Policy and procedure management is the foundation that connects board-level governance with day-to-day operations. With hybrid work now firmly established and growing emphasis on 

 — alongside constant regulatory and business change — effective policy management is more critical than ever.

Yet there's often a significant gap between board-level policymaking and organization-wide adoption. According to

, 60% of organizations report their governance and finance systems are either completely siloed or only partially integrated, with just 4% achieving full platform integration. This fragmentation extends to policy management, where well-crafted policies frequently end up in a virtual cupboard and are forgotten.

Boards face a fundamental challenge: How do you set strategic policy direction while ensuring those policies translate into consistent organizational behavior? The answer lies in establishing clear accountability, structured processes and technology-enabled oversight that bridges the gap between governance vision and operational reality.

This guide explains how boards can implement effective policy and procedure management by covering:

What policy and procedure management is and why it matters for organizational governance

The full policy lifecycle from creation to retirement

How boards balance strategic direction with appropriate delegation

Best practices for documenting, reviewing and updating policies

Common risks during policy change, and how to mitigate them

Policy and procedure management is the systematic process of creating, approving, communicating, maintaining and enforcing policies and procedures across an organization. It encompasses the full lifecycle from initial drafting through review, approval, distribution, attestation and eventual retirement.

Effective policy and procedure management connects board governance with operational execution. Your policies set out your corporate position, establishing your standpoint and supporting your goals and values. They provide the bridge between leadership vision and management tactics — aptly described as the "collective voice of the board."

, we need to consider the importance of policy over all.

Why is having policies important? Your business policies set out your corporate stall, establishing your standpoint and supporting your goals and values.

Your policies give your business operations a structure and framework that underpin your 

 programs. But of course, setting policy is only half the battle. Life would be easy if boards could set the organization on its chosen course and sit back to enjoy the ride.

In practice, there can be a chasm between board-level policymaking and business-wide adoption. 

 — an annual survey of more than 200 U.S. public company directors conducted in partnership by the Diligent Institute and Corporate Board Member — shows this gap is widening. The findings reveal that 53% of directors say they don’t receive real‑time data between meetings, and 47% want more structured full‑board risk discussions — expectations that put even more pressure on having up‑to‑date, well‑documented policy frameworks. This is where policy management is vital.

Effective policy and procedure management follows a complete lifecycle:

: Developing policy content that reflects board direction and regulatory requirements

: Routing policies through proper approval chains with documented sign-offs

: Ensuring policies reach all relevant employees and stakeholders

: Confirming employees understand and acknowledge their obligations

: Tracking adherence and identifying gaps before they become violations

: Evaluating policies against changing requirements at regular intervals

: Formally removing outdated policies to prevent confusion

Each stage requires clear accountability and documented processes. Organizations that skip stages, particularly attestation and regular review, discover gaps only during audits or crises, when remediation is most expensive.

The board's responsibilities: Knowing when to step in and when to step back

Directors play a central role in determining policy, but should employ a lighter touch on implementation and oversight.

The board should determine company policies and delegate the implementation of those policies to management, confining the board's role to monitoring and evaluating this implementation. This sounds reasonable when you consider that delegating appropriate decision-making is recognized as one of the 

Understanding when to step back is a skill all board directors should refine when it comes to policy. Your leadership team has been appointed for their collective expertise and judgment and should be allowed to exercise them.

Setting strategic direction without micromanaging

Your policy statements should be broad yet concise, designed to outline your corporate purpose and position rather than providing step-by-step implementation actions. This approach enables the business to take ownership of policies, tailoring them to fit specific circumstances and updating them as needed in response to internal or external change.

Effective delegation doesn't mean disengagement. Boards retain crucial accountability in periodically reviewing and evaluating policies. The 2026 What Directors Think report found that 58% of directors want less time spent on presentations and more time for strategic planning — a clear signal that boards continue to prioritize forward-looking strategic discussions over operational detail, a finding that applies directly to policy oversight.

"There's often an inclination to avoid bad news, with a hope that problems will be resolved before they escalate to the board level," says Pav Gill, CEO of Confide. "But boards should proactively request access to whistleblowing reports. It's essential to see firsthand how secure, effective and current mechanisms are. Only then can you be confident in the integrity of your compliance framework."

Building cross-functional policy governance

While boards set direction, effective implementation requires coordinated involvement across multiple organizational functions. Large organizations increasingly establish cross-functional policy committees that handle lifecycle activities day-to-day. These committees typically include representatives from:

This structure ensures policies reflect operational reality while maintaining alignment with board-level governance direction.

