For vendor management, there are three unique sets of documents that you're going to want to create and update. The first document you should focus on is writing a third party risk management policy. In today's podcast, we're going to cover steps that will assist you in getting starting writing an effective risk management policy.
Welcome to this week’s Third Party Thursday! I’m Brittany Padgett here at Venminder.
In today’s session, we’re going to discuss one of the first steps in developing a third party risk management discipline. It’s writing a third party risk management policy.
For vendor management, there are three unique sets of documents that you’re going to want to create and update – a vendor management policy, a program and a set of procedures. While these are interrelated, there are some key differences. So, let’s discuss the policy.
First off, what’s a vendor management policy? It’s a document used to assert how your organization will manage its third parties and the risk associated with outsourcing certain activities. It guides your vendor management work.
Here are some steps that we hope will assist your organization with creating this document.
1. First, remember that the policy should be high level. It’s written at the board level and should essentially describe the purpose of third party risk management and outline in basic but broad terms how third party risk management at your organization will be handled.
2. Second, include details regarding the 6 pillars of vendor management. The pillars are:
• Selecting a vendor
• The risk assessment
• Due diligence
• Contractual standards
• And ongoing monitoring
3. Third, you’ll want to include any relevant guidance when developing the policy. Add to the document if guidance is updated or new guidance is released. This is crucial. Examiners will be looking for this.
4. Fourth, it’s a best practice to use as much of the same terminology as used in the guidance so you’re speaking in regulators' terms they readily recognize.
5. Fifth, be sure to discuss the work product expectations in the policy. This will help eliminate any possible confusion from department to department across the organization. When reviewing work product during an internal audit or prior to an examination, you’ll want to verify it matches what you’ve relayed in the policy documentation. A common mistake we see is a work product doesn’t match the policy’s stated objectives.
6. Sixth, since it’s high level, you’ll want to ensure that it’s narrow in scope and shorter – 5-6 pages will usually suffice since you’ll go into much more detail in the program documentation.
7. Seventh, make sure your policy is approved annually by your senior management and board. This is also very crucial.
By following all these seven steps you’ll be off to a great start. I hope you’ve found these recommendations helpful and feel ready to begin drafting, or revisiting, your organization’s vendor management policy.
Again, I’m Brittany and thanks for tuning in to this week’s Third Party Thursday; if you haven’t already done so, please subscribe to our series.