Need and Importance of Vendor Off-Boarding:
Entities are likely to have several established contracts with third-party vendors that enable the business
to operate proficiently. However, most third-party relationships will inevitably cease as product designs
are updated, projects are completed, or better alternatives become available. In addition, terminations
may be necessary when third parties present unacceptable levels of risk, such as from security
exposures, performance shortfalls, financial challenges, or reputational problems.
Whatever the reason for terminating a vendor contract, it’s important to have a structured offboarding
process in place. Vendor offboarding is the practice of removing a vendor’s access to systems, data and
corporate infrastructure – and ensuring that other final actions are executed as stipulated in the contract.
The goals of vendor offboarding are to ensure a smooth and secure transition, minimize risk and
disruption to business operations, and protect sensitive information.
Many organizations overlook the importance of a secure and programmatic offboarding process, and
that exposes them to future risks. Few of them are listed below:
• Examines challenges in managing vendor offboarding;
• Discusses best practices to securely wind down business relationships; and
• Recommends a comprehensive vendor offboarding checklist to reduce risk and simplify the process.
Best Practices for Vendor Offboarding
A centralized process can help teams automate vendor offboarding, ensure its completeness, and
effectively mitigate risk.
Here are five best practices to follow during offboarding:
1. Communication Open to Vendor:
Mitigate the risk by keeping the lines of communication open with the vendor throughout the
offboarding process. This includes informing vendors of the offboarding timeline, answering any
questions, and providing clear instructions regarding what is expected during the process. A solution
that centralizes interactions with vendors, maintains tasks and timelines, and requires approval
workflows will greatly reduce the manual work required to address these issues.
2. Perform a Final Review of the Contract:
Review the contract’s termination provisions to ensure you have the right to terminate the relationship,
and if so, the proper timelines for doing so. A final review with legal and procurement can identify
scope creep and ensure that the vendor provided all the contractually obligated goods and services.
Finally, review KPIs, pending deliverables, and payments. If the vendor is supplying parts, make sure
warranty and support agreements that survive termination are clear.
3. Settle Any Outstanding Bills:
After thoroughly reviewing the contract terms and identifying remaining obligations for both parties,
ensure that you receive final deliverables and schedule final payments. Be sure to include any credits
or returns when calculating payments, as these may be difficult to recover after you terminate the
4. Revoke Access to IT Infrastructure, Data and Physical Buildings:
Vendors may require access to your systems, such as those used for purchasing, engineering, marketing,
and financial data. When offboarding a vendor, it is critical to terminate their access to your intellectual
property and other sensitive data.
• Ensuring you have a list of all vendor accounts and deleting login credentials.
• Providing the vendor with a complete list of all company-owned equipment they must return. When
repurposing returned equipment, be mindful of data retention requirements.
• Deauthorizing access to all applications, including VPNs and cloud apps for file sharing and
• Deauthorizing any access the vendor may have had through APIs, as these could be a useful attack
vector if a hacker later compromises the vendor.
5. Continuously Monitor Vendors for Potential Future Risks:
Even though the contract has been terminated and all tasks have been successfully completed, risks to
company’s systems and data, as well as compliance or reputational risks, can still emerge long after the
relationship ends. Continuously monitoring multiple risk vectors will ensure that your team has
extended visibility into potential future risks.