The ultimate vendor risk assessment checklist for compliance teams

Vendor relationships are now inseparable from core operations. Most organizations rely on third parties for critical workflows such as cloud hosting, payroll, data processing, and security — which means important processes now live outside your direct control.

But the accountability doesn’t shift. If a vendor mishandles data, experiences a breach, or falls out of regulatory compliance, your organization is still on the hook. That’s why third-party risk management can’t rely on gut feelings or scattered documents. You need clear processes to assess and manage these risks.

Cue your vendor risk assessment checklist. This structured process helps you see risks clearly, evaluate them consistently, and put mitigation steps in place to ensure thorough, repeatable, and auditable vendor evaluations.

Here’s how you create a third-party risk assessment checklist and tailor it to your organizational needs.

Why you need a vendor risk assessment checklist

Vendor ecosystems are growing rapidly. Teams now work with hundreds of third parties for core functions. In fact, the companies in Whistic’s recent report say they work with an average of 237 vendors.

Every one of those vendors extends your operational footprint. Think of it like adding extra doors to your building. Each door is useful, but every door also needs to be locked, monitored, and checked regularly.

And when those “doors” aren’t consistently checked, the risks become clear. According to Mitratech, 61% of companies experienced a third-party-related security breach between 2023 and 2024 — a whopping 49% increase from the year before.

But the fallout of these incidents goes beyond the direct costs. Gartner found 84% of organizations experienced operational disruption due to missed vendor risk issues. And that disruption means delays, downtime, lost trust, and strained customer relationships — all problems that cost your organization money.

A structured vendor risk assessment checklist helps teams understand where risk enters the business and how to control it before it spreads. Here’s why a checklist is so important.

Common pitfalls of ad hoc assessments

Without a standard process, vendor reviews vary depending on who is doing them and how risk-averse the reviewer is. One reviewer may ask for SOC 2 reports and probe deeply into data handling, while another may rely only on a basic questionnaire to keep things moving. That means what gets reviewed and how deeply it’s reviewed changes from vendor to vendor.

This inconsistency makes it difficult to explain why one new vendor was approved and another wasn’t. This makes it almost impossible to defend those decisions during an audit or incident review.

The other consequence is more dangerous: security and compliance gaps. When everyone follows their own approach, it’s easy to overlook vulnerabilities and cybersecurity risks, leaving your organization open to security incidents, compliance failures, operational disruption, and uncomfortable questions from stakeholders.

Benefits of consistency and audit readiness

With a standardized checklist, you review every vendor in the same way. This consistency reduces blind spots, captures evidence, and supports repeatable, scalable decision-making that stands up to audits and leadership questions.

Building confidence with regulators and stakeholders

To build trust with regulators and stakeholders, you need to show how you assess and manage risks. A clear, documented, repeatable process demonstrates responsible oversight, not just good intentions.

Then, if an incident does occur, you can prove your organization took reasonable, consistent steps to prevent it. This protects confidence with executives, regulators, and customers when it matters most.

Core components of a vendor risk assessment checklist

A robust vendor risk assessment checklist provides the structure to review every vendor in the same way and to the same standard.

Use the components below as your master framework, adapting depth based on vendor criticality and data exposure.

Vendor identification and due diligence

Start by identifying the vendor and exploring their role within your organization.

This section should include details about who the vendor is, what they do, and what access they’ll have:

• Vendor ownership and corporate details
• Services they’ll provide
• Systems, data, and facilities they’ll interact with

This step prevents misunderstandings about what the vendor will actually do or access. It also helps you determine the level of risk from the start by clarifying whether the vendor will interact with sensitive data, critical systems, or core business processes.

Knowing this risk level helps you understand how deeply you need to assess the vendor.

Regulatory compliance validation

If your vendor is non-compliant, you’ll still be held responsible. To prevent accidental non-compliance, validate vendor systems to ensure they meet regulatory requirements.

In this section, include checks on whether the vendor meets the laws, frameworks, and compliance requirements relevant to your industry:

• SOC 2, ISO 27001, PCI DSS, HIPAA, GDPR, or other required certifications
• Documented data privacy and security policies
• Evidence of ongoing compliance monitoring

Financial and operational health checks

Imagine approving a vendor only for them to fold, get acquired, or cut services six months later. A company’s financial and operational stability directly affects your business continuity, so you need to assess these risks early.

