Vendor risk management in action: Reducing disruption, building resilience

All organisations depend on vendors. They provide essential goods and services, software platforms and outsourced functions. But even trusted vendors can cause disruptions when risks go unnoticed and unaddressed.

Procurement leaders now manage large networks of third-party suppliers and vendors, each one bringing possible operational, financial and reputational risks. The impacts of COVID-19 and Brexit along with recent UK procurement regulation changes only complicate matters. Without clear oversight, these risks can accumulate across the supply chain.

Vendor risk management (VRM) helps procurement teams build structure around these vendor relationships and supply chain complexities. A strong approach allows you to identify vulnerabilities early, maintain compliance and protect business continuity.

Why vendor risk management matters

Vendor risk management refers to the process of identifying, assessing and managing risks associated with third-party vendors and service providers.

Modern procurement teams work with a large number of vendors including technology vendors, logistics partners, manufacturers and service providers. Each relationship introduces potential risks across the vendor lifecycle:

• Operational risks appear when vendors fail to deliver goods or services on time

• Financial risks can emerge from vendor instability, unexpected cost increases or contract failures that affect procurement budgets

• Compliance risks arise when vendors fail to meet regulatory requirements such as General Data Protection Regulation (GDPR), industry standards or contractual obligations

• Reputational risks appear when vendor behaviour conflicts with sustainability commitments or public expectations

• Data protection and cybersecurity risks occur when vendor systems connect with internal systems, potentially exposing organisations to data breaches, cyberattacks and information security vulnerabilities.

Recent research shows how common these risks have become. According to Mitratech and Prevalent’s 2024 Third-Party Risk Management Study, 61% of organisations experienced a third-party-related security breach over the past year.

Operational disruption remains a major concern as well. A Gartner survey on third-party risks shows that 84% of organisations experienced disruption due to vendor issues that teams failed to identify early enough.

These findings underscore the importance of VRM. It gives procurement teams a structured way to assess vendors before contracts begin, monitor their ongoing performance and mitigate risks when these emerge.

How to identify and assess vendor risk

Effective vendor risk management begins before your procurement team signs a contract. Early assessment lets you identify vulnerabilities during vendor onboarding and address procurement risks before they affect operations.

The process usually starts with a vendor risk assessment, which evaluates the following factors linked to vendor reliability and long-term risk exposure:

• Financial stability

• Regulatory compliance

• Sustainability track record

• Cybersecurity posture

• Operational resilience.

Visibility across purchasing activity also matters. When you track who buys what, from which vendors and how often, you can identify patterns that signal risk. These insights help enforce vendor policies and reduce unmanaged vendors.

How to prioritise vendors by risk level

Not every vendor introduces the same level of risk. Vendors supporting critical operations require more substantial due diligence than those providing routine goods. Ensure you apply the right amount of time and effort when assessing each vendor relationship to avoid slowing down everyday purchasing.

To understand which vendors need more oversight, procurement teams usually classify vendors according to criticality:

• Critical vendors support core operations or provide essential infrastructure. These vendors require the highest level of monitoring because disruptions could affect business continuity.

• Medium-risk vendors provide important services but usually have alternatives. Procurement teams still monitor these relationships, but they require fewer controls.

• Low-risk vendors typically supply standard goods or services that, if disrupted, would have limited effect on day-to-day operations.

Questions to ask during onboarding

Vendor onboarding provides one of the best opportunities to reveal hidden risk. Consider asking potential vendors these questions:

How do you maintain daily operations if your critical subcontractors fail?

A question about daily operations can reveal whether the vendor has contingency plans in place. Relying on a single subcontractor without backup arrangements can signal operational risk.

What dependencies exist in your supply chain that could create disruption?

By asking this, you shed light on hidden dependencies that could interrupt service delivery if one of the vendor’s key suppliers or partners fails.

How quickly can you detect and respond to a security incident?

This shows the maturity of the vendor’s security monitoring and incident response processes. Slow detection or unclear response plans can indicate weak security controls or gaps in incident management.

What internal processes measure your performance against service level agreements (SLAs)?

This question shows whether the vendor can consistently monitor service delivery and correct issues early, rather than allowing small performance problems to escalate into larger operational disruptions.

How do you handle regulatory changes that affect your service delivery?

This answer shows you whether the vendor has processes for adapting to new regulations and maintaining compliance over time.

How do you scale service delivery if demand increases suddenly?

This reveals whether the vendor can support growth without creating service bottlenecks.

After you’ve completed due diligence and approved vendors, the next challenge is ensuring your employees actually purchase from these providers. The most effective way to maintain this control is through smart solutions such as Amazon Business’ Guided Buying (a Prime Business feature) that guide employees towards approved vendors and preferred supplier categories.

Building a vendor risk management process

Vendor risk management works best as an ongoing process rather than a one-time check. An effective VRM process usually follows four key stages:

1. Identify vendors and relationships

Your procurement team starts by mapping third-party relationships across your organisation. This step identifies vendors, service providers and outsourcing partners involved in the supply chain.

