Why manage vendor selection?
Outsourcing means putting selected processes in the hands of specialized partners to let companies focus on their core business. The more important the process a company decides to outsource, the stronger the impact the vendor has on the business. Wrong decisions in this area can result in serious consequences, so companies pay a lot of attention to vendor management and use best GRC software to mitigate the risks.
- Failure to select the right vendor carries many risks
- It is the buyer who is most often responsible for the vendor’s mistakes
- Vendor risks can and should be managed. The best way to do this is by using with vendor risk management tools.
From the formal point of view vendors, subcontractors, data processors, suppliers or third parties are not elements of buyer’s organization. However, because they carry out tasks closely related to its people and processes, they should be treated as its employees. In fact, they often are, if you look at how closely they work with the buyer’s teams and how much trust and access to information they have. Choosing a vendor is like hiring new people or whole new teams. It means that looking for a vendor is like searching a well-tailored employee meeting company needs.
Poor choice of vendor – what can go wrong?
The answers is: everything! The subcontractor’s failures in performance may be fraught with serious consequences for the buyer regardless of the scale of the business.
The list may include:
- Loss of reputation
- Penalties for non-compliance (regulation)
- Legal responsibility
- Operational and business interruptions
Of course, buyers can hold their suppliers accountable in court. But do their customers care? We all know cases where 3rd parties’ errors (intentional or not) caused serious crises. Does anyone recall the vendor’s name? Probably not. But customers and users are great at remembering brands that let them down. Vendor rarely takes the bullet and it’s usually the buyer who must bite it.
Start with the basics and use the right tools
Companies should organize vendor risk management processes to choose their vendors and build effective relations with them. This process means controlling the list of suppliers and the services they provide. It also aims to ensure 3rd party compliance and risk control by, among other things, auditing those who generate risks and responding quickly when necessary. If companies are operating on a large scale in a regulated environment, the support of innovative vendor risk management tools is essential.
AdaptiveGRC is one of the best GRC software that allows you to manage all of your third-party compliance and risk activities in one solution. As the pool of information about your vendors grows, so does your ability to more quickly identify and control potential compliance gaps and other vendor risks.