Vendor Risk Analysis Definition

A vendor risk analysis is a process for assessing the potential risks posed by a company’s vendors, and developing strategies to mitigate those risks. The goal of a vendor risk analysis is to protect the company from any potential harm that could come as a result of doing business with a particular vendor.

There are many potential risks that can be associated with doing business with a vendor, and these risks will vary depending on the type of business the company is in, the products or services being purchased from the vendor, and the country in which the vendor is located. Some of the more common risks that are typically considered when conducting a vendor risk analysis include financial risks, reputational risks, legal risks, and compliance risks.

When conducting a vendor risk analysis, it is important to consider both the probability of a particular risk occurring, and the impact that it would have on the company if it did occur. A high-probability/low-impact risk may not warrant as much attention as a low-probability/high-impact risk. However, all risks should be evaluated and mitigation strategies should be put in place for those that are deemed to pose a significant threat to the company.

There are many different ways to conduct a vendor risk analysis, but most companies will start by collecting data about their vendors through questionnaires, interviews, site visits, financial reports, and public records. This data will then be used to identify any potential areas of concern. Once