CISM Information Security Programme Practice Question
A company is implementing a vendor tiering system for third-party risk management. Which TWO factors should be used to determine the tier of a vendor?
⚠ Common exam trap
The trap is selecting financial or size metrics (revenue, stock price) as tiering factors; candidates must focus on risk-based factors like data sensitivity and business criticality.
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
Criticality of the service provided by the vendor
Option B is correct because the criticality of the service provided by the vendor directly determines how much operational impact a failure or disruption would have on the organization, which is a primary driver of vendor tiering in third-party risk management. Option D is correct because the type of data accessed by the vendor (for example, PII, PHI, PCI, or intellectual property) determines the regulatory, privacy, and security risk exposure, and vendors handling sensitive or regulated data warrant a higher tier. Options A, C, and E are not appropriate tiering factors: marketing budget, stock price, and annual revenue reflect the vendor's financial or promotional posture rather than the risk the vendor poses to the organization's operations, data, or compliance obligations.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
Vendor's marketing budget
Why it's wrong here
Marketing budget has no bearing on the likelihood or business impact of a vendor failure, so it cannot determine tier. It is tempting because spend data genuinely feeds commercial and relationship-value analysis, which is the correct input when segmenting vendors for procurement attention rather than for third-party risk tiering.
- ✓
Criticality of the service provided by the vendor
Why this is correct
Tiering hinges on how critical the vendor's service is to business operations, since an outage or compromise of a core function causes disproportionate impact. This satisfies the stem by ranking vendors according to operational dependency, driving proportionate due diligence depth.
- ✗
Vendor's stock price
Why it's wrong here
Stock price reflects market valuation, not the likelihood or impact of a vendor breach, so it cannot drive tiering. It is tempting because financial health genuinely informs vendor viability assessments, which is the correct consideration when evaluating continuity and solvency risk rather than inherent risk tiering.
- ✓
Type of data accessed by the vendor
Why this is correct
The sensitivity and volume of data the vendor accesses determines breach impact and regulatory exposure, making it a core tiering input. This satisfies the stem by classifying vendors on data risk, so higher-tier vendors receive deeper assessments and stricter contractual controls.
- ✗
Vendor's annual revenue
Why it's wrong here
Annual revenue measures vendor size, not the data or service criticality that determines inherent risk tiering. It is tempting because revenue legitimately supports due diligence scoping and contract value thresholds, which is the correct use when prioritising commercial negotiations rather than assigning risk tiers.
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JA
Written and reviewed by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
Last reviewed September 2026 · checked against the official ISACA exam blueprint
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