Working with third party vendors can be both rewarding and risky. It can help your business grow, but it can also put you in danger if your vendors are not reliable. This article is going to discuss five essential things you need when working with third party vendors. These are vital components that will help ensure the success of your partnership with your vendor and to reduce the risk of an unfavorable outcome.
Clear Vendor Objectives
Before partnering with a vendor, you should have a clear set of objectives and expectations. Consider your company’s goals, budget, and timeline. These objectives should be discussed and communicated with potential vendors during the selection process. More importantly, they should be included in your contract and service level agreements (SLAs). This can help set and manage vendor expectations, thereby reducing the risk of any unmet deliverables.
Risk Management Plan
Your company should have a well-thought-out process for assessing and managing risks associated with your third-party vendors. Working with vendors can increase complexity and involve new risks, such as data breaches or compliance and regulatory failures. It is essential to have a robust risk management plan in place to help you identify, assess, and manage vendor risk effectively.
Reporting and Accountability Measures
Your vendor should be accountable and transparent in their relationship with you. To help ensure this, your contract should include reports and metrics that measure your vendor’s performance against your objectives regularly. This data-collecting should be automated and delivered on time daily or occasionally depending on your business model.
Escalation Process
Sometimes, and despite your best efforts, issues may arise, or there may be disputes with your vendors. That is why you need to develop a well-thought-out, structured escalation process to address any issues arising from the vendor’s non-performance or misconduct. The escalation process should be included in the contract and you must update it periodically.
Third Party Vendor Risk Automation Software
Third Party Vendor Risk automation software is an essential tool that streamlines risk management and reporting processes and helps to keep you one step ahead of any potential risks. While manual risk management is adequate for small vendor relationships, many larger organizations prefer automated processes to detect risks proactively and rapidly implement remediation plans.
Partnering with third-party vendors can be a complex business, and it is risky if not adequately managed. To manage the risk effectively, you need to establish clear vendor objectives, a robust risk management plan, and accountability measures. You also need clearly defined escalation processes and third-party risk automation software to streamline and automate your processes. These are the essentials that can help reduce third-party vendor risks and help ensure the success of your partnerships.
