Businesses and organizations are becoming increasingly reliant on their third-party vendors, especially in rapid growth industries. As such, their exposure to high levels of risk also increases. For those businesses that do not have a successful vendor risk management framework in place, this escalation of risk can have a negative effect on the success of the business, both financially and reputationally.
If your organization or business has a large number of vendors, or is experiencing a period of rapid growth, then it is important to take responsibility to identify and evaluate the risks any possible vendor may present to your business. Thorough due diligence at this stage can help you evaluate and prepare for inherent risk, rather than simply reacting to issues and problems when they occur.
Forming strong business relationships with your vendors is key to both reducing risk and the success of your overall business strategy, so understanding your vendor and having a level of visibility into their business and connections must form part of the focus of your due diligence. By applying time and resources at this stage of the vendor risk management process, it will help protect your business, mitigate risk, avoid issues and lengthy investigations that can have an adverse effect on the running of your business and any financial or legal penalties due to non-compliance with regulations.
As extended enterprise and vendor networks expand and become more complex, so too does the regulations around the governance of business relationships. Compliance is becoming an ever-bigger issue for organizations or businesses and not only does your business have to maintain adherence to internal policy and procedure, but there is increasing pressure to guarantee compliance with external regulations from both your business or organization and that of your vendors.
To help legal and compliance teams, it is imperative that once the procurement stage is over, the vendor risk management process does not stop. Continual monitoring and diligence can effectively assess risk or threats before it causes damage to the business and can establish if your vendors are staying compliant with current legislation and regulations and still fulfilling their contractual business obligations.
From the procurement stage to the end of a contract with a vendor, the entire process needs to be correctly managed for risk. A comprehensive vendor risk management system or framework is essential if your business wants to be successful and remain so. Risk can be easily prevented or mitigated with a vendor risk management structure in place. This means your business can achieve sustainable success because you have the foundations to support it.
Although the various processes of vendor risk management may seem time consuming and unwieldy, there is now technology available to help manage your vendor risk and turn what can be a long, manual process, into an efficient, productive, and effective system. Vendor risk management provides a platform for business growth and stability, whilst managing the associated risks of increasing your third-party vendors. By streamlining all the procedures your business needs to complete to ensure the most value and least risk out of your vendor contracts, vendor risk management (or third-party risk management) can help your business not only switch from reactive to proactive risk management, but helps with compliance, vender governance transparency, vendor performance and protects your business at the same time as increasing productivity and revenue.
By implementing current technology, and integrating vendor risk management into your business or organizations, you stand to gain substantial benefits from having the framework in place for scalability and protection against future risk.
So how does having vendor risk management benefit your business?
As we highlighted earlier in the article, due diligence can play a vital role in the future success of your business and its relationships. Selecting the right vendor is crucial, therefore the diligence and research required must match the importance of this phase of vendor risk management.
Due diligence can help identify areas of risk with each vendor, although trying to manually gain this information can be a time sink for businesses, despite the level of responsibility involved when securing the right vendor. However, identifying the risks, the drivers behind them and where a vendor may leave your business exposed, ensures a correct assessment of whether the risk can be mitigated or managed against the possible value the vendor will bring to the relationship.
Vendor risk management or VRM, can streamline this process and help collect the data needed to create risk profiles. With features such as identity management, software can identify, authenticate, and investigate individuals and companies, helping to detect and prevent fraud and reducing the risk any vendor may pose to your business.
A lot of VRM software providers also have links to external databases, giving you automated access to advanced security profiling and a comprehensive background check of all possible vendors. For example, the TPR solution from Symfact offers links to Dow Jones, LexisNexis, Dun & Bradstreet and Refinitiv, so you can be sure you are getting the correct information to support your vendor selection.
Once each vendor has been rated for risk, you should determine which vendors may need further due diligence, whether they provide a critical role to your business function and if and how the relationship moves forward. By using VRM to analyse and assess the data collected, you can help determine if or where in the relationship you may be exposed to risk. This ensures the driving force behind any decision of your procurement and compliance teams are firmly rooted in fact.
