8 steps to an efficient vendor management program in your company
Published on Jan 14, 2020

Last year in December (sounds like it was a long time ago) I had the pleasure of publishing my first ever Medium post. Its purpose was to highlight the importance of proper vendor selection management and present the consequences that may come into play when you underestimate the risk of doing it wrong. You are welcome to check it out here.

This time, I’ve focused on a little bit more practical approach and to continue the thread I’d like to share with you some tips on how to build efficient and long-term risk management processes.

Yes, vendor selection is a process. It can be managed, introduced step by step and run for as long as you wish to avoid the risk of making bad subcontractor choices. Establishing the vendor management program in your company requires 8 steps. I had an opportunity to present this approach last year on ISACA (known as Information Systems Audit and Control Association) conference organized to celebrate the organization’s 50th anniversary.

Step 1: Create and consolidate the list of vendors

Yes, it’s that simple. List them all, make a table with their names, addresses, names of your contacts over there and their emails. Sometimes this activity would be easier to deliver as part of a Vendor Consolidation Project. It’s also helpful to have this information standardized.

Step 2: Create a list of services that you consider relevant to your organization

What services does your organization need? Think of all of them and make a list. This list should include every service that the organization receives from third parties. Each service should be assigned with a significance rating which indicates the importance of the service to the enterprise business. Using a finite numerical scale or a set of the quality descriptors for this rating is recommended.

An example list of services:

  • Accounting services
  • Legal services
  • IT systems services
  • Human resources support services
  • Office cleaning services
  • Application hosting services
  • Data processing services
  • Big data analytics
  • Physical security and building access control

Now, you can probably guess what the next step is.

Step 3: Find relations between vendors and services

Yes. Combine the tables! Just assign suppliers from the vendor list to the services your company needs and find the links. The links allow an organization to identify the providers that require special attention (e.g. those that process enterprise data, including personal data, or host enterprise IT systems).

A provider may offer multiple services. Sometimes, the linking process reveals that some vendors do not have assigned services, or some services do not have assigned vendors. If this is the case, the organization should answer the following questions and resolve any issues:

  • Is the vendor list complete?
  • Is the services list complete?
  • Why does the enterprise need a vendor that is not delivering a value (no services assigned)?

Step 4: Verify the need for creating Vendor Risk Profiles

Creating a risk profile for each vendor will let you understand how essential their services and/or products are for your organization. They also let you have a better look at your relationships and define what type access (physical, IT, data) to give to the vendor.

Filtering criteria used in the profiles should be harmonized in the organization. There must be no exceptions to that.

Step 5: Create a Vendor Risk Profile

The enterprise assesses each third-party regarding two aspects:

  • Aspect 1 — Risk linked to the organization maturity of the third party as a result of it running its day-to-day business activity.
  • Aspect 2 — Risk linked to the services rendered to the enterprise by the third party.

It is recommended to include the risk criteria below to build the profile. You have to leverage knowledge available in your organization (it’s a MUST). You can enrich the data with additional information sources (like D&B, Bisnode etc.)

Services risks:

  • Compliance and regulatory risks related to the service
  • Customer and financial impact
  • Criticality level of the service delivered by the vendor for our company
  • Financial transactions processed
  • Personal and sensitive data involved?
  • Maturity of the service?

Entity risks:

  • Maturity of the service?
  • Location of the vendor
  • Known security incidents
  • Size of the company
  • Financial standings
  • Performance history

It is important to understand that a created risk profile for enterprise providers may change over Time. This is not a one-time activity. This is a continuous process that should be repeated annually (at least).

Step 5. examples. Completed vendor risk profiles in two dimensions (Entity and Service risk score). Source: AdaptiveGRC (https://adaptivegrc.com)

Step 6: Check the vendor compliance and assess risks using a self-assessment

It is possible for your vendors to carry out the self-due diligence activity, especially, when you provide them with tools to do that. All your vendors should be required to complete self-assessment and enabling them to fill a risk assessment questionnaire template is a great idea. These online forms can be prepared well in advance, either as spreadsheets or a dedicated online polling system.

