5 Hacks To Mitigate Vendor Fraud Costs With Vendor Risk Management

Vendor vetting is nothing but assessing vendors. Businesses can avoid external supply chain dangers by evaluating vendors. Successful vendor vetting encompasses four stages i.e. creating vendor selection criteria, searching for suppliers’ sources, evaluating suppliers, and finally, obtaining quotes from shortlisted vendors.

In the absence of proper vetting, businesses can experience sub-standard production, leading to unsatisfied customers, decreased retention, and negative reviews. However, vendor assessment is of utmost crucial to avoid supply chain disasters. Organizations can sign contracts that increase operational efficiency by choosing vendors who comply with standards and laws.

When forming a vendor partnership, a company should be mindful of the following risks:

• Data transfer, protection, and privacy
• Access to network and sensitive information

With a proper vendor risk management program in place, companies can minimize third-party risks and build a partnership with reliable vendors.

Significance of Managing Vendor Risks

Vendor risk assessment is the practice of assessing potential vendors before and during a contracting process or signing a partnership. Vendor risk management strategy should include:

Well-documented policies and procedures

There are just too many ways that a vendor can default on their payment, go bankrupt, or do something else to ruin your relationship. Vendor fraud is a serious issue that costs companies billions of dollars every year. Mitigate these risks with well-documented policies and procedures that make it clear where they stand and what they can and can’t do. Also, perform background checks on all your vendors before you sign a contract with them.

Pinpoint vendor vetting process

The difficulty to find a reliable vendor has existed for ages. Efficiently and effectively vetting a vendor can be a daunting task, especially when there are several other pressing matters to attend to. The risk of choosing the wrong vendor is too high to take. So, always have a well-defined and detailed vendor vetting process in place.

Standardized templates for contracting

Having standardized and legally approved contract templates not only simplifies the process of preparing for new vendor contracts but also reduces the risk of new vendor contract defaults. Most of the standard contract templates are designed with the intent of addressing all risks of a given project in advance of the contract being signed. Knowing the risks upfront, in advance, allows for more effective contract negotiation.

Vendor risk auditing process

When you are buying products and services from vendors for your business, there is a potential for a major vendor risk. You need to be able to manage the risks associated with a vendor. Internal controls are crucial to ensuring that vendors, who have access to sensitive information, are trustworthy. With the help of the latest vendor contract management solutions, identify and assess all your internal vendor risks, so you can be proactive and mitigate them before disaster strikes.

Robust and comprehensive reporting

The process of vendor risk management is cumbersome, ineffective, and expensive. So, it is imperative that instead of maintaining reports in traditional formats like excel sheets, PDF files, or any other drive, opt for a process of deriving customizable reports in real-time. Centralized contract management will solve this concern and aid you to create visually appealing reports by extracting metadata.

Endnote — Create an Effective Vendor Ecosystem

With increasingly complex vendor networks, rising customer demands, and a rapidly changing regulatory environment, organizations need to create an effective vendor ecosystem for efficient vendor contract management. Ensure that your vendors maintain consistent compliance with internal policies and various evolving regulations.

Watch this exclusive webinar on how to achieve holistic vendor risk management and evaluate vendor performance on ServiceNow. This is a joint webinar with Aavenir — ServiceNow Elite partner delivering AI-based Contract and Obligation management solutions on the ServiceNow platform.