Tips for Building An Effective VRM Workflow
Vendor Risk Management isn’t enough, of and by itself; it’s how efficiently you put it into practice that matters most.
Vendor Risk Management (VRM) is a discipline dealing with the continued management and assurance that the party vendors and services your company is using do not result in a negative impact on the business’ performance or any type of disruption to the current business workflow.
This process is meant to assist in managing and monitoring for potential risks. A risk management program must be methodical and organized to be effective.
What are the keys to a good VRM workflow?
By working in unison with your own risk management team and your vendor’s own risk managers, you can achieve that kind of organization. Together, you’ll be able to create a complete vendor assessment and remediation lifecycle workflow. Some tips for creating a successful vendor risk management workflow are:
- Know who your vendor risk managers are and to make sure they are making ongoing updates to the vendor information over the lifetime of your relationship.
- Make sure you have all vendor contact information, including email addresses and locations. This is important in your risk assessment process.
- Make sure VRM is able to be integrated with other applications that facilitate your risk controls and facilitates assessment questionnaires, if necessary.
- Create risk assessment templates, questionnaires, and document request templates.
- Make sure these templates are sent during the early stages with new or potential vendors to assess their potential risks as soon as possible.
- Have the ability to send to other collaborators and monitor the progress of these collaborations.
- Once assessments are completed, they should be recorded and made available to the risk analyst.
- Be aware of who the subject matter experts are in-house are for your due diligence document requirements.
Find a VRM system that has automated tools and features to allow your organization to spend less time monitoring vendors and more time analyzing the risk impact. Intuitive reporting and visualizations will help communicate relevant data into a concise report that enhances the decision-making process for organizational leaders.
Using automated workflows increases productivity and frees up staff time, strengthens your vendor risk management program, enables easy collaboration, and reduces employee workloads for assessing risk and managing due diligence. Various easy-to-read dashboards and reporting also simplify oversight, freeing up management and executive time.
Vendor risk assessments
A vendor risk assessment or a risk review will help you evaluate the potential risks that could arise from using a product or service from a specific company. It is a crucial process to your ongoing monitoring and due diligence processes. The vendor risk assessments will give you a better understanding of each vendor and their potential risks to your business.
Questions to consider when creating your initial vendor risk assessment process:
- Who are the vendors that are the most critical to your business and business operations?
- This provides a chance to determine what the due diligence requirements might be and who should be categorized as critical vs. high risk.
- What are the requirements for Regulatory Compliance?
- Pay attention to industry standards such as the International Standards Organization (ISO) which offers guidance for creating ideal business practices.
- How are you currently monitoring financial news, data security breaches, SEC filings, etc.?
- Are you able to see initial risk assessments as well as ongoing risk potentials?
- What types of information are your vendors required to gather, convey, and store on their own?
- Will any of the vendors have access to your servers, systems, networks, and records?
- If so, what level of access will they have to your records and data?
- Are you currently tracking all of your contracts that auto-renew?
Vendor risk reviews give a company the ability to sort their vendors into groups based on the types of services they provide (e.g. processors, marketing, maintenance, cloud storage, etc.).
This will also provide an opportune time to get a list of all vendors from the Accounts Payable department to make sure a vendor is not missed, or you are not looking into someone who is no longer providing services for your company. Through creating a risk assessment process and evaluating risk and compliance management, each vendor is given a rating. A full assessment template has now been created for them for future assessments and compliance controls.
This creates a great foundation for all future relationships and automation into risk management solutions, ongoing risk monitoring, and security controls.
Risk management involves forecasting and evaluation of financial, legal, and other negative factors together that could harm your business while identifying potential solutions or procedures to avoid or minimize their impact.
Reviewing third-party risk management and compliance allows you to review both inherent risk and residual risk. Inherent vendor risk is the first impression of risk that a new or potential vendor poses.
This allows for a more in-depth assessment of the compliance management policies and procedures they have in place to mitigate and manage potential risk concerns. It also provides a chance to reach out and see if vendors are being proactive and implementing stricter security procedures to reduce risk. Residual vendor risk is the amount of risk that may remain after the inherent risk has been identified and steps have been taken to reduce it.
Risk management allows the design of new business processes with adequate built-in risk control and containment measures for any perceived security risk or financial risk factor. It should be a way for your team to be able to avoid detrimental business risks altogether and create strong compliance management controls.
Risk management is constantly evolving, so policies and procedures should be ever-changing to allow for the increase in complexity and to continue to challenge businesses to develop strong, fully comprehensive risk management frameworks. Incorporating the right vendor risk management solutions will be key to their success.