Vendors are an essential component of your organization and many times now a true extension of your organization. They can provide all the tools, products, and services necessary to keep everything running, from supplies to supporting internal processes. And yet, those same third-party vendors you rely on may be putting your business at risk.
So, how do you know whether your third-party vendors are leaving you exposed to threat?
The simple answer: Create a Vendor Risk Management Program.
This will help you safely get the most out of your supplier relationships, and taking the time to improve it goes a long way to building up your bottom line.
In this article, we’ll cover the basics of vendor management programs, what an effective one looks like, and some actionable tips to help you get started.
Why Third-Party Vendor Management Matters
Companies have expanded their reliance on vendors beyond the classic office supplies, travel, services and other goods. Most companies today rely on third-party suppliers for complex technology integrations and processes- all vital to the company.
Soft skills and good communication are no longer enough to facilitate and maintain a safe robust working relationship with your vendors. Reducing vendor-related risks is more relevant than ever. We refer to this practice as enterprise vendor risk management since it’s ultimately a form of risk quantification and mitigation.
With a risk management program, you will address decisions from all angles. For example, while a cheaper vendor might give you better revenue now, do those savings justify the additional risk you may be exposed to?
Many larger companies will refuse to do business with your organization if they believe that you or your vendors may be exposed to unnecessary risk. After all, no company wants to be associated with a major data breach or potentially find themselves in the middle of one.
Your choice of vendors can make or break the business, so it’s worth checking up with regular audits and full visibility into your vendors to ensure you’re getting the most from your vendor management processes.
Start Getting Value With
Centraleyes for Free
See for yourself how the Centraleyes platform exceeds anything an old GRC
system does and eliminates the need for manual processes and spreadsheets
to give you immediate value and run a full risk assessment in less than 30 days
The Components of a Successful Third-Party Vendor Risk Management Program
If you’re responsible for the vendor risk management in your organization, implement these steps, strategies and best practices to get the most benefit from the program.
Make Upper Management a Partner in Your Plans
Getting business leadership sponsorship is key to ensuring effectiveness and long term adoption of a program. Be ready to make your business case to the executive team. Being able to articulate why vendor risk assurance is critical with compelling data to show the benefits of improved supplier relationships.
Appoint Dedicated Resources
Appoint a dedicated team or resource to take responsibility for ensuring proper vendor risk management. The exact size of such a team depends on the needs of your business, and the amount of vendors you are trying to manage, that said the technology solutions you are using will impact the number quite drastically. Define their responsibilities considering the following:
- Vendor selection: Every new prospective supplier requires due diligence from the team. Choose the contractors and suppliers that are in line with your overall financial and business objectives.
- Transaction screening: Every purchase and contract made through an entity on the supplier list should also go through this vendor management team.
- Relaying communication: The team also acts as a liaison between other vendors and the stakeholders within the company, for example, between Human Resources and suppliers regarding professional services.
- Performance reviews: You need to make sure current vendors match up with your needs while keeping in mind how they will fit into your company in the future. Conducting regular performance reviews is another responsibility of this team.
- Auditing: Meticulous record keeping should be another responsibility of vendor risk management. Having a “paper trail” of documents, invoices, and purchase orders will help you audit your financial activity later down the line.
Categorize your Vendors
Not all vendors are created equal. Depending on the market each one serves, a supplier brings with it a unique set of risks, challenges, and benefits. It’s not an uncommon tactic to categorize vendors into groups depending on how they should be managed.
By doing so, you create a chance to focus your due diligence on the suppliers that need it the most, such as those providing mission-critical supplies and services, or those who result in the largest expenses.
Aim For a Consistent Contracting Process
A new focus on vendor risk management will help you streamline the contracting procedures of your business. Contracts define the terms with which you work with suppliers. A consistent process for determining these terms ensures you minimize risk and set clear expectations for every new deal.
The signing of the contract is only the beginning. Incorporate vendor onboarding procedures so that any post-contract activities and responsibilities are properly accounted for. Ensure that both parties remain compliant with the contract so that you will continue to gain value from the relationship.
Don’t Forget About Risk Management
Like any business relationship, a degree of risk is involved that can compromise trust and confidentiality. You often share sensitive information with your vendors and vice versa, so don’t forget to protect the emails and other points of contact.
Likewise, check with government regulators regarding risk management compliance, which can range from strategic risk to reputation risk and cybersecurity.
Know When To Quit
Think of vendors as employees; if one fails to provide the value you expect, then it’s time to assess and reconsider. Regular awareness of how much you are gaining or losing from each vendor is key to digging out problematic contracts.
If you do find it necessary to break up a relationship, develop a formal process for off-boarding. Most contracts have terms in place regarding the handling of sensitive information and assets during a termination.
Empower Yourself With Automation
With sourcing and vendor management becoming more complicated by the day, businesses are turning largely to software and other related technologies to address some of the challenges.
The power of automation is a game changer in vendor risk management. Automating your vendor risk program can allow you to reach many more vendors with less resources and at the same time improve both the vendors cooperation and accuracy of their responses. On top of this, collecting automated external data sources can help validate many of the self attested items the vendor provides, all this leading to a much more robust and data driven vendor risk management program.
The data from B2B purchases can come from a wide variety of sources like emails, documents, digital files, scans, and others. Orchestrating all this disparate data together in a consistent format matters when it comes to efficient auditing and recordkeeping.
Vendor risk management solutions specialize in automating the data collection process, and turning that data into actionable insights that highlight a vendor’s adherence to basic governance, risk and compliance, while giving the organization the tools to identify the highest risk vendors at a click of a button. Quantifying what level of impact a vendor has on the organization alongside what the likelihood of an attack them is will help you establish a vendor risk score in effort to prioritize those high risk vendors.
Create a Winning Vendor Risk Management Program With Centraleyes
Effective risk management is a winning strategy for any company. That’s why it’s more important than ever to ensure your vendors are practicing the same level of risk management.
Centraleyes’s 3rd party solution allows you to automate and orchestrate your vendor risk program. Through the platform you can easily onboard, assess and visualize vendor risk at scale. Through powerful automation you can leverage preloaded frameworks, which combine self attestation by vendors together with automated cutting edge threat intelligence the Centraleyes platform collects from the Dark Web, Public and vendor perimeter. With intuitive functionality managing vendor risk has never been easier and more efficient.
Are you interested to see how top companies leverage the Centraleyes platform to measure their vendor risk book a meeting today to learn more.
Start Getting Value With
Centraleyes for Free
See for yourself how the Centraleyes platform exceeds anything an old GRC
system does and eliminates the need for manual processes and spreadsheets
to give you immediate value and run a full risk assessment in less than 30 days
