Vendor risk management: Taking control with procurement

Managing vendors has never been more complex—or more critical. That’s because procurement administrators today face a growing web of third-party relationships, compliance expectations, budget pressures, and operational deadlines. As a result, every purchase needs to be accurate, timely, and properly documented. 

Although risk teams, IT, and compliance departments often lead an organization’s formal vendor risk management program, procurement still plays a central role in supplying data, maintaining purchasing controls, and ensuring that the organization operates responsibly. While dedicated functions manage vendor risk assessments, procurement departments can use efficiency tools like Amazon Business to streamline their own workflows, improve transparency, and ensure that purchasing activity aligns with organizational policy. 

What is vendor risk management?

Vendor risk management (VRM) is the process that organizations use to identify, assess, monitor, and mitigate risks that stem from partnerships with third-party service providers. These inherent risks can range from a lack of financial stability to cybersecurity issues and non-compliance, and they directly influence the resilience and continuity of your operations.

In most organizations, VRM is a cross-functional responsibility. That means that while compliance, information security, IT, legal, and risk management groups typically own the frameworks and technology they use to evaluate and monitor vendors, procurement teams are essential contributors. Because they’re often the closest to purchasing activity, they understand vendor performance patterns and can maintain the documentation that’s necessary for risk reviews as a result.

Even if procurement teams don’t manage VRM platforms or make formal vendor risk determinations, however, they still play an important role in enabling the process by collecting sensitive information during onboarding, supplying spend data, and enforcing purchasing policies that reduce potential risk exposure throughout the vendor lifecycle.

The goal of vendor risk management

Organizations depend on third-party providers for critical services, so service disruptions or regulatory compliance failures can quickly impact business continuity. Because of this, VRM aims to ensure operational resilience and accountability. 

To this end, effective VRM provides the following benefits:

• A consistent process for evaluating suppliers

• Clear expectations for vendor due diligence

• Visibility into vendor-related risk exposure

• Preparedness for audits or regulatory inquiries
  
  

Often, procurement’s contribution to the process is less about vendor risk scores and more about maintaining structured, defensible buying processes. That’s because when purchasing behavior is organized, standardized, and traceable, it becomes much easier for risk and audit teams to perform their assessments.

Key types of vendor risk

There are many different types of risks that procurement teams might encounter in their day-to-day operations. Here are some common categories, along with examples of how they may affect procurement:

• Cybersecurity risks: Concerns around how vendors handle sensitive data or access internal systems

  • Example: A software vendor that stores user data without adequate controls could create vulnerabilities for a cyberattack during an integration project.

     

• Financial risks: The possibility that a vendor can’t meet its financial obligations

  • Example: A key supplier unexpectedly goes out of business, which results in critical service-level disruptions. 

     

• Operational risks: Failures in vendor processes, systems, or capacity that affect daily operations

  • Example: A shipping partner consistently misses delivery windows, which causes downstream delays.

     

• Compliance and regulatory risks: Situations where a vendor fails to comply with laws, contractual obligations, or regulatory requirements

  • Example: A supplier that lacks necessary certifications for regulated industries like healthcare or education or doesn’t follow relevant laws (like HIPAA or the GDPR) could cause compliance issues for your organization.

     

• Reputational risks: Negative publicity or unethical behavior that reflects poorly on your organization

  • Example: A vendor that’s involved in unethical labor practices may cause your organization reputational damage by association.

     

• Socially responsible purchasing (SRP)–related risks: Risks associated with sustainability goals, local economic requirements, or supplier diversity commitments

  • Example: A lack of diverse or sustainable suppliers could hinder your organization’s progress toward SRP objectives or expose supply chains to regional vulnerabilities.

     

Understanding these risk categories can help your procurement team recognize where it can support VRM by supplying accurate data, following structured workflows, and partnering effectively with specialized teams.

The vendor risk management lifecycle

While procurement doesn’t typically own risk systems or make risk determinations, it still plays a collaborative role in the VRM lifecycle, especially during onboarding and continuous monitoring. 

The VRM lifecycle includes these five core stages:

1. Identification: The organization identifies a need for a product or service and determines whether engaging an external vendor is necessary.

2. Onboarding: Procurement gathers potential vendor information, such as contracts, certifications, tax forms, and performance details, while risk, legal, and IT conduct their respective assessments.