Understanding the full vendor ecosystem allows you to pinpoint hidden dependencies and overlapping providers. It also highlights vendors whose failure could disrupt multiple parts of your organisation.

2. Assess risk exposure

Next, you conduct structured vendor risk assessments. Start by reviewing factors such as financial stability, security certifications, regulatory compliance and operational resilience to understand how the vendor operates and where potential vulnerabilities may exist.

From there, assign a risk score based on the vendor’s criticality to your operations, the level of risk exposure and whether they handle sensitive data or support essential services. Through this scoring approach, you can determine which vendors require deeper monitoring and stronger controls.

3. Monitor vendor performance

Vendor risk management continues after onboarding. Check vendor performance against service level agreements and monitor delivery reliability, service quality and compliance indicators to detect issues early.

Procurement analytics tools can support this monitoring. Dashboards that track purchasing activity and vendor usage patterns show you where vendor dependencies are developing and whether vendor relationships remain aligned with procurement policies.

For example, tools such as Amazon Business’ Spend Visibility (a Prime Business feature) show you purchasing activity across departments in a convenient format. This helps you keep an eye on spend trends, identify emerging dependencies and maintain oversight across vendor relationships.

4. Review and offboard vendors

Evaluate against organisational need and delivery performance whether the vendor relationship will continue. If you decide to end the relationship, you will also need to manage vendor offboarding carefully.

When you terminate vendor contracts, you must revoke system access, protect sensitive information and secure data. This final stage ensures you maintain strong data security and regulatory compliance across the vendor lifecycle.

5. Embedding compliance and approvals

VRM becomes far easier when your procurement protocols govern how employees must purchase from vendors. When these controls sit directly within purchasing workflows, you can keep vendor activity in check without slowing down buying efficiency.

Existing purchase approvals and approved vendor lists help you enforce procurement compliance during sourcing. These controls reduce the likelihood of employees introducing new, unassessed vendors into the supply chain.

Procurement tools can support this process by guiding purchasing behaviour. For example, the Amazon Business Guided Buying (a Prime Business feature) directs employees towards approved vendors and preferred provider categories.

Best practices for managing vendor risk

Once vendors have entered your organisation’s ecosystem, you need practical ways to keep track of vendor activity, measure performance, and identify and respond to risks.

To manage your third-party relationships more effectively after vendor onboarding:

• Use consistent criteria when assessing vendors so you can spot issues early and compare providers fairly

• Centralise purchasing activity to better understand how departments interact with various third-party vendors (clear visibility into purchasing patterns lets you identify unmanaged vendors and reduce unnecessary exposure to risk)

• Review vendor performance against SLAs and contracts regularly to detect operational problems early and address potential risks before they disrupt operations

• Maintain clear purchasing policies to control which vendors employees can buy from

• Encourage compliance and sustainability by working with vendors so they meet relevant certifications, regulatory requirements and sustainability commitments

• Use analytics to find spending or efficacy gaps such as unusual purchasing patterns, declining vendor performance or signs of emerging vendor risk.

How Amazon Business supports VRM

Effective vendor risk management hinges on procurement teams having insights into and control over how vendors interact with the organisation. By improving visibility, Amazon Business helps you oversee vendor relationships for a smoother supply chain.

Spend Anomaly Monitoring

Spend Anomaly Monitoring adds an extra layer of oversight by identifying unusual purchasing activity. You can review unexpected transactions, investigate potential policy breaches and identify patterns that may signal vendor risk or unauthorised spending.

Pay by Invoice

This feature consolidates invoicing and payment tracking so you can manage payments more securely across procurement workflows. With it, procurement teams can verify transactions more easily and resolve payment issues before they affect vendor relationships.

Spend Visibility

Amazon Business Spend Visibility (a Prime Business feature) allows procurement leaders to track purchasing trends across departments. When you can see spend patterns across your organisation, it becomes much easier to understand which vendors different departments work with, detect emerging vendor dependencies and identify non-compliant purchasing behaviour.

Guided Buying

With this Amazon Business Prime feature, you can enforce purchasing policies by creating rules that direct employees towards approved vendors and preferred categories instead of relying on manual approvals. (Guided Buying is a Prime Business feature.) This reduces the likelihood of teams introducing unvetted vendors into the ecosystem and helps you maintain stronger control over vendor relationships.

Turning vendor risk into resilience

Vendor relationships drive modern supply chains, but these relationships also introduce risk.

While you can’t eliminate vendor risk entirely, building structured processes enables you to identify vulnerabilities early and minimise disruptions.

By evaluating vendors carefully and monitoring vendor performance regularly as part of a strong procurement strategy, your team gains a clearer picture of how vendors support your operations. With this visibility, you can spot emerging issues and protect business continuity.

Get in touch today to learn how Amazon Business can help you reduce vendor risk and strengthen your organisation’s resilience.

This article was created by professional writers and editors with the assistance of AI-powered tools. AI was used in a supportive capacity only – for example, to aid with translation, content review, and alignment with brand guidelines. All substantive research, editorial decisions, and final approval were performed exclusively by human authors and editors, who retain full editorial responsibility for this publication.