Centralized contract storage
Document and data storage can be a pain point for businesses, especially when trying to stay compliant with data regulations. All VRM software platforms offer an online central repository for contract and document storage.
Not only does this ensure version control and a single source of truth available for anyone in the organizational hierarchy but allows for access and visibility during the course of your vendor contracts and simplifies the on-boarding process.
By having VRM in place to compile and consolidate the information you need from data sources, risk profiles can be easily assessed and categorized into levels of risk. With the level of oversight, a central repository can offer, your business can prioritize the vendors or processes where the risk may be higher and ensure any further research and due diligence is done based on fact. This helps adhere to the regulatory responsibilities' businesses have when forming a relationship with a vendor.
As compliance with regulations, both internal and external, forms a large part of the continued risk businesses must face, centralized storage can help provide protection with the safe control of all information. The handling and storing of data have now been heavily regulated, so a VRM that supports a safe location for all your contracts, documents, SLAs, and data can help avoid liability and non-compliance penalties.
Performance analytics and monitoring
The continued monitoring of your vendors can often be overlooked as part of a vendor risk management system but is a crucial part of a robust and successful framework.
VRM offers risk analysis and automated tracking of any vendor, metrics or set KPI’s or KRI’s in the contract. By continually assessing and reporting of risk, businesses or organizations can be proactive to any issues that arise during the vendor relationship and whether obligations are being met and regulations are being complied with.
By optimizing your third-party risk management by using the tools and features included as part of VRM , you can continually monitor all your vendor network. This allows you to regularly assess for risk and project long-term revenue. If you already have VRM processes in place, many software providers can integrate any features a business needs to improve their overall risk management into existing systems and risk framework and as part of a broader governance and risk strategy.
We have outlined some of the features included in the risk management software offered by Symfact as an example of the features you need to optimize your VRM:
- As businesses expand and relationships change and grow between your business and your vendors, risks also change and need to be managed. This means there must be a certain level of configuration ability within your software. Symfact has an access control interface, allowing you to have complete control over what changes can be made, and who has access, which improves data security and makes you less vulnerable to outside influences and attacks.
- An incident capture and reporting suite. This ensures all incidents are stored and automatically assigned for investigation, whilst analysis tools can assist with legal protection for you during the length of your relationship with a vendor. This helps you manage risk and issues quickly and with the least amount of disruption to the running of the business.
- Reference earlier in the article, identity management does not just help with investigations into possible vendors, but can help with understanding your customers, employees, and vendors, making your business more secure and profitable.
- When launching new vendor relationships, the VRM approach from Symfact can design, build, and publish intelligent questionnaires to help identify any risks before your vendor is even on board, making vendor selection far easier.
- If you have a large amount of vendor contracts, it is imperative that you can easily track any changes made. Everything needs to be accountable to ensure compliance with regulations. As such, every action made in Symfact’s platform is fully tracked in the audit logs, along with a timestamp and the user’s information.
- If you are a larger business with a lot of vendors to manage, then look for a self-reporting or custom feature in your VRM software. This drastically reduces the time spent conducting reports on each third party and makes risk management far more efficient.
Managing vendor risk and ensuring both your business and third parties maintain strict adherence to regulations can often be a complex process for any department(s) tasked with the governance of vendor risk. Vendor risk management is designed to make the entire process simpler and help protect your business by assessing, monitoring and mitigating risks that can have a detrimental effect on your relationships and business, as well as ensuring compliance with internal policies and outside regulations. By optimizing your approach to vendor risk management and implementing a robust vendor management platform like the third-party risk management software offered by Symfact, you could make a positive difference to your business. So, if you feel your business or organization could benefit from using risk management software as part of your broader governance and risk strategies, then please do not hesitate to contact us here at Symfact. We will help you find the right solution for your business.