During our recent three day Vendor Management Bootcamp (click here to watch on-demand), we had a lot of GREAT questions come in. It was simply impossible to get to them all during the live sessions, so we took your questions and worked with the various speakers to compile the answers and make them available for all here.
Below you will find the questions and the speaker responses from Day 2, Session 2.
Answers kindly provided by:
Vendor Due Diligence
Q1: Financial statement requirements; should they be audited or not audited?
Answer: "Audited whenever available."
Q2: If you can't make the onsite visits, what do you recommend in place of the onsite check?
Answer: "Perhaps a webinar or send a limited team or have a conference call or hire a local firm to do an audit or review results of their own audit program."
Q3: Aside from building it into the contract, what are some tips on getting financial statements from privately held companies who do not agree to give them to you?
Answer: "Ask for accountant's statement or tax returns, pull a Dun & Bradstreet, ask for professional references. If it's a deal breaker, be willing to walk away."
Q4: Instead of reviewing articles of incorporation, etc., wouldn't it work to only check with the Secretary of State that they are 'active' and in good standing? Seems redundant.
Answer: "It is a bit redundant, but also a good check in case they cannot provide their articles of incorporation or if there is any question as to whether they are in good standing."
Q5: To what extent would you perform due diligence on a fourth party vendor? If the fourth party vendor is High Risk and Highly Critical to your vendor, would you consider doing an onsite review as you would the vendor?
Answer: "I (Branan) would conduct the same level of due diligence as done on the third party who holds the fourth party relationship and may, in fact, need to rely on the contracted third party to obtain the information. Yes, to the second question, but may need to involve your contracted third party to make it feasible (and we have done so in the past)."
For more information about fourth parties, download our infographic.
Q6: What documents constitute STANDARD due diligence?
Answer: "Please see our Model Due Diligence Checklist infographic."
Q7: Can you explain in more detail why you would consider a title company a low risk vendor when they have access to NPI?
Answer: "Unless the title company you are using is used quite regularly or with large volume, I would still say it's generally low risk in the overall scheme of things. You could argue, if you use the threshold that even the most passing glance at potential NPI warrants high risk (I.e., you're using that one title company one time and sharing just routine NPI, it's a pretty limited amount), you'd have to rate any third party who enters your facility as high risk as they could potentially access or shoulder-surfing see NPI. I agree, it's a bit of a slippery slope, but if you have to draw the line somewhere, an occasional use title company is low risk (unless you have other concerns with them)."
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