3 things to think about when managing vendor risk – Forbes | Region & Cash

Starting a startup is risky, and things only get riskier when services are outsourced. Most executives need some Vendor Risk Management (VRM) to give them the confidence to succeed.

“Founding a startup is already a risky endeavor, and unfortunately, outsourced services introduce more risk,” said Todd Boehler, senior vice president of strategy at ProcessUnity. “Even the most basic of vendor risk management processes can significantly benefit a company’s longevity.”

But the exact nature of this VRM will vary between startups. For example, fintech startups might need immediate vendor risk management programs to protect processing of sensitive data and extend outsourced services to support rapid development.

Although many companies are just starting out, that doesn’t mean they can’t identify important information about their providers: what they do, what they can access, and how they monitor that access for misuse or abuse.

This information can give customers peace of mind about sensitive data. In an era of increasing cyber threats, transparency and vigilance go a long way in setting a startup apart from its peers. Maintaining a strong public commitment to safety is an excellent step in building brand advocates.

Startups differ from large companies when it comes to VRM

Startups face unique challenges and need agility from the start to quickly onboard the right partners to support growth. You should also carefully ensure that early vendors are the right ones for their needs. Big companies can easily survive backfires with vendors, but startups can be brought down by turning to a vendor that eschews major security practices or otherwise compromises the viability of the business.

Early adopters are one of the most critical aspects of a company’s success or failure – yet they are easily overlooked. Typically, founders focus on coming up with an innovative idea, getting attention for their business, or looking for fun, memorable marketing angles. All of that is great, but if you work with the wrong vendor early on, all that work can go to waste.

3 things to think about when considering VRM

1. Keep watching vendors.

Diligence shouldn’t end with properly screening vendors prior to onboarding. it is important, that continue Monitor seller actions over time. Things often change, be it in relation to your contact person at the supplier company or at the higher management level.

Additionally, looking at a long-term scale can give you a much better picture of the relationship than simply relying on the early weeks of the partnership, when vendors are likely to be at their best.

2. Be prepared for staffing needs.

Startups are also faced with the challenge of having fewer people behind VRM processes. Large companies likely have several people dedicated to overseeing all vendors, but startups are often just a few founders who are overwhelmed and cover all the bases for launch and the initial scale-up phase.

For established companies, more employee performance means more time to identify vendors in their ecosystems, understand how they contribute, and decide which ones are critical and who owns which relationship. Spending a significant portion of your human resources on vendor screening and onboarding often slows your time to market for critical products or services. The trick is to increase efficiency while maintaining proper due diligence for risk mitigation and regulatory compliance.

3. Assess risks well.

A clear view of the risk associated with each vendor is crucial. The risk can be determined based on the nature of the product or service offered by the provider. Critical information such as access level, incident history, and service type sheds light on what type of risk providers might be posing. Areas of risk may include information security, financial resilience, bribery or corruption, business continuity, and others.

By using a good inherent risk process, you can better determine due diligence requirements. This process determines next steps, including appropriate contractual clauses and monitoring requirements or even termination of the business partnership.

By carefully examining VRM, you can rest assured that you’ve ticked an important checkbox to protect your startup’s future. Just be safe to keep You can tick it off each month as you continue to monitor your supplier relationships to give your startup every chance of success while you focus on the fun parts of early-stage adoption and growth. You can build and enjoy fruitful partnerships with the best providers available, but that success only comes with the right VRM, so don’t hesitate.

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