Risk exposure is indiscriminate. Irrespective of the size of your firm, your business may face severe fines, penalties, or regulatory red tape – especially if you fail to understand and comply with the applicable rules and regulations. This makes it indispensable for you to track your company’s risk exposure levels and conduct a comprehensive vendor risk assessment.
The best practices mentioned below will help you realize the role of vendor risk assessment in vendor vetting and ongoing monitoring processes. And will act as a vendor risk assessment checklist which you can depend on to gain a better understanding of the risk posed by each vendor relationship.
At SpendEdge, we understand that an effective vendor risk assessment requires a deal of expertise and systematic approach. And to help you ease the process, we have listed three critical steps that can minimize your risk exposure while working with vendors.
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What are the Best Practices for Successful Vendor Risk Assessments?
Although assessing vendors and maintaining ongoing records seems like an obvious task, not many companies practice this. A majority of them have a disorganized approach when it comes to hiring third parties or vendors. In fact, some even lack the purchasing strategy that is crucial for vendor risk assessment.
On the contrary, best-in-class companies develop a catalog of all their vendors and suppliers promulgating the information about services they provide and domains they serve within the organization. To know more about the best practices for cataloging vendors, request for more information.
Gauge Inherent Risks
Develop vendor profiles during the selection process by questioning the business unit engaging with them. This will help you to analyze the importance of a vendor’s products or services to the company and provide vital insights about the information they will be handling. In addition, the vendor profile determines strategies that you need to devise to mitigate risks associated with vendors.
Categorizing vendors on the basis of the industry that you are working, facilitates vendor risk assessment. For example, companies in the healthcare sector can categorize their vendors on the basis of insurance, lab services, and a medical equipment provider.
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Conduct On-site Audits
Each relationship should be risk rated depending on the vendor’s practices. This may require you to conduct an on-site audit since it can provide an in-depth evaluation of vendors’ activities. On-site audit depends on the parameters of the vendor risk assessment process.
Sites can provide a great deal of information to you but meeting the client-facing staff can help you flesh out potential risk issues. Moreover, it can provide you a better understanding of the organization and the security measures.