What does best practice policy management look like?

What constitutes best practice in policy and procedure management? It encompasses several interconnected activities that transform policies from documents into organizational behavior.

When organizations start out, they often take a relaxed approach to documenting policies. A small number of employees and an entrepreneurial ethos can drive a reluctance to overly formalize procedures. As a business grows, though, documenting policies and processes becomes more critical.

Documenting your policies enables you to take a more consistent approach — especially if your organization consists of several locations or 

 — facilitating proactive risk management and giving boards comprehensive oversight of organizational operations and performance.

When you ask, 'How often should we review our corporate policies?' answers vary. But best practice is to review policies every one to two years — some experts 

. And of course, if organizationally you have undertaken change, this will usually demand a change in your policies and procedures.

The most lovingly crafted policy is no good if the regulation it refers to was superseded years ago, or if legislation has been expanded since it was drafted, or if your business no longer resembles the organization described in the policy.

. External events may have caused you to revisit your business 

. All of these should trigger a review of your corporate policies.

3) Harnessing best practice policy management to drive GRC

Policy management is vital in itself, but from a board perspective, its importance in helping to create a risk-management-focused organization shouldn't be overlooked.

A best practice approach to policy management gives you a framework for your 

 — enabling you to embed GRC at every level of your business. Having well-defined policies is a vital starting point for any programs designed to improve governance, risk or compliance. Policy management enables you to see where documented procedures are lacking and where your approach could be improved.

Mitigating risk during company policy change

All change initiatives, including policy changes, come with execution risks. Whether you're undertaking an organizational restructuring, implementing new AI governance frameworks, or adapting to regulatory changes, any change to business policy and strategic management brings several risks that require careful management.

Risk 1: Changes fail to drive improvement

Not all changes are for good, and every policy tweak carries the chance that the new approach won't better the previous one. Boards need to communicate a sound rationale for change, underpinned by data that evidences the shortcomings of the outgoing policy.

Before approving significant policy changes, directors should ask:

What specific problem does this change address?

What evidence supports the need for change?

What are the unintended consequences we should monitor?

Risk 2: Management lacks capacity to implement changes

Management must remain focused and positive (although realistic) about the project, particularly any slippages in timescales, to inspire commitment and buy-in. Resource constraints are real: according to Diligent's Transaction Readiness Report, 56% of organizations cite limited resources as their top challenge.

Boards can mitigate this by ensuring adequate resources are allocated for implementation, setting realistic timelines that account for operational demands, providing clear escalation paths when implementation encounters obstacles and monitoring progress without micromanaging execution.

Risk 3: Employee resistance undermines adoption

Change is often met with skepticism, fear and resistance. Boards can help mitigate this by introducing policy change in small steps, rather than overhauling too much at once, and by leading by example in adopting new practices.

Turning reluctant employees into advocates of policy change demands clear communication and a pragmatic approach. Change should never be forced but should be bought into at all levels.

This requires clear explanation of why changes are necessary, involvement of affected teams in implementation planning, visible leadership commitment to new policies and recognition of early adopters and compliance champions.

Learn how automated policy management reduces compliance risk while freeing resources for strategic priorities.

Build compliant, audit policies

How AI transforms policy and procedure management

For boards overseeing complex policy frameworks across multiple jurisdictions and business units, technology has become essential infrastructure rather than an optional enhancement. Centralized policy and procedure management platforms address the fragmentation challenges that undermine governance effectiveness.

1. Automated workflows and approval routing

Policy and procedure management software like 

 provides configurable workflows that route policies through proper approval chains automatically. Rather than relying on email chains and manual tracking, policies move through creation, review and approval stages with full audit trails documenting who did what and when.

For enterprise organizations managing thousands of policies across global operations, these automated workflows ensure consistency while reducing administrative burden. Customizable workflows adapt to your organizational structure and approval requirements rather than forcing rigid processes.

2. Policy attestation and comprehension tracking

Automated attestations fundamentally change policy governance by providing documented evidence that employees acknowledged and understood their obligations. Policy Manager automatically tracks acknowledgment, delivers comprehension testing where appropriate and escalates incomplete attestations without manual follow-up.

This capability is particularly valuable during audit preparation and regulatory examinations. Instead of scrambling to compile evidence of policy compliance, organizations maintain continuously updated documentation that demonstrates governance maturity.

3. Version control and audit-ready documentation

Policy changes create compliance risk when organizations cannot demonstrate which policies were in effect at specific times. Centralized policy management maintains a complete version history, approval tracking and audit trails that support regulatory compliance and litigation defense.

