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Decreasing Risks through Vendor Management

Posted by: Paul Dempsey | September 17, 2018

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Every organization must deal with vendors. No person is an island, and neither is any company. The problem with having vendors is that it opens your organization to risks that are out of its control. There are many different types of vendor risks, and they can be mitigated only with a powerful vendor management system.

Vendors can deliver many different types of services with varying importance to the operations of the business. Vendors do everything from delivering window cleaning services to providing essential raw materials for the production line. Managing so many vendors manually at the same time results in red flags being ignored. Thus, there is a need of a system which is able to track and monitor all the vendors in one place and alert management if there is an issue that needs their focus.

Decreasing Risks through Vendor Management

Types of Vendor Risks

Vendors carry many different types of risks. The three most important are:


Organizations depend on vendors for many different services and a lapse in the delivery of these services results in operational losses. These losses range from minor issues that affect operational facilities to major breakdowns in the operations of the business. A restaurant can have issues if it doesn’t get one ingredient on time and is unable to create some items from its menu. A vendor for a factory can fail to deliver a chemical which can result in production shutting down in the factory.

Having a system to manage such risks results in better operational efficiency for the organization. It is only when such systems are in place that organizations become acutely aware of just how often minor operational disturbances occur.


Compliance related issues are common when it comes to vendors. An organization which operates in the financial sector must comply with many different financial regulations – it is possible that some of their vendors are not from the financial sector, and thus may not be aware of all necessary regulations. Outsourcing services to a vendor which violates regulations can result in heavy punitive damages for the organization. Similar issues are present in all heavily regulated industries such as the healthcare industry and the oil and gas industry.

These issues are not to be taken lightly. Vendor management systems help ensure that the vendors are aware of the regulations they need to comply with. These systems also keep track of all non-compliance incidents related to vendors which allows organizations to quickly weed out vendors that present the most risk.


There is always a risk that a vendor’s actions can result in a financial hit for the organization. Any issue that arises due to vendors is a risk to the bottom line of the organization. This is especially true for vendors that are directly involved in the revenue stream of the organization. The bank the company uses may have operational issues, resulting in them not having access to their funds. A payment processor may end up having operational issues which can result in lost profits for the organization. 

How Vendor Management Systems Help 

Vendor management systems create a framework that allows organizations to quickly assess issues with vendors, make decisions based on them, and ensure that all risks have been minimized. Every incident related to a vendor is logged into the system. The system keeps track of vendor performance and warns if a vendor has a history of issues while delivering services.

This allows organizations to track vendor performance in a way that isn’t possible without vendor management systems. The power of these systems lies in the fact that there is no audit required to discover problems. There is no need to spend hours poring through records and creating reports. Incidents are highlighted as soon as they occur. If such vendor management systems are integrated into a full GRC platform they even alert the senior management and start reflecting the issues in the overall risk assessment of the organization.

For organizations to deliver the highest quality services to their customers it is important that the organization’s vendors deliver the same level of service. This is another powerful feature of vendor management systems. They don’t just alert management about incidents, they also track the performance of vendors, which can be used to give feedback and demand better services from the vendors. It isn’t simply a question of dropping vendors and replacing them with better vendors; existing vendors will also improve their services once they start receiving actionable feedback about specific incidents.

If you want to see what a Vendor Management Software like Predict360 can do for your organization, simply sign up for a 30-day free trial. You can also get a live demo of Predict360’s most exciting features by getting in touch with us through chat, or by filling the Contact Us form.

About the company

360factors, Inc. (Austin, TX) helps companies improve business performance by reducing risk and ensuring compliance. Predict360, its flagship software product, vertically integrates regulations and requirements, policies and procedures management, risks and controls, audit management and inspections, and on-line training and qualifications, in a single cloud-based platform based on artificial intelligence.

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