You can say that a Vendor is someone who provides, or in other words-supplies goods and services. If you know about the Supply Chain, you will understand that vendors form the last link of the supply chain.
While thinking about approaching a new Vendor, a lot of thoughts and questions pop up about their sales and financial background among others. Keep reading to know more about Vendor Assessment.
Understanding Vendor Due Diligence
Assessing vendors involves finding out all the necessary details about them that could have an impact on a prospective business.
This is where Vendor Due Diligence comes into picture.
A vendor is reviewed thoroughly on various parameters like the nature of their business, incorporation documents, the possibility of financial fraud, legal status and cash flow.
Why Vendor Due Diligence
To engage with other businesses, you need to be certain whether their goods and services aregenuine or not.
It is like providing the buyer or investor with a seal of trust saying that this vendor will not be much of a liability to them.
Moreover, it helps vendors to paint a clear picture about what kind of risks they can fall into and make decisions about their assets.
7 Vendor Due Diligence Practices To Rely On
Here are our top picks for the best Vendor Due Diligence practices that should be done for any new vendor you are planning to engage with.
- Gathering and Reviewing of Business and Financial Information
Collect every single piece of information of the prospective vendor starting from financial stability to employee conduct. Make sure to go back to those who have recommended the vendor. Proper understanding of the organization is a must.
2. Operational Risks To Be Noted
It is necessary to understand that there are chances where the vendor could experience a data breach. Strategies and Plans of Action should be planned out for any such occurrences in future accordingly.
3. Legal Risks
Vendors have access to all of the information for the company or organization they’re providing their services to. With such information, the company is vulnerable to data leakage. Hence, there has to be a thorough assessment of all the legal risks.
4. Analyze Risks in Cybersecurity
Apart from Operational and Legal Risks, the company must also look into the cybersecurity issues beforehand and decide whether they work with the vendor or not.
5. Prioritization of Risk Profiles
Vendors have to be under scrutiny all the time because of all the information they hold. To cut down on the risks mentioned above, they have to be on a tight watch.
6. Constant Monitoring of Vendor Risks
When a clear picture of the risks has been made as told previously, to minimize the risks, they (vendors) have to be observed always.
7. Automation of The Questionnaire Process
The company has to invest in impartial third-party software to view all inside information of the vendor and conclude whether they are fit to work for the company or not.