Advanced analytics transform this documentation into actionable intelligence. Organizations can demonstrate policy compliance metrics to investors and auditors while identifying departments or locations that require additional attention.

4. Integration with broader GRC infrastructure

The most significant benefit of modern policy management platforms comes from integration with broader governance, risk and compliance systems. Policy Manager connects with the 

 to ensure policy management aligns with risk assessments, compliance monitoring and board reporting.

Rather than managing policies in isolation, organizations connect policy frameworks to the risk and compliance activities they're designed to support.

Effective policy management requires boards to set strategic direction while allowing management to oversee implementation. Get this balance right, and you'll enjoy better documented processes while strengthening your entire GRC strategy.

See how Diligent delivers audit-ready policy management that scales with your organization. 

Frequently asked questions about policy and procedure management

How often should policies and procedures be reviewed?

Best practice is to review policies at least every one to two years, with interim reviews triggered by material changes. These triggers include regulatory changes, corporate restructuring, M&A activity, IPO preparation, technology adoption and crisis events that expose policy gaps.

Policy and procedure management platforms automate review cycles and reminders, ensuring policies stay current without relying on manual tracking. This continuous approach prevents the common problem of discovering outdated policies only during audits or incidents.

What is the board's role versus management's role in policy management?

Policy and procedure management: A strategic guide for boards

For general counsels and chief risk officers at large organizations, enterprise vendor risk management (VRM) sits squarely on the board agenda. Your organization likely depends on hundreds or thousands of third parties for critical services — and each one represents potential exposure to cybersecurity breaches, operational failures and regulatory violations that land on your desk.

 by Diligent Institute and Corporate Board Member, 84% of boards have changed their scenario planning approach in the past five years due to heightened risk, with 45% now incorporating supply chain disruptions into their crisis preparedness exercises.

Yet only 6% of directors cite strengthening third-party and supply chain risk oversight as a top 2026 priority, revealing a gap between recognized exposure and dedicated governance attention.

Regulators have noticed. Frameworks like 

 in Australia and the UK FCA's Critical Third Parties regime — all effective in 2025 — now require documented vendor oversight with structured processes, continuous monitoring and direct board accountability. The days of informal vendor management are over.

You already know third parties create exposure. The hard part is building governance infrastructure that satisfies regulators while actually reducing real risk — not just checking compliance boxes.

What enterprise vendor risk management is

Why third-party risks demand board attention

Core components and governance structures for an enterprise VRM framework

How technology enables enterprise-scale vendor oversight

What is enterprise vendor risk management?

Enterprise vendor risk management is the systematic identification, assessment, mitigation and monitoring of risks across your entire third-party ecosystem — from strategic partners and technology providers to outsourced service providers and supply chain vendors.

VRM ensures that the use of service providers does not create unacceptable potential for business disruption or negative impact on business performance. This strategic focus differs from traditional vendor management, which emphasizes controlling costs and negotiating contracts.

The key distinction: You remain fully accountable for third-party performance as if the activity were conducted internally. Using third parties does not diminish your board's and senior management's responsibility for safe and sound operations. This retained responsibility doctrine is why vendor risk management belongs on the governance agenda, not just in procurement.

The business case for elevated vendor risk governance is compelling. Supply chain and third‑party vendor compromise breaches cost organizations an average of USD 4.91 million — higher than the global average breach cost according to 

. These elevated costs reflect complexity in identifying compromise points across multi-tier vendor relationships and contractual limitations in accessing vendor security logs during investigations.

Yet supply chain accountability ranks among the most underestimated compliance risks according to the 2026 What Directors Think report, with only 15% of directors recognizing the gap — even as 26% expect cross-border trade, export controls and sanctions compliance to demand significant board attention this year. The disconnect highlights how third-party exposure often flies under the radar until a compliance failure surfaces.

Organizations without safeguards — especially those with cross-border interests in politically sensitive industries — face heightened risk. Regular top-down reviews help assess risk tolerance and preparedness for escalating tensions.

Core components of an enterprise VRM framework

An effective enterprise VRM program rests on five pillars:

1. Centralized vendor inventory with risk-based tiering

Start with a complete vendor inventory from procurement, accounts payable and IT systems, capturing services provided, data access levels and operational criticality.

Apply specific criteria to identify critical vendors: access to customer personal data or financial information, services affecting revenue-generating operations, regulatory compliance dependencies or no viable alternative vendor within 90 days.

