With any successful partnership, there should be an agreed upon level of understanding between both parties. In this piece, we’ll look a little deeper, past the dinner with the executive team, past the free trial, even past the special team assigned to your account to get your business up and running. Basically, we will look at your vendor relationship post honeymoon.
For Better and For Worse
While the initial 90 days may have gone well, it can change:
- Cracks in service may appear after the initial roll out has ended. Matters are made worse if you don’t have a strong contract in place to guard against failing service levels, especially if you are locked in for a set term.
Living with the consequences and working through ongoing pain points with a vendor are not only draining on the vendor management team but can have a domino effect on the lines of business and the end consumer.
- Like any blossoming relationship, those early days should be drama free. If your vendor oversight program has performed an adequate level of due diligence on a potential vendor, then luckily it might stay that way. If the review was subpar, then you may have opened the organization to increased levels of risk that you will soon encounter.
The industry is highly regulated, and your organization may be subject to increasing levels of oversight too – take for instance a warehouse lender, extending a line of credit to a mortgage company.
Cultural fit plays a huge part in determining which relationships to be involved in. For the warehouse lender example, they want to make sure that the lender is running a compliant operation and will provide a profitable return in additional volume. The same approach can be taken when looking at all your potential vendor relationships.
6 Areas to Consider When Looking at a Vendor
Take a look at these six areas:
- Does the vendor have a strong compliance management system?
- What’s the reporting structure of compliance and risk? Do they report into the very people they must oversee? This can prove to be troublesome and is not a proven model for successful risk management.
- What does the training program look like? What level of training is dedicated to customer facing personnel and what are the compliance training topics the staff must be trained on?
- Were there any findings from other annual assessments which are red flags to your organization?
- Are they staffed appropriately? Consider your future growth plans. There’s nothing worse than outgrowing and outpacing the service levels of a vendor who cannot grow with you.
- Does the vendor have a history of litigation? Would the use of this vendor open your organization up to additional litigation or reputational risk?
Taking the KYC (Know Your Customer) discipline as an example, the same can be said about knowing your vendor. Ultimately, the vendor will become an extension of your organization. Just as human resources and a hiring manager determine if a potential new hire will fit with the team, the same approach should be taken when understanding if the vendor will also be a good fit for the product or service which they’ll provide.
Perform Due Diligence and Ask the Right Questions
A common theme so far is about doing proper due diligence. Documenting the “Are We a Fit” discovery is key for all organizations to move your third party vendors into trusted third party relationships.
A one-year contract term can either go very quickly or very slowly depending on the day-to-day experiences you encounter.
Determining if the vendor and your organization shares the same goals and has the same cultural ideologies will go a long way in the future success of the relationship. Your due diligence and risk assessment play a significant role in making the correct alignments.
Do you have these due diligence items on your checklist? Download your copy now to get started.