Last week we talked about what Vendor Management is and really why you should care about it for your organization. This week we are going to outline the top 5 reasons, in no particular order, of why your organization needs to have a Vendor Management Program implemented and that makes sense for your company. This will sort of be like when David Letterman used to do his Top 10 Lists on a nightly basis except that it will be shorter and probably not as funny. But, what it lacks in length and comedy it will certainly make up for in valuable information (fingers crossed). Here we go:
- Mitigate Risks: I know that we discussed this one last week in my blog post but I want to mention it again because it is that important. The fact of the matter is that your vendors or third party service providers pose a risk to your organization. Fact. The question now becomes, do you know what those risks are? What impact would they have on your business if something were to happen to them (go out of business, suffer a breach, etc.)? Have those risks changed over time? How have they changed? These are all questions related to the risk that a third party service provider poses to your organization. Without a Vendor Management Program in place, how can you measure the answers to these questions? You really can't which is why this is so important.
- Reduce Costs: Imagine that you are an organization that is fairly small in size and has 10 vendors that you work with for a variety of different services. Who manages those vendors? What happens when you grow your company and end up with 75 vendors? Who manages all those vendors? How do they get managed? Is it by department or is it centralized? By lacking a formal process and program you are most likely losing money. Do you use the same company for different services that would allow you to negotiate better pricing? Visibility can help reduce costs and Vendor Management gives you visibility.
- Measure Performance: How do you know that you are getting what you paid for when you signed up with ABC company? I am not going to bad mouth sales people, most likely because I am one, but there have been times where what you were promised and signed up for is not what was delivered. Most of the time, you only hear about these situations when something catastrophic goes wrong (think Target breach). But do you measure the performance of your vendors with what they put in writing (their contract) and what they are delivering to you? Should you renew with them when your contract is up?
- Increased Efficiency: Let's go back to the example above in point #2 when you have 75 vendors that your company uses for different services. If you don't have a process and program in place to manage these vendors, how can you possibly keep up with them? Here are some questions to think about related to efficiency in managing your vendors:
- When does their contract renew?
- When does their insurance certificate expire?
- When do we need to conduct our annual due diligence review to assess the risk they pose to our organization?
- Have their services changed that increases or decreases our risk?
- Have our services or processes changed that increase or decrease our risk?
- Protect Your Company: Every company relies on third party service providers to assist them in some facet of their business. Fact. What happens when you choose a vendor that doesn't behave in the most ethical manner? What impact does that have on your brand and your reputation that you have worked so hard to build? By having a centralized Vendor Management Program in place, you have better visibility and insight to your vendors and the risk they pose so you can be proactive in your response instead of reactive.
Vendor Management is important, there is no doubt about it. In fact, having vendors or third party service providers is necessary for your business to operate and provide the service and/or products to your customers. How you manage those vendors is up to you and your leadership team but hopefully the 5 points above will provide some food for thought around what you are currently doing and what changes you might need to implement.
Compass IT Compliance will be conducting, as part of our monthly Knowledge Series, a webinar that discusses the importance of Vendor Management, some key components of a Vendor Management Program, and some strategies for how to manage your vendors. The webinar will be on November 19th at 1:00 PM EST and is free. Click on the box below to register and we look forward to seeing you on the 19th!
Vendor Management Webinar