How to Mitigate Third-Party Risks During Vendor Consolidation

6 Best Practices to Reduce Risk During Vendor Offboarding

It's important to weigh the benefits of vendor consolidation against the need for supplier diversity to avoid unacceptable levels of concentration risk. And it’s equally important to recognize that offboarding vendors during vendor consolidation can pose security and compliance risks if not handled properly. Consider these best practices to minimize those offboarding risks:

1. Prioritize non-critical vendors

Focus on offboarding vendors that are no longer critical to your business operations. This will reduce the risk of disruption to your business processes. Criticality is typically determined by performing an inherent risk assessment to identify key suppliers early in the relationship.

2. Review contracts

Review all vendor contracts before offboarding. Ensure that all contract terms are fulfilled, and that you are not in breach of any agreements. Review KPIs, pending deliverables, and payments. If the vendor is supplying parts, then make sure warranty and support agreements that survive termination are clear.

3. Communicate with impacted vendors

Notify vendors of the offboarding process and the reason for it. Provide a timeline for the offboarding process, any support they may need during the transition, and final payments. Ensure timelines are reasonable and not too aggressive, which could lead to business disruption, compliance violations or increased security risks. Keep records of all offboarding activities, including the notification process, data transfer, vendor attestations, and contract termination.

4. Ensure data and system security

Ensure the secure transfer all data and intellectual property back to your organization, or that the vendor has deleted or destroyed all data they hold about your organization. Ensure that any retained data is protected according to your organization's security policies and compliance requirements. Revoke any physical or system access provided to vendor employees.

5. Conduct a final risk assessment

Perform a vendor risk assessment to identify potential risks and vulnerabilities associated with offboarding vendors. Offboarding is often overlooked when it comes to third-party risk management, however a lot can happen in the last days of a vendor relationship. Conducting a final risk assessment can validate that your systems and data are securely decommissioned, while also providing records for demonstrating compliance with data privacy mandates.

6. Set up vendor monitoring

If the vendor had system access or managed your data, be sure to monitor for data exposure on the internet and Dark Web. Receiving alerts to potential compromises will enable your organization to be proactive in its incident response efforts.

Use a Vendor Offboarding Checklist

By following these best practices, you can minimize security and compliance exposures during the offboarding process. For more, download the Vendor Offboarding Due Diligence Guide for a prescriptive list of 40+ recommended offboarding tasks or contact Prevalent to schedule a demo today.