Many organizations often have a cumbersome and extensive budgeting process. Sometimes, the budgeting endeavor includes endless hours and late nights — not to mention that constant battle for the “right amount” of money to run business units year to year.
Vendor management is always in a precarious position since it’s not normally an area thought of as a mainstream business activity and doesn’t generate sales for the organization the way other business units will. However, vendor management does add to the organization’s bottom line, if the program has the investment to do it right.
3 Primary Forms of Investment and Why You Need Them
1. Well-qualified staff with internal expertise.
You need a team to do the job right. But, not just any team. In many cases, third-party risk requires experience and credentials. Take a good hard look at your internal resources as vendor management requires time from legal, compliance, audit, IT and other areas of expertise to make sure vendor management processes flow smoothly and due diligence is completed with the right level of input.
If you can’t hire someone with the qualifications and credentials required – perhaps due to budget constraints and obstacles around full-time resources – consider looking outside of your organization for contract help in areas like business continuity planning, financial analysis, information security and compliance. By partnering with an outsourced due diligence provider you can receive expert assistance at a fraction of the cost, give time back to your internal staff to focus on other initiatives and the outsourced team can serve as an extension to your staff.
Pro Tip: If you do need to outsource services, be sure to extensively weigh the pros and cons. Leaning on their expertise and added protection can be what saves your organization from a third-party data breach… and that kind of peace of mind is just about priceless.
2. Ongoing training.
It’s imperative that you create an ongoing training program for third-party risk management. This will require a bit of planning to decide what format and type of training is most appropriate and effective. No matter how you spin it, developing and/or planning for training requires both time and money to keep your team up to speed on regulatory changes and best practices.
So, be sure to consider ongoing development when determining budget and where your team will spend their time. Some webinars are free. However, some webinars may require you to pay money or you may need to attend industry conferences to remain educated and maintain your Continuing Professional Education (CPE) credits. Be sure to set aside some travel money and do your research to find the webinars or conferences that are most suitable for your team.
3. Effective platform (Software as a Service).
The days of handling third-party risk in an Excel spreadsheet are long gone. There is too much room for error. You need a streamlined system that gives insight into upcoming key dates and your current stance on due diligence. Automation will help consolidate the work to be completed on your side.
Many software tools exist, but look for ones that are intuitive and that allow you to manage, organize, record and report on your vendor management activities. Other features you should look for are integration with data collection and access, workflow tools for review and approvals, notifications to users for expiration/renewal terms as well as risk assessment tools that will allow your team to calculate both the inherent and residual risk your vendors pose.
Now that you understand how proper investment helps organizations perform vendor management well, don’t forget to track all of these investments and report it regularly to your board or directors and examiners. Demonstrating that third-party risk is an investment and not just a once a year perfunctory exercise is crucial.
When done well, third-party risk management can really help to drive a strategic advantage through better control of quality, competitive strategies to maximize return on expense, and avoiding costly compliance and regulatory errors. It’s a good idea to outline these advantages when sharing the investment you’ll want the board and your examiners. This will better help them understand why it’s so important.
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