These checks should look into their long-term business health:

• Financial statements: Look at profitability, cash flow, debt exposure, and so on.
• Business continuity maturity: Ask whether they can keep operating during disruption.
• Staffing and support capacity: Consider whether their operational capacity reliably serves your account.

If a vendor can’t sustain operations in the long term, the threat becomes yours. You risk interrupted services, delayed projects, reputational fallout, and unexpected replacement costs.

Information security and data protection

When a vendor touches your data or systems, their security becomes part of your security. If they fail, you absorb the damage. And it’s a double hit. You face the costly technical fallout of the incident and the regulatory or contractual consequences of failing to protect that data.

Dig into each vendor’s IT security and data protection to look for gaps across the system:

• Access controls and authentication: Look at who gets in and how they verify access.
• Encryption standards: Consider how they protect data in transit and at rest.
• Incident response plans: Assess how quickly and effectively they respond to cyberattacks and security breaches.
• Penetration testing and vulnerability management: Look into how they find and fix weaknesses in their systems.

Making sure vendors meet your security standards safeguards both your data and your compliance position.

Business continuity and disaster recovery

Confirm the vendor can continue service during outages, disruptions, or emergencies.

This section should look at the risk management plans and processes they have in place to handle downtime:

• Documented disaster recovery plan
• Recovery time objectives
• Backup and redundancy practices

When a vendor has strong business continuity plans, it reduces the risk of downstream disruption to your customers and operations.

Legal, contractual, and insurance documentation

Once you understand the vendor’s risks and capabilities, you need to formalize how you’ll manage them. Contracts turn expectations into obligations, clearly defining who is responsible when something goes wrong.

In this section, confirm and document the legal and financial protections in place:

• Data processing agreements: Define the ways you both handle, store, and delete data.
• Service level agreements (SLAs): Set expectations around performance, uptime, support response times, and escalation.
• Liability, cyber insurance, and indemnification terms: Clarify who pays for what in the event of a breach, outage, or failure.

Strong documentation ensures accountability is clear from the outset. If incidents do happen, these contracts serve as your safety net, guiding how quickly you can respond and who is responsible for remediation.

Scoring and prioritizing vendor risk

Once you’ve gathered information, you need a structured way to quantify vendor risk and decide where to focus vendor management efforts. Scoring brings consistency to those decisions and makes them easier to explain to stakeholders, auditors, or regulators.

Setting criteria and weights

Begin by defining what matters most based on your organization’s risk profile. Consider factors like data sensitivity, system access, financial stability, and regulatory requirements.

Assign weights to each factor to indicate importance. A vendor handling sensitive data, for example, should carry more weight than one providing a non-critical utility.

Example scoring models

Scoring isn’t a perfect mathematical system. What’s important is that you’re consistent.

These models help apply the same logic across every vendor:

• Weighted Scorecard Model: Each criterion is scored (e.g., on a 1–5 scale), multiplied by its weight, then totaled.
• Inherent vs. Residual Risk Model: Start by scoring the vendor’s risk based on their role and data access. Then evaluate their security controls to see how much these controls reduce that risk. The remaining score is the residual risk you need to manage.
• Likelihood × Impact Matrix: Plot vendors on a grid based on how likely an issue is and how severe the consequences would be.

How to tier vendors by criticality

Once scoring is complete, group vendors into tiers so you know where to focus time and oversight:

1. Sort vendors by total score or residual risk.
2. Set thresholds, for example:
   • High risk: Scores above 75
   • Medium risk: Scores 40–74
   • Low risk: Scores below 40
3. Apply controls and effort based on tier, for instance:
   • High-risk vendors: Deeper assessments, more frequent reviews, stronger contract terms, continuous monitoring
   • Medium-risk vendors: Standard review and periodic reassessment
   • Low-risk vendors: Lightweight review and annual check-ins

Tiers keep the process efficient, so it’s thorough where it needs to be and streamlined where it doesn’t.

