Vendor risk management doesn’t always work out as planned and when that's the case, the end-result can be quite chilling.
7 Scary Third Party Risk Management Scenarios to Avoid
- Contract Mishaps – Often times, you’re managing hundreds of vendors and many more contracts. If a key contract date is missed, such as an auto-renewal notice period, you could find yourself trapped in a vendor contract for longer than anticipated. This may ultimately be a nightmare scenario if the vendor has been one of your very own real-life monsters.
- Cutting Corners in Due Diligence Reviews – This can be a recipe for disaster. What if your vendor is no longer financially stable due to a decline in business or maybe a recent buyout? A vendor who is no longer financially stable tends to cut costs in any way they can by taking actions such as reducing staff which can lead to poor customer service.
- No Time to Prepare for an Exam – Oh no! The examiners are coming, and you’re not prepared! This is sure to be a scary sight when you have to lurk at night trying to prepare last minute for the upcoming examination.
- A Vendor Break Up – Sometimes a vendor relationship doesn’t work out for various reasons. If you did not mitigate and address any potential issues upfront, you may now be in a frightening situation where you’ll need to break the news to your vendor and find a way out of the contract.
- A Poor Exam – The examiners have arrived, and they are not impressed. They’ve now presented you with serious findings with a very limited time-frame to implement the changes. The pressure is on.
- Lack of Strong Work Product – Your team has implemented a strong policy and program; however, the work product doesn’t match what you had planned. By not being consistent, it can raise quite a lot of questions and overall confusion.
- Failure to Document – Failure to document is essentially a failure to plan accordingly or cutting corners in the interest of time or effort. Examiners, senior management and the board will all expect processes to be documented and to have access to important meeting minutes. Don’t let a lack of solid documentation and notes cause terrifying repercussions.
5 Ways to Prevent Them from Happening in the Future
None of us want any of the above scenarios to happen at our organization. Keep these 5 points in mind to prevent them from occurring in the future:
- Dust off your vendor management program and policy. Make sure it's up-to-date and that your work product matches. If there is anything that is not lining up, now is the time to dust off the cobwebs.
- Be as organized as possible. Automate your program with a system in place, then you may find that the program is running more efficiently and that important dates are no longer being missed.
- Make sure any problems that arise are fully addressed and remediated. Document and report any issues to senior management and the board.
- Understand the scope of your exams and audits. If you have questions, be sure to ask prior to the start of the examination.
- Keep the lines of communication open with vendors. This way you’ll both be more likely to address any concerns before a major issue arises.
And there you go - 7 scenarios to avoid and 5 tips to prevent them from happening in the future.
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