Having an effective strategy for vendor risk management is critical to protect your organization and your customers. Continuing to make improvements to your existing policy, program and procedures will help you stay in front of third party risk, but with so many components it can be difficult to know where to start or pick back up. Here are 14 steps you can take to improve your vendor risk management program going into 2019.
Steps to Improve Your Vendor Risk Management Program
- Remember it all starts and ends with effective management and appropriate documentation. Consistency in form and practice is truly half the battle.
- Verify you’re using the right vendor management model (centralized, de-centralized or hybrid). We recommend a hybrid approach. This will set you up for an organized and disciplined vendor management office setting the guidelines and checking the results while working closely with the business units to ensure consistency and timeliness of practices.
- Create a culture of compliance. Make sure your whole team, including senior management, understands their role in risk management, the importance of playing by the vendor risk management rules and the real consequences for violating rules.
- Re-examine the expectations you set in all areas of your vendor management program. Are the expectations sufficient and following best practices? Are team members aware of the expectations?
- Ensure your vendor knows the expectations set for them. Even though most items should be mentioned in the contract, you can’t be sure they’re fully clear on what you need from them unless you have that conversation to confirm. Also document those conversations for proof for later down the line if something goes array and they try to claim they didn’t know.
- Check your understanding of the lines of defense. Day to day performance management is handles by the lines of business. For the general vendor management team, you’ll play the second line of defense but must communicate effectively with the first line of defense. The first line are your eyes and ears to how performance at the vendor level is being handled. The third line is to ensure that the second line is working within their own policy guidance. It’s important to go by this versus operate in silos.
- Ensure you follow the vendor management lifecycle for the proper order of tasks. That includes planning, due diligence and third party selection, contract negotiation, ongoing monitoring and termination.
- Take a look at your vendor management policy, program and procedures documentation. Are there any updates to make? It’s recommended that you review these documents at least annually. And, each time you make updates, you should have them reviewed by senior management and the board.
- Make sure your due diligence and risk assessments have not gone stale on your vendors. It’s always important to have up-to-date documentation to reference to ensure the vendor is still safe to work with and no red flags have popped up.
- Don’t forget to be monitoring your vendors on an ongoing basis. Ongoing monitoring is the most forgotten pillar in vendor management and can lead to many issues considering the status of a vendor can change at any time.
- Actually analyze contracts, business continuity and disaster recovery plans, cyber reports and policies, financial reports, etc. Don’t just file that information away or sign off on it before truly reading and reviewing them.
- Stay on top of your vendor risk assessments. If concerns come to light, it’s important to report such finding to your compliance or enterprise risk management structure and to your vendor. Your vendor needs to know expectations and next steps to correct the issue. Ensure to record the issue and response as well.
- Create vendor management reports. Having reports satisfies regulatory requirements, keeps senior management and the board informed and also helps all parties involved to be better.
- Invest in education. Are you still reading industry articles and news headlines? Did you ever start? It’s important to do this in order to stay up-to-date in what’s happening in the world of vendor risk management – every week there’s something to read.
Taking these 13 steps to improve your approach to vendor risk management is a proactive way to safeguard your organization. It’s important to regularly revisit your vendor risk management policy, program and procedures to make necessary adjustments.
Choose a vendor management model that meets the needs of your company. Download this infographic.