Vendor financial viability is critically important
The financial health of your third parties, especially your high risk or critical third parties, is a vital part of your overall risk management process and, ultimately, to your vendor’s performance. Per regulatory guidance, you must not only collect the vendor’s financial statements but carefully analyze their financial health to determine the vendor’s capacity to continue to provide safe, secure and quality products/services at the level you require.
Poor vendor financial performance can lead to:
- Staff Reductions: Reducing staff is often the quickest and easiest way to cut costs (and artificially/temporarily improve financial reporting).
- Information Security Issues: Staff reductions will likely sacrifice experienced and sufficient team members who understand how to maintain the appropriate level of controls.
- Research and Product Development Stalls: Product development will likely stall out and routine maintenance will slow down.
- Inferior Service: Fewer people means service begins to degrade.