Implement a tiered classification system:

 access sensitive data, support revenue-generating operations, create single points of failure or carry significant regulatory compliance obligations. These warrant thorough due diligence, quarterly assessments and continuous monitoring.

 provide standard business services with limited data access and available alternatives. These require focused assessments and semi-annual reviews.

 deliver commodity services with no data access and minimal business impact, justifying basic questionnaires and annual reviews.

Document your risk tiering methodology in writing and obtain board approval. This ensures your classification captures the full risk profile of each vendor relationship and enables proportionate oversight.

2. Multi-layered governance with clear accountability

Boards hold ultimate responsibility for approving 

 policies and risk appetite, receiving regular reporting on significant risks and incidents, ensuring adequate program resources and holding management accountable for effectiveness.

You need to define accountability across functions. For example:

Procurement manages vendor selection and contracts

Information security conducts risk assessments

Business units own relationship management

"There needs to be collaboration between risk and the business, vertically up and down, but then also horizontally across the organization," says Michael Rasmussen, CEO of GRC Report. "The problem is there are silos."

3. Lifecycle management from planning to exit

Structure your program around the lifecycle stages regulators expect: planning, due diligence, contract negotiation, onboarding, ongoing monitoring and termination. Each stage builds on the previous one, creating a continuous cycle of 

Pre-contract due diligence should be proportionate to vendor criticality. Screen against 

, EU and UN sanctions lists, verify financial stability with audited financial statements and confirm beneficial ownership structures.

For critical vendors, require independent security validation — SOC 2 Type II reports, 

 certifications, recent penetration testing results and documented incident response capabilities. Relying on vendor self-assessments alone is like accepting management assertions without independent audit verification.

Monitoring frequency should match risk tiers. Critical vendors need continuous automated monitoring with quarterly reassessments. High-risk vendors require semi-annual reviews, medium-risk annual and low-risk biennial.

But schedules alone aren't enough — supplement with event-driven triggers. Material scope changes, security incidents, M&A activity or financial distress should prompt immediate reassessment regardless of where you are in the cycle.

Structured offboarding should begin 90-180 days before termination. Revoke all access comprehensively, ensure data return in usable formats and obtain written certification of data deletion within 30 days. Poor exits create lingering risk, so treat offboarding with the same rigor as onboarding.

4. Risk appetite aligned with enterprise risk management

Document risk appetite statements defining acceptable vendor risk levels — zero tolerance for critical vendors without SOC 2 Type II certification, maximum concentration limits for critical services and minimum control maturity levels for data processors.

Additionally, position vendor risk within your broader

 rather than maintaining it as an isolated program. Continuous monitoring findings should feed into enterprise risk registers, executive dashboards and strategic planning processes.

Third-party breach involvement has escalated dramatically. This makes contractual protections your primary legal defense when vendor failures occur.

 Require vendors to notify you within 24-48 hours of any actual or suspected unauthorized access. This timeline supports incident assessment and regulatory notification planning under 

 Negotiate provisions covering data breaches, regulatory fines, legal defense costs, notification expenses and business interruption losses. Start broad and negotiate specific carve-outs rather than accepting narrow initial proposals.

 Include unrestricted rights to verify compliance, conduct security assessments and review subprocessor arrangements. Additionally, specify "upon reasonable notice" for routine assessments but "immediately" for suspected breaches.

 Implement risk-based cure periods with shortened timeframes for security breaches. You should also address data return, certified destruction and preservation requirements.

Require cyber liability insurance that covers your organization. Also, prohibit unauthorized subcontracting and include flow-down obligations ensuring subcontractors meet equivalent security standards.

Get real-time alerts on emerging vendor risks before they become compliance issues.

Proactive vendor risk visibility

How technology enables enterprise-scale vendor risk management

Manual vendor risk processes struggle to keep pace with the scale and velocity of enterprise third-party ecosystems. Spreadsheet-based vendor tracking, email-driven assessments and document-based compliance reporting leave gaps that compromise oversight — often discovered only during audits or regulatory examinations.

"Risks are all integrated; they're not isolated," says Edna Conway, Board Director and Executive Advisor. "Where can I go to get that information a) swiftly, b) in a palatable, absorbable way? That's what we're looking for."

