How To Implement a Successful VRM Strategy?
Global economic conditions today have caused almost every enterprise to pay greater attention to risks related to their service and supply chain. In addition to that, with the new and expanding compliance regulations many enterprises are also focusing on better ways to manage their ongoing vendor risks and compliance issues.
Vendor management is therefore looked upon as a project for staying compliant and efficiently managing third party risks. It is all about attaining the best possible returns and generating additional value from vendor investments. Furthermore, it involves, adopting a holistic approach for monitoring every aspect of the vendor relationship, i.e. from sourcing, selection, performance management to risk and compliance monitoring. Any effective vendor relationship management (VRM) strategy aims at harmonizing the appropriate people, business processes and supporting VRM software to derive the best possible results. It also includes conducting targeted vendor audits to uncover high risk vendors or instances of non-compliance and resolving the identified issues.
In order to ensure successful implementation of a VRM strategy, it is essential for organizations to follow the three essential steps. They are:
- Conduct risk analysis – Organizations need to understand the significance of the vendor to the organization, the nature of activity performed and the innate risks present in it. Only when the risks are recognized appropriate measures can be arrived at.
- Document a vendor relationship contract – All vendor relationships regardless of the risks should be defined in a written contract format in order to avoid any disagreements.
- Supervise the vendors on an ongoing basis – All the vendor policies associated with internal controls and security must be reviewed to determine whether a vendor is following the controls need to be developed as well.
Improve vendor collaboration
Today esteemed service providers specializing in enterprise compliance management software have introduced advanced vendor management solutions that make sure enterprises and their outsourced partners remain compliant. This results in improved collaboration with vendors and other benefits, such as:
- Automates the monitoring of technical controls and critical data
- Manage risks with a Vendor Manager
- Assess vendor risks by using multiple assessment types and library of questions based on best practice standards
- Attain risk, IT security and compliance rating of vendors from assessment results
- Evaluate vendor compliance to procedures and regulations
- Tracks and recognizes non-compliance areas
An enterprise that implements an effective vendor management strategy backed by appropriate vendor management processes, is better positioned to drive growth, manage expenses, and alleviate risk across every department and business unit.
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