3. Assessment: Risk and compliance teams evaluate the vendor using questionnaires, due diligence checks, and internal scoring frameworks.

4. Monitoring: Throughout the vendor relationship, the organization periodically reviews performance, contract compliance, spend patterns, and risk indicators. Procurement contributes data and insights from day-to-day purchasing to make this process more effective.

5. Offboarding: When the relationship ends, teams remove the vendor from systems, close out contracts, and appropriately handle associated data.
   
   

It’s important to keep in mind that procurement’s role across these stages is to support data accuracy, enforce policies, and maintain structure within the purchasing environment, not manage the risk mitigation itself.

Why vendor risk management matters

VRM isn’t just a compliance requirement—it directly affects your organization’s financial health, operational continuity, and ability to deliver products and services.  In fact, according to a recent study by SecurityScorecard, third-party vendors were linked to more than 35% of global data breaches in 2024—an increase of 6.5% from the previous year. 

A similar 2024 study by Mitratech found that more than 60% of organizations experienced a third-party security incident in the past year. Additional research from SecurityScorecard found that nearly all (98%) global organizations have had vendor relationships with at least one third-party company that has experienced a breach in the last two years.  Overall, the number of vendor breaches is growing, which threatens the broader vendor ecosystem and increases the importance of a solid risk management strategy. 

In addition to security, VRM also matters because it’s deeply interconnected with purchasing accuracy, documentation quality, and spend visibility, which makes it a direct threat to procurement.

The compliance and audit lens

Procurement plays a key role in audit readiness because of the data, access, and purchasing records it stores. Many internal and external audits rely heavily on procurement documents, including these:

• Contracts

• Purchase orders

• Invoices

• Supplier communications

• Spend reports

• Policy-aligned purchase approvals
  
  

Structured buying processes support cleaner audit trails. That’s because when purchasing is consistent and well-documented and aligns with policy, auditors can more easily trace approvals, verify spend, and evaluate vendor selection rationale. This in turn reduces audit cycle time, minimizes follow-up questions, and strengthens the organization’s control posture.

As a result, procurement teams that maintain clarity around who can buy, what they can buy, and how they approve purchases contribute directly to VRM objectives, even without managing risk scoring or compliance platforms.

The cost and continuity lens

Vendor-related failures can lead to unexpected costs or operational disruptions. Procurement teams are often the first to see these early signals:

• Delivery delays

• Quality issues

• Unexplained cost fluctuations

• Repeated invoice discrepancies

• Overreliance on a single vendor for a critical category
  
  

But by collaborating closely with risk and finance teams, procurement can prevent small issues from escalating into supply chain interruptions or budget overruns. Additionally, visibility into spend patterns, supplier diversity, and contract utilization all contribute to more resilient and informed decisions when buying.

Strong purchasing controls also help organizations ensure that employees select from vetted suppliers and approved categories, which reduces the likelihood of accidental exposure to risky vendors.

4 best practices in vendor risk management

While your procurement team may not lead the VRM function, it can adopt best practices that support effective oversight and minimize risk exposure across the organization. These practices align naturally with procurement’s workflow.

Below are four key strategies that your team can implement today:

1. Centralize vendor information

Keeping vendor documents scattered across different systems or individual inboxes creates inefficiencies and increases the likelihood of errors. However, a centralized repository—whether that’s a contract management system, a shared drive, or an internal portal—helps procurement teams ensure that the following are true:

• Contracts are easy to reference.

• Certifications and required documents are up-to-date.

• Vendor contacts are accessible.

• Teams can retrieve information quickly during audits or assessments.
  
  

You don’t need to maintain a dedicated VRM platform to benefit from centralization. Even standardized internal documentation practices improve consistency.

2. Partner closely with IT and compliance

VRM is inherently cross-functional, which means your procurement team’s role is to supply accurate data about purchasing behavior, contract terms, and vendor performance while risk and compliance teams evaluate exposure based on established criteria.

Effective collaboration should include the following steps:

• Holding regular check-ins with IT on data handling requirements

• Sharing vendor performance feedback with risk functions

• Supplying spend reports for risk tiering exercises

• Coordinating during new vendor onboarding and contract renewals
  
  

Tip: Establish recurring cross-functional reviews to align teams on vendor tiers, thresholds, and emerging requirements. This helps your team stay coordinated with risk functions, even as the vendor landscape evolves.