Purpose-built governance platforms eliminate this fragmentation, transforming reactive vendor compliance into proactive risk management.

 unifies governance, risk and compliance functions into a single connected infrastructure — reducing the silos that allow vendor risk gaps to go undetected. Within the platform, multiple solutions directly address the challenges that undermine third-party oversight quality.

 delivers comprehensive vendor lifecycle management from onboarding through continuous monitoring:

 provides exclusive ownership and affiliation network data, enabling Know Your Vendor processes that verify beneficial ownership, sanctions exposure and regulatory risk before engagement.

 achieves 70% faster adverse media review compared to manual processes, surfacing reputation risks and compliance issues as they emerge rather than during periodic assessments.

 delivers real-time alerts on new risks — sanctions designations, adverse media, financial instability — ensuring your team responds to emerging threats before they become incidents.

 provide visibility into your vendors' vendors, addressing the supply chain transparency that DORA and other frameworks now require.

 enable vendor self-service for assessment completion, accelerating onboarding while reducing administrative burden on your team.

For organizations with technology-heavy vendor portfolios, 

 provides specialized capabilities for IT and cybersecurity risk:

 from BitSight and SecurityScorecard deliver objective, continuous visibility into vendor security posture without relying on self-assessments.

 (NIST, ISO) enable consistent assessments across your technology vendor population while automated alerts and SLA tracking support continuous oversight.

 prioritizes resources where they matter most — ensuring critical SaaS providers and cloud infrastructure receive appropriate scrutiny while streamlining oversight of lower-risk technology vendors.

These integrated capabilities ensure that vendor risk management moves from policy documents to operational reality — providing the accountability, transparency and oversight that regulators and stakeholders increasingly demand.

Whether you're establishing your first formal third-party risk management program, preparing for DORA compliance or demonstrating vendor oversight maturity to investors, integrated governance technology provides the accuracy and efficiency that manual processes cannot match.

 to see how Diligent helps organizations transform vendor risk from fragmented oversight into unified, board-ready capability.

Frequently asked questions about enterprise vendor risk management

What is the difference between third-party and fourth-party risk?

Third-party risk involves the vendors and service providers your organization contracts with directly. On the other hand, fourth-party risk extends to your vendors' vendors — the subcontractors, cloud providers and service companies that your direct vendors rely upon.

How often should vendor risk assessments be conducted?

Assessment frequency should align with vendor risk classification:

Critical vendors require quarterly detailed assessments with continuous automated monitoring between reviews

High-risk vendors need semi-annual assessments

Medium-risk vendors warrant annual reviews

Low-risk vendors can be assessed biennially or when triggered by specific events

Beyond scheduled assessments, event-driven triggers like security incidents, M&A activity or material scope changes should prompt immediate reassessment regardless of the standard schedule.

What should be included in a vendor risk report to the board?

Board reports should answer four questions: Which critical vendors underwent assessment this quarter? Which vendors exceeded risk thresholds requiring remediation? What percentage of vendors meet baseline security standards? Where are we vulnerable if a vendor fails tomorrow?

Present 5-7 key metrics with traffic light indicators, lead with business impact rather than technical scores and include both leading indicators (concentration risk, assessment coverage) and lagging indicators (incidents, breaches, disruptions).

Ready to build board-ready vendor risk management that satisfies regulators while reducing real risk? 

 to discover how Diligent delivers unified third-party oversight.

Enterprise vendor risk management (VRM): Building board-ready programs that reduce real risk

This article originally appeared in our January 29th edition of the Diligent Minute Newsletter. For more insights like these, delivered straight to your inbox, subscribe 

AI is top of mind for directors this year, the connective tissue linking growth, risk, human capital and compliance. That’s what we found in our 

 report, an annual survey of U.S. public company directors produced in partnership with Diligent Institute and Corporate Board Member. More than 200 directors shared how they’re navigating strategy, risk, talent and governance in an environment defined by volatility and technological change. The result is a rich window into what’s really on board agendas in 2026 — and what may be missing.

One in four boards view technological disruption, including AI, as among the greatest opportunities for their companies, yet only a small minority cite it as a top risk — highlighting an optimism that may not fully account for how quickly AI‑native competitors can upend business models.

Some headline AI‑related stats from the survey:

 of directors say pursuing growth through M\&A and strategic partnerships is a top priority for 2026, while 

 cite deploying AI technology across the business and 

 point to growth through new products or new markets.

 say technology adoption and integration will be a primary focus of capital investment in 2026, outpacing M&A and market expansion.

 of boards report that AI is fully embedded in risk oversight and decision‑making; 

 of directors expect AI and technology‑related regulation to demand the greatest compliance‑related board attention in 2026, and 

 say AI and technology regulation is the most underestimated area of compliance oversight today.

When asked how to strengthen risk oversight, 

 want enhanced use of AI‑powered data and technology tools, and 

 say access to AI‑powered technology for board work and oversight would help optimize governance processes overall.

Diligent

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