Working with vendors brings a new level of risk into an organization. Adequate due diligence is recommended prior to contracting with a vendor, particularly if the company will be held responsible for the vendor’s actions. Using vendor management services is one step a company can take to help control those risks.
How Are Vendors Risky?
Vendors often act on behalf of the company, yet management may not have as much control over their actions. Examples of risks include:
- Theft or exposure of confidential information
- Inadequate cyber security controls
- Accidents that injure customers and employees
- Violation of regulatory requirements leading to reputational damage or penalties
How Can Vendor Risk Be Reduced?
Many companies use vendor management services as part of their risk management strategy. VMS providers often have specific industry knowledge that can be used to find more appropriate vendors and negotiate better contract terms. Typical VMS services include:
- Sourcing vendors after conducting thorough due diligence
- Ongoing monitoring and evaluating of vendor performance to ensure quality and contractual compliance
- Identifying and monitoring risk issues to develop better controls
What Are the Benefits of Working Through a VMS?
Companies hiring temporary staffing vendors often work through vendor management services to administer the vendor relationship. VMS consultants typically provide risk management services using a combination of hands-on staff and sophisticated computer systems. In addition to benefiting from risk management services, companies also frequently enjoy cost reductions and procurement process streamlining that lower expenses while improving performance.