Vendor Risk Management

Effective Vendor Risk Management: Using automation to achieve your goals.

The products and services your supply chain provides you with – and the problems they solve – are core to the value you create for your own customers.

The risks involved in these close relationships – interruption to supply, contractual breaches, compliance issues, or black swan events, as just a few examples – can be significant and have serious commercial, reputational, and even legal repercussions for your business.

These relationships are typically longstanding, deep-rooted, with complex operational, commercial, and contractual ties both ways. The vendor risks are complex, and vary from project to project and with each situation.

Vendor risk management involves and defining these risks early in a supplier-vendor relationship, through effective policy definition.  These risks should be policed regularly throughout the commercial relationship for compliance against the policy, alongside any contractual performance metrics. Finally, should the unthinkable happen? There needs to be a rapid assessment of the risks a business is exposed to, their implications, as well as the creation of options that can address them. An effective vendor risk management frameworks need to be efficient, cost-effective, transparent, and part of the business as usual of an organization. Automation can provide powerful capabilities that allow vendor risk information to be captured, monitored, and reported on, allowing a business to effectively manage key elements of their business success.

Complexity requires a multi-layered approach

Complex supply chains mean that companies have to spend significant time and energy managing them.

The complexity grows with the scale and geographic scope of company projects that the supply chain is involved with.

A best practice approach to supply chain risk management is to implement several layers of capabilities to prevent issues developing, to mitigate the risks when they do, and finally address the key issues when they demand a response.

The first layer is effective policy management, to fully capture the corporate and core project core requirements, alongside the specification of the project and the contractual and commercial performance terms. These polices may cover issues as diverse as:

The final element of vendor risk management is responding effectively to a vendor issue that has the potential to impact one of your core business processes. Here the ability to be able to have a searchable database for all the up to date information about that supplier, to understand the scale and scope of the potential issue, as well as the scale of its involvement with the business are very important. It helps to generate options, and inform the final plan, whether it be to seek a new supplier, or halt the impact business process or devise a customer communications plan.

Automation solves the challenge

The challenge for any organization is that much of this risk information is typically held in multiple silos, in multiple formats, whether on shared drives or applications (with limited access and expertise), in email systems, or worse, in the heads of staff members. While being highly flexible and aligned with how people manage their day-to-day, this approach lacks transparency and auditability, as well as being inefficient.

The optimal approach to effective vendor risk management is to utilize automation to provide an enterprise-wide risk policy and compliance framework, that is flexible enough to adapt to the differing departmental, project, and corporate policies. It should be easy to use, search, and provide reports. There is also a premium in implementing a solution that adapts to the needs and processes of the business, with no disruption.  

Vendor Risk Management

Policy Management

Compliance & Obligations Management

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