Key components in building an effective Vendor Management Program

1. Key components in building an effective Vendor Management Program Nowadays, many of the businesses are depending on vendors to improve their operations for specialized projects and services to customers. On the other hand, this is allowing the third- party vendors to get access to an organization’s security system and other sensitive information that can put the business and its customers under risk. An enterprise-wide approach to vendor management is often a necessity in an organization, however, the enterprise fails to implement it due to several barriers like limited adoption of vendor management policies, lack of authorized contact for enterprise vendors and standardized vendor management process, etc. Since third-party access is a risk, it becomes important for businesses to choose the vendors, evaluate them, and monitor them throughout their term of service. The implementation of a robust vendor management program helps in building a proactive approach to risk management, thereby providing a competitive advantage to businesses. Designating a Program Owner Assigning a third party to access the secure and sensitive information of an organization is always a risk. So, the organization should designate a program owner to monitor and evaluate the vendors and to completely own the vendor management program end-to-end. This includes approval of vendors and ensuring that the vendors agree to the approved policies and procedures of the company. Businesses should not look for a decentralized approach when it comes to engaging vendors that are based on relationships. Any decision should be based on considering the risk factors to the organization and its customers. Comprehensive Policies and Procedures Before assigning any vendors, the company should develop written policies and procedures to provide a clear understanding of the governance of the vendors. These procedures and policies also provide the framework to ensure that the company works in compliance with the needed regulatory requirements. But all the vendors don't need the same level of attention. Creating a risk-based approach helps in creating better efficiency and efficacy in the vendor management process where more attention is given to high-risk vendors than the moderate or low-risk vendors. New Ways to Risk Rate Vendors The vendor management program must be able to differentiate the procedures, policies, and other documentation requirements among high, medium, and low-risk vendors. This approach will help in allocating the resources where high-risk exists by still maintaining the efficiency of those low-risk vendors. Companies should be well-aware of the vendors and should consider their previous services while evaluating them.

2. Clear Understanding of the Vendors & Auditing So, what is the most crucial factor in a vendor management system? –It’s vendor selection. Companies should learn about these vendors before hiring them, where the entire vendor compliance is covered. Companies should take care of these high-risk vendors and ensure that these vendors are monitored timely. Required Documentation When organizations conduct vendor audits, it is important to document the responses as well. Apart from the responses, the vendor should also provide the qualifications on their experience, proofs on their insurance, licenses, references, etc. along with the agreed applicable laws and regulations. Apart from these, information around security, network access, physical access, disaster recovery, termination provisions, performance benchmarks, software development management, and training programs should also be collected from every vendor. Organizations must ensure that a vendor management program is in place and can help accomplish tasks with the best solutions available in the market.