Estimating Vendor Risk
One of the not-so-fun things to do when you’re in business is to analyze risk management. This type of analysis can cover a wide range of unwanted exposure that could derail your efforts. For many, it is something that takes a back seat to what they may feel to be more pressing issues in the business world and instead give primary focus to their marketing and sales departments. Sadly, thinking in this way could do more damage to the bottom line than any gains they might make with a good marketing plan.
More progressive businesses recognize that there are inherent dangers in failing to carefully analyze their vendor risk and that this is one element that needs to be included in their overall management strategies.
We live in very progressive times and things are constantly changing in the business world. Along with those changes are the risks that a company may be exposed to. As a result, this type of analysis needs to be reconsidered on a regular basis. A well-planned out risk analysis may be good for this year, but the following year exposure may have moved into other areas.
Unlike other areas of business compliance, vendor risk management has the misfortune of not being governmentally regulated. Because of this, there is little motivation to give it the kind of attention it needs. Still, recognizing the danger signs can prove to be highly beneficial in helping your business to avoid many of the mistakes that could cost a great deal of money.
It is not enough for a business to know where they may be vulnerable to losses. It is also important for them to extend that knowledge to the vendors they are doing business with. For example, companies may need to take credit card purchases in order to get more sales. This may require them to maintain a great deal of personal data on their customers that needs to be kept secure. According to one recent study, in 63% of data breaches that had occurred, it was the third party (or the vendor) that failed the business rather than the company itself. In such cases, a business may not be at fault, but nevertheless, such a breach will cost them, no matter what they do. This doesn’t just happen in cases of data breaches, but can also involve their couriers, drivers, suppliers, etc.
For this reason, every business needs to take the time to carefully evaluate their exposure to risk via their vendors. When something happens, a company cannot just tell their customers “it’s the other guys fault.” Whatever the case, if it happened on their watch, consumer perception will land on their door, especially if the vendor at fault is an obscure company that the public knows little about.
So, when formulating the risk assessment of your company, you need to also thoroughly vet each vendor you use. This includes not just understanding the services they offer, but also their IT systems, their practices, and what measures they have in place to protect your interests.
While this may take a little time and commitment, it can save a company in many ways. It can help to avoid getting caught up in lengthy lawsuits, bad press, or poor customer reviews on forums and review sites. All of these and more can ring a severe death blow to any company.
This is why analyzing a vendor should include more than just the mechanics of a business. It should also include their company values, their mission statement, and the steps they take to follow through on those things. No business owner (large or small) can afford to work with vendors that haven’t taken the time to assess such matters and develop a working plan to prevent risk in their own company.
Businesses need to be more proactive in these highly progressive times. Risk management is an issue that is growing with each passing day. While there is no need to micromanage every aspect of a vendor’s business, one must be more engaged in where that business is going and how they plan to get there to know if the partnership will be a good match for them.
Risk visibility - the ability of a company to monitor all vulnerabilities - has been a long-held issue when working with vendors. An anonymous call center hotline can offer your staff a crucial means to report downstream issues in the supply chain, such as those that arise when working with third parties. Ethix360’s CaseTrac™ enterprise solution features access to our world-class call center with a whistleblower hotline, as well as email, texting, and Interactive Voice Response intake methods for reporting concerns. Contact us today for a free demo!