Three Risks in IT Vendor Management You Must Prepare For
Risk-Based Vendor Management
Organizations these days are putting a lot of emphasis on risk-based vendor management as they continue to expand the role and reach of the vendors they use.
According to a recent report from research firm Gartner entitled Predicts 2017: Critical Investments in IT Vendor Management Will Enable Growth and Control, vendor management is continuing to grow as a business discipline and is being “fueled by demands to not only improve vendor contracts and performance but also to mitigate vendor risks.”
Solarus Tech can help make sure that your vendors are monitored regularly and risk is averted altogether.
For More Information, Call Solarus Tech at (843) 816-3518!
Three Types Of Risk
Several factors contribute to the focus placed on vendor risk management such as the expansion of digital business, growth of cloud services and increasing regulatory scrutiny of third-party vendor relationships.
Although each organization may have different activities, here are three types of risk you want to be prepared for:
Business operations involve a lot of people and procedures. Hence, operational risk is quite inevitable. This major hiccup (or shutdown) of some segment of your business can happen if a vendor’s processes, people or systems fail. Operational risk is typically higher with vendors that provide services such as outsourcing, IT systems and data.
In order to mitigate operational risk, you must conduct regular on-site and/or due diligence reviews. Additionally, you need to create a contingency plan in the event of a failure by a risky vendor. These steps are imperative, especially for mission-critical vendors.
Financial risk is the risk of negatively impacted finances due to a vendor relationship. This can result in either excessive costs or lost revenue.
The risk of excessive costs stems from managing costs. Although most organizations have become proficient in managing competitive solicitations and negotiating good pricing, they do not know how to properly enforce contract compliance, effectively manage the procure-to-pay cycle, as well as conduct periodic cost and contractual audits.
Lost revenue, on the other hand, relates to the reliance on vendors who support your own revenue-producing activities such as fundraising companies or outsourced service providers, and fulfillment centers. You may also encounter problems with vendors whose technologies you use to process financial transactions.
You need to identify and segment these types of vendors in order to know how to effectively monitor them and create contingencies.
Regulatory Compliance Risk
Regulatory compliance risk presents the possibility of a third-party vendor violating a law or regulation that your organization (or an outside agency) has placed on them as a requirement for doing business with you. Nonprofit organizations like health plans, healthcare systems and credit unions, along with those that receive Federal grants, are heavily regulated by Federal agencies. And in many cases, certain regulations pass through to third party vendors.
It is crucial for your organization to know that your vendors are compliant to the laws and regulations by regularly checking that they are aware of new and existing regulations as well as making sure that they implement it correctly according to the best practices proposed by the regulatory bodies.
IT Vendor Management in New York
Risk is ever-present in business, especially if you are dealing with vendors. The best way to avoid risk is to carefully assess them so you can properly segment and efficiently manage your vendors. However, if you wish to have more time to focus on tasks that are vital for your business, you need to have a good vendor management system in place.
Solarus Tech guarantees that we can provide consistent, reliable, and unparalleled customer service. We will take the time to handle the relationship with the vendors on your behalf. We will also make sure that we update you real-time about what was done or is expected to be done, so you’re always in the loop.