Few businesses can operate without assistance from third-party technology vendors. And that dependence continues to grow as organizations struggle with inefficient internal processes and the challenges of keeping up with technology. In fact, according to a 2017 Bomgar survey of 608 IT professionals, 181 vendors on average are granted access to a company’s network in a given week.
Paradoxically, organizations are seemingly overwhelmed by the proliferation of contractual agreements that they’ve signed with vendors like niche software providers, spurring them to push for vendor consolidation and its supposed benefits, including: reduced costs and inefficiencies; increased purchasing power; and improved relationships with vendors they actually keep.
The Trouble with Vendors
Still, regardless of whether your organization engages one vendor or 181 vendors, such relationships can open you up to risks—the leading ones being:
- Cyber Risks: Outsourcing multiple software or technology applications can mean multiple gateways for hacking opportunities. It can also result in the IT department’s attention being diverted away from cyber security, while it focuses on the time-consuming task of running a multitude of applications and ensuring they can co-exist, as well as fulfill their own individual purposes.
- Financial and Operational Risks: Organizations rarely invest in third-party technology systems if they don’t promise some sort of financial or operational gain. That being said, assessing multiple vendors to determine their effectiveness can get unwieldy and inefficient. Further, if the technology has proven effective, the risk could be even greater as your organization is likely dependent upon it: If service is interrupted for some reason, your own organization’s business could be disrupted.
- Contractual Risks: Just as assessing vendor risk can become unwieldy, so can managing vendor contracts, or even certificates of insurance. And even though such work is tactical in nature, not doing it well can result in additional liability if you haven’t appropriately established data ownership, service levels and indemnification, or if you haven’t ensured vendor compliance with standards and regulations from higher authorities.
If cutting the cord with all your technology vendors seems like the only way to avoid all these risks, don’t despair. The right risk management technology can help.
Consolidate Vendor Systems To Manage Risk
First and foremost, the right risk management technology can help stopgate the proliferation of too many third-party technology vendor contracts at your organization. Because risk management technology, by its very nature, is built to span across a variety of departments and business challenges, it can oftentimes replace a variety of solutions.
For instance, the right technology can replace everything from business intelligence analytics solutions to internal and operational audit systems, as well as health and safety management, vendor management and business continuity systems.
Fewer systems means fewer vendor contracts to review and potentially less contract liability as you’ll have more time to make sure the contracts you do have in place are airtight. Also, those contracts you keep can be managed automatically within the right risk management technology—meaning you can prepare, send and get contracts signed electronically from within the system; automatically collect certificates of insurance; and so much more.
Not only will you spend less time managing contracts, your IT department will spend less time managing multiple applications, which can create tremendous efficiencies. As such, your IT department might be able to devote more time to cybersecurity. Plus, fewer applications likely means less risk of one or a multitude of those applications causing a breach or falling out of compliance—also improving cybersecurity.
Also, with regard to compliance, the right risk management technology can replace Compliance and Regulatory Management Systems—helping you (and your vendors) to conform with all the requirements you are mandated to meet or have voluntarily instituted by providing ready-made compliance templates. The technology allows for consistent oversight, automatic updating and extensive reporting so you can identify and monitor the full range of these requirements.
Adequately Assess Vendor Risk with Ease
Still, we all know the most successful businesses don’t start or stop with compliance when it comes to managing risk, vendors or anything else. Instead, they take the long view and proactively assess vendor risk. Having a user-friendly vendor management system to actively monitor and regularly audit your vendor’s performance and security is of great importance to warding off financial and operational risks.
For example, it’s important to provide vendors with questionnaires that assess their operational protocols when it comes to issues that might affect your organization or interrupt your operations. Such surveys should consist of simple and objective questions that elicit complete, but not cumbersome, responses.
To achieve this electronically, the right risk management technology will establish and house metrics and “conditional logic” (or “if this, then that”) questionnaires. A link to the questionnaire can be automatically emailed to any potential vendor flagged as needing to be assessed. The system can even be “flexed” if you desire to automatically approve vendors based on their responses.
Further, all vendor data and relevant documentation can be stored and updated in a single environment by multiple stakeholders—without version or status confusion. Our system’s ability to trigger automatic vendor communications cut down on manually chasing data.
All this functionality can speed up the entire vendor assessment process and improve the quality of survey responses because vendors are no longer burdened with answering duplicative or irrelevant questions. Even more important, you’ll be able to identify key risks in your “supply chain” and proactively manage those.
In fact, adequate risk management technology can help you do that with an alerts system that automatically identifies vendors potentially impacted by more than 45 event types and then facilitates communication between you and your vendor. In addition it allows you to hedge and institute a backup plan. This helps to minimize disruption to your business—hopefully keeping you up and running and profitable despite your vendor’s business interruption.
It May Take a Village, But The Village May Only Need One Solution
Engaging third-party technology vendors doesn’t have to be one of the riskiest parts of your business. Selecting more comprehensive solutions as opposed to one-off “point-solutions” for individual business challenges is the first step.
Be sure to look outside your department and find common ground with other departments like human resources, health and safety, vendor management, legal and compliance. Such collaboration will serve you well in terms of securing technology that allows you to consolidate vendors without having to sacrifice the functionality any one group needs to efficiently and effectively do their jobs.
From there, be sure to consider risk management technology as a solution to cut across departments. After all, it makes sense that technology committed to enterprise-wide risk can serve as an enterprise-wide solution—even if the business challenges that need to be solved are not necessarily within the traditional realm of risk management.