Global financial crisis and global business competition has led to increasing regulatory scrutiny. It is not just the banks and financial institutions that fall under this regulatory purview but all third parties and vendors that supply them. Today the various regulatory authorities are asking financial institutions to assess vendor risk closely for they are responsible for their own as well as all third party actions. As cases of scams and high profile breaches increase, it is not enough that companies pay compensation to make up for the deceptive and fraudulent of their vendors. They need to come up with programs that will prevent such situations at the very onset of the relationship.
What is needed is a comprehensive vendor risk management program that will allow businesses identify and assess vendor capabilities and decrease potential business uncertainties. This is even more important when hiring vendors for IT products and services where information breach risk is high. One has to have a deep understanding of the legal liabilities regarding third party hiring and acquire a comprehensive risk management strategy. A solid binding contract keeping all necessary regulations in mind is first. Accurate information exchange, data collection and analysis, is accompanied by consistent monitoring of vendor performance. This will ensure that they meet with regulatory compliance guidelines for the industry and all contract stipulations, at all times.
Businesses cannot perform with limited perspective on their suppliers’ interactions with customers anymore. With a volume number of vendors supplying services and interacting with customers it has become imperative that these relationships are carefully managed and monitored. This is even more important for vendors that handle sensitive data and services where the privacy and security risks are very high. The scope of regulatory oversight has broadened to include the consumer today which means all businesses need to be prepared about third party risks, not just the banks and financial institutions. Outsourcing a business process to an external vendor means high risks of sensitive data being misused or ill-handled, yet one cannot survive without outsourcing today.
Since the buck stops with the main business who must answer for all vendors, it is imperative that these vendor relationships be managed very expertly. New and advanced vendor risk management programs will help them identify and manage these risks better. Developing strategies that will incorporate thorough regulation check and embracing best practices will go a long way to mitigate these risks and allow for a successful vendor management practice.
Compliance Education Institute (CEI) leverages over 30 years of industry experience to provide unparalleled vendor risk management services.
