
  • Provides a central repository for relevant documents (SLA’s, security audits, insurance forms, etc.).
  • Rates each vendor based on risk to your organization and its operations.
  • Manages tasks that you assign to vendors to meet your requirements.
  • Includes off the shelf content for over 30 regulations and standards.
  • Encrypts your data in transit and at rest.

Although risky, working with vendor’s is often necessary. Much is at stake, but safely and successfully using a third-party can be done if the proper preventive measures are taken.

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