What is a "vendor risk assessment"?

A "vendor risk assessment" refers to the process of evaluating potential risks that could arise from engaging a vendor or supplier. This assessment involves identifying and analyzing threats that could impact project success, operational continuity, or financial performance related to the vendor's performance or practices. By looking at factors such as the vendor's financial stability, compliance with regulations, operational procedures, and potential reputational issues, organizations can make informed decisions about whether to engage with a vendor and how to manage those risks effectively.

This assessment is crucial in ensuring that the organization is aware of any vulnerabilities that could affect their own operations and allowing them to put appropriate risk mitigation strategies in place. Engaging with vendors often includes a level of dependency or trust, making it essential to understand the associated risks fully.