How to tailor the checklist for your organization

The core checklist provides structure, but not every vendor needs the same level of scrutiny.

Here’s how you tailor your checklist so the process fits your industry, risk tolerance, and operational reality.

Industry-specific considerations

Different industries face different regulatory and data sensitivity demands. For example, healthcare and finance require tighter controls around data handling and audit evidence, while manufacturing may focus more on supply chain continuity.

Align your checklist with the standards and regulations that apply to your environment.

Adjusting depth for vendor criticality

Not all vendors carry the same risk. A vendor with access to sensitive data or core systems should go through deeper assessment than one providing a low-impact utility service.

Use your risk scoring model to determine how deep to dig. Update question score weighting to reflect the risk.

Frequency and reassessment triggers

Vendor risk isn’t static.

Reassess vendors on a set schedule (e.g. annually for medium-risk, quarterly for high-risk) and any time something changes, such as scope expansion, an incident, ownership change, or compliance lapse.

Operationalizing and automating the process

A checklist only works if it’s used consistently. Operationalizing the process ensures vendor due diligence reviews don’t stall, get bypassed, or vary by who is running them.

Assigning ownership and timelines

Define who is responsible for each step. For example, procurement initiates reviews, security looks at controls, and legal finalizes the contracts.

Set clear timelines so assessments don’t hold up onboarding. Otherwise, unclear ownership means reviews either stall or get forced through just to keep things moving.

Linking findings to remediation actions

Assessment results should lead to informed decisions. If your assessments identify gaps, assign remediation tasks with deadlines and owners. This keeps issues visible and prevents them from being “noted and forgotten.”

Digitizing with GRC tools

Spreadsheets and email are hard to track and scale. Instead, use a Governance, Compliance, and Risk (GRC) platform to centralize vendor data, automate workflows, store evidence, and provide dashboards for oversight.

By digitizing the process, you’ll improve consistency, speed up approvals, and strengthen auditability.

How AuditBoard simplifies vendor risk assessments

AuditBoard’s third-party risk management (TPRM) capabilities bring structure, consistency, and visibility to the vendor review lifecycle, helping teams assess risk without adding administrative overhead.

Here’s how.

Centralized checklist templates and scoring

AuditBoard provides a single place to maintain your vendor assessment checklist and scoring framework.

Teams can use shared templates, reference documentation, and weighted models to evaluate every vendor against the same criteria. Evidence, approvals, and notes live alongside the vendor record to create a clean audit trail that’s simple to review later.

Workflow automation for follow-up and approvals

Instead of managing reviews through email threads and disconnected documents, AuditBoard routes tasks to the right people automatically.

This means follow-ups, reminders, and escalations happen in the background, and remediation items stay visible until resolved. That way, reviews keep moving without anyone manually pushing or chasing.

Real-time dashboard reporting

Live dashboards show you the state of your vendor risk management ecosystem at a glance, including risk tiers, open issues, overdue tasks, control gaps, and remediation progress.

With clear visualizations, leaders get context, not just raw data, and teams can drill into any vendor’s assessment history with full traceability.

Centralizing assessments and documentation in this way makes conversations with executives, auditors, and regulators clearer and more confident. Everything is traceable and grounded in data.

As Adam Hardy, Internal Audit Manager at TopBuild, says about using AuditBoard: “Sharing information with the external auditors, once it’s gone through our review, is streamlined and seamless and actually functions the way that you would expect it to.”

Bringing structure to vendor risk

A structured vendor risk checklist helps you spot potential risks early, stay compliant, and make decisions you can defend.

The key lies in having a consistent method of evaluation, so you’re asking the same questions, using the same scoring, and producing the same documentation every time.

This is where a GRC platform like AuditBoard can help. It standardizes checklists, centralizes evidence, and keeps reviews moving automatically. If you’re ready for a vendor risk process that’s consistent, traceable, and easy to defend, book a demo today.

About the authors

Kyle is an Information Security professional with a background in GRC and cybersecurity operations. With experience supporting clients at Accenture, Ernst & Young, and AuditBoard's Product Solutions Team, Kyle has a passion for helping organizations improve their information security posture and reduce risk. He now helps organizations navigate GRC transformation with a technology-driven approach.