3. Standardize vendor onboarding processes

Inconsistent onboarding processes create gaps that auditors (and risks) tend to find. However, your procurement team can support VRM programs by using structured, repeatable methods like these:

• Checklists for required vendor documents

• Pre-defined due diligence questions

• Workflows that route vendors to risk or IT for specialized review

• Standard contracts or addendums
  
  

Even if your team doesn’t conduct the risk review itself, it can make sure that vendors enter the system with complete, accurate information that compliance teams can rely on.

4. Use data to inform smarter purchasing decisions

While your team likely doesn’t track vendor risk directly, you can use spend analytics to highlight patterns that matter to risk and continuity, such as these:

• Over-concentration of purchases with a single supplier

• Increasing spend in high-risk categories

• Gaps in preferred vendor usage

• Spending behaviors that fall outside of expected patterns
  
  

These insights support internal conversations about whether purchasing behaviors align with the organization’s risk tolerance and strategic goals.

At the end of the day, procurement best practices should naturally complement third-party risk management by reinforcing structure, reducing variability, and helping other departments perform their risk assessments more effectively.

How to strengthen your procurement controls

Beyond supporting the VRM process, your procurement team can take direct action to strengthen internal controls. These controls improve policy compliance, ensure purchasing accuracy, and create the documentation that other teams need for audits and risk reviews.

This is where Amazon Business can be helpful—it streamlines purchasing, guides employee buying behavior, and increases visibility into spend to make procurement more effective. Here’s a closer look at how its features can strengthen your vendor risk management:

Establish clear purchasing policies

As the foundation of procurement control, effective policies clarify the following:

• Who can make purchases

• Which categories or items your organization has permitted

• Spending thresholds that require approvals

• Exceptions for urgent or emergency purchases

• Documentation that’s necessary for audit readiness

   

Clear rules reduce ambiguity and help employees make compliant purchasing decisions.

To this end, Amazon Business’ approval workflows and Guided Buying can support these policy efforts by steering stakeholders toward approved products or categories. These features help your team enforce internal guidelines without unnecessarily restricting your teams.

Improve spend transparency within your ecosystem

Visibility is essential for maintaining control since procurement teams need timely insights into what employees are buying, how much they’re spending, and whether purchases comply with policy.

To help with this, Amazon Business’ smart buying solution provides transparency into that portion of organizational spend. Features like Spend Visibility (a Business Prime exclusive) can help procurement teams with these tasks:

• Identify opportunities to consolidate purchases

• Recognize patterns that may affect budgeting

• Ensure compliance with category- or product-level policies

• Detect unusual purchasing behaviors
  
  

Other features like Spend Anomaly Monitoring (a Business Prime exclusive) offer a way to gain visibility into unusual spending patterns, which helps procurement administrators review unexpected spikes or deviations more quickly. It’s important to note, however, that this visibility applies to Amazon Business spend only, not all your vendor spend.

Regularly review supplier diversity and sustainability goals

Responsible purchasing contributes to long-term resilience, as having diverse and sustainable supply chains can reduce concentration risk, support community goals, and help your organization meet SRP commitments.

With these goals in place, your procurement team can more easily accomplish these tasks:

• Review progress toward diversity and sustainability targets

• Identify categories where your organization needs alternative suppliers

• Work with internal stakeholders to reinforce socially responsible purchasing requirements
  
  

Amazon Business supports these efforts by providing access to business sellers, including certified local, diverse, and sustainable suppliers. You can even search for those that meet your organization’s needs using filters, which makes more sustainable sourcing far easier. 

From compliance to confidence

Procurement may not own VRM frameworks or systems, but it still plays an essential role in strengthening your organization’s control environment. Through structured buying practices, clear policies, spend visibility, and cross-functional collaboration, procurement can contribute meaningfully to vendor oversight and operational resilience.

Solutions like Amazon Business help procurement teams optimize their workflows, guide purchasing behavior, manage approvals, and gain better visibility into their procurement spend. And by integrating with over 300 procurement systems, this smart business buying solution bridges the gap between vendor risk oversight and purchasing execution.

Ready to learn how you can operationalize VRM through built-in procurement tools? Contact sales today to see how Amazon Business can help.