Step 7: Gaps and findings management

After the necessary information is collected via assessment, you can carry out the evaluation process and determine the order of corrective measures, as well as establish a list of activities and assign them to people responsible. The corrective measures may concern both your organization and individual vendors.

Step 8: Risks Mitigation to identified findings (Probability/Impact matrix)

Probability and Impact Matrix combines the probability of risk occurrence with impact scores and enables their prioritization. Build it to determine which risks should be considered and answered with proper response.

Probability/impact matrix example. Source: Own materials

Vendor management is a process. Start small, make first steps and then grow the process to become a program. It’s not about winning the race, It’s about taking proper part in it.

You are welcome to contact me if you have any questions or would like to discuss the details on a more complex level.

Written by

Jan Anisimowicz

Go To Expert Spotlight Page

This Article Tags

All Tags

Our Clients Success Stories

How during the pandemic we optimized vaccine production and delivery process?

During the pandemic, our client, a global pharmaceutical leader, needed to optimise its COVID-19 vaccine production and delivery processes. Our client had to rapidly implement business applications in order to increase production efficiency.

How we boosted a COVID-19 vaccine production by digitally enhancing manufacturing operations

In response to an unprecedented global pandemic, our client – one of the pharma industry leaders- set out to develop, test, mass produce and organize the global distribution of a COVID-19 vaccine.

How to manage national resources to fight COVID-19 in the cloud?

Availability of ICUs is one of the key factors to keep the death toll as low as possible. ICU-M has been one of the reasons Germany has been managing the pandemic relatively well, keeping the number of deaths per 1M population at the low end compared with other EU states.

Bringing a global pharma company out of the dark via a Single Source of Truth (SSOT)

To get the full picture of the global market situation, companies use various sources of data. But to effectively control and steer business activity at all levels on global scale they need a centralized and trustworthy data source.

How to restore effective sales in animal pharma ensuring high quality and reliability of data

Our solutions cover all aspects of customer and sales transactions processing for life science industry companies carrying out their sales activity on many markets in cooperation with wholesalers, distributors and retailers.

Can proper data management help restart a shutdown pharma production plant?

Introducing rigorous quality assurance and management tools into data integration to enable the fastest possible resumption of a production plant’s functioning shut down due to issues with ERP system implementation.

How we helped Boehringer-Ingelheim stabilize their data ecosystem

Data governance, data management and data quality are the basis for the effective integration of IT systems, especially when the organization implements new solutions.

How we made the slow and inaccurate CEESA reporting in an animal pharma company much faster and much more accurate

Abundance of data can have enormous potential for business, but it can also be a source of problems. With large-scale operations – and this is where international animal pharma players operate – automation and advanced analytical methods become essential to building value from data insights.

Improving the workflow of Randstadt’s HR with an employee self-service solution

Low-code is the perfect tool for creating scalable solutions that ensure employee empowerment and self-service for simple activities and tasks. This can significantly relieve HR departments of the overload of administrative matters.

See how we used low-code to enable our pharma client to stay transparent and compliant with European legislation

End-to-end, flexible low-code based solution integrated with all the peripheral systems in company to meet rigorous transparency regulations for the pharma industry.

It’s not about winning the race, it’s about taking part in it.
Vendor management is a process. Start small, make first steps and then grow the process to become a program.

Latest Articles

Let`s Talk About a Solution

Questions?We’re here to answer them.

Our engineers, top specialists, and consultants will help you discover solutions tailored to your business. From simple support to complex digital transformation operations – we help you do more.

    We will only use the collected data for the following purposes:

    The Controller of your personal data is C&F S.A. with its headquarters in Warsaw, ul. Domaniewska 50, 02-672 Warszawa, Poland. We ask for your consent to the processing of your personal data collected using the form above. We may also collect other data as specified in our Privacy Policy.