What are the biggest mistakes you've seen in vendor risk management?

1 Not having a clear VRM strategy

One of the biggest mistakes you've seen in VRM is not having a clear and consistent strategy that aligns with your business objectives, risk appetite, and regulatory requirements. Without a clear VRM strategy, you may end up with inconsistent or incomplete vendor assessments, contracts, monitoring, and reporting. This can lead to gaps in your visibility and control over your vendor risks, as well as missed opportunities for improvement and optimization. To avoid this mistake, you should establish a VRM framework that defines your goals, roles, responsibilities, processes, tools, and metrics for VRM. You should also communicate your VRM strategy to your stakeholders and vendors and ensure that it is reviewed and updated regularly.

2 Not segmenting your vendors by risk level

Another common mistake you've seen in VRM is not segmenting your vendors by their risk level and impact on your business. Treating all vendors equally can result in wasting time and resources on low-risk vendors, while overlooking or underestimating the high-risk ones. This can expose you to serious consequences such as data breaches, service disruptions, compliance violations, or reputational damage. To avoid this mistake, you should conduct a risk-based vendor classification that considers factors such as the type, scope, and sensitivity of the services or products they provide, the access they have to your data or systems, the industry standards and regulations they must comply with, and the potential impact they have on your operations, customers, and reputation. You should then apply different levels of due diligence, oversight, and reporting to your vendors based on their risk level.

3 Not involving the right stakeholders

A third mistake you've seen in VRM is not involving the right stakeholders in the VRM process. VRM is not a one-person or one-department job. It requires collaboration and coordination across multiple functions and levels in your organization, such as procurement, legal, finance, IT, security, compliance, audit, and business units. Without involving the right stakeholders, you may miss important information, perspectives, or feedback that can affect your VRM decisions and actions. You may also face challenges in getting buy-in, support, or accountability from your stakeholders for your VRM activities. To avoid this mistake, you should identify and engage the relevant stakeholders in your VRM process and ensure that they have clear roles and responsibilities. You should also foster a culture of communication and transparency among your stakeholders and vendors and leverage their expertise and insights for VRM.

4 Not monitoring your vendors' performance and compliance

A fourth mistake you've seen in VRM is not monitoring your vendors' performance and compliance on an ongoing basis. VRM is not a one-time or periodic activity. It is a continuous process that requires regular tracking, measurement, and evaluation of your vendors' performance and compliance against your expectations, standards, and agreements. Without monitoring your vendors, you may not be aware of any changes, issues, or incidents that may affect your vendor risks or opportunities. You may also not be able to identify and address any gaps, weaknesses, or areas for improvement in your VRM process or vendor relationships. To avoid this mistake, you should establish and implement a vendor monitoring plan that covers aspects such as service level agreements, key performance indicators, risk indicators, audit results, incident reports, feedback surveys, and contract reviews. You should also use a VRM software or tool that can help you automate, centralize, and streamline your vendor monitoring and reporting.

5 Not learning from your mistakes

A fifth mistake you've seen in VRM is not learning from your mistakes or best practices. VRM is a dynamic and evolving process that requires constant learning and improvement. Without learning from your mistakes or best practices, you may repeat the same errors, miss the same opportunities, or fall behind the industry trends and standards. You may also not be able to adapt to the changing needs, expectations, or risks of your business or vendors. To avoid this mistake, you should adopt a proactive and continuous learning approach to VRM. You should collect and analyze data and feedback from your VRM process and vendor relationships and use them to identify and implement corrective actions, preventive measures, or improvement initiatives. You should also benchmark your VRM performance and practices against your peers, competitors, or industry leaders and learn from their successes or failures.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?