Vendor Risk Management (VRM), Third-Party Risk Management (TPRM), and Supplier Risk Management (SRM) are programs that companies employ to assess their relationships with third parties or suppliers for potential risk. The most common types of risk a company will want to evaluate for are regulatory, operational, financial and reputational.
The purpose and function of VRM, TPRM and SRM are similar: the core process is to identify, assess, monitor and mitigate risk. The slight variations between each program depend on your company’s unique relationship and demands.
Vendor Risk Management or Third-Party Risk Management
In recent years, risk experts have (mostly) come to agree that the difference between Vendor and Third-Party Risk Management is overwhelmingly semantic. “Third-party” is a catch-all term used to describe every organization your company interacts with, while “vendor” is typically used to describe a provider of a product or service.
Regardless of nomenclature, both programs are equally concerned with monitoring risk for the duration of the third-party lifecycle, from initial onboarding to the end of contract. By focusing on a company’s individual relationship with each vendor or third-party, each program provides a thorough evaluation of inherent and residual risk.
There will always be risks, but the specific risks and degree of that risk will differ based on several factors: data, network or facility access, volume of information exchanged, geographic location, etc. A risk management program platform that identifies third-party risk tiers and automates the processes can help you focus on critical vendors.
Supplier Risk Management
Supplier Risk Management strays from Third-Party Risk Management’s fine-tuned focus to assess the entire supply chain. SRM programs also monitor sourcing to protect the organization against risks that can result in grave consequences before a supplier is onboarded.
SRM is most relevant to the product industry, where companies need a clear understanding of who they are sourcing materials, labor and other components from. Like Third-Party Risk Management, organizations need to know exactly what a supplier does for them, and they must also assess the supply chain on a broader scale to understand how its structure can pose additional risks. For example, a company may assess for geographic concentration to limit the risk a natural disaster could pose by assessing if their suppliers are all located in one area. With the general shift towards offshoring practices, SRM also considers unique risks such as ethical production, geographical concentration and spend concentration.
Though Supplier Risk Management is concerned with different risks than Third-Party Risk Management, the way these risks are managed within a program remains consistent. The first step in establishing a successful risk management program is identifying the unique risks your third parties or suppliers pose.
Implementing an Automated VRM Process
Many forward-looking organizations are moving to a VRM process that’s driven by artificial intelligence and automation. Implementing an automated VRM process will substantially reduce the amount of manual labor required by your team, and provide opportunities to partake in continuous monitoring, enabling you to identify vendor risks early. This way, you can develop a risk mitigation approach before they cause potential damage to your organization.
An automated VRM solution should:
- Pre-qualify and On-Board Vendors – A high-quality solution should integrate data that checks a prospective vendor’s security performance before you commit to working with them, so you can rule out those with security concerns.
- Classify vendors According to Risk Level – Although only certain vendors will need access to proprietary data or touch your company’s’ infrastructure, this subset of vendors requires careful monitoring. Your solution should identify these vendors on your behalf.
- Implement a Vendor Assessment Solution to automate vendor questionnaires and responses.
- Implement a robust Vendor Risk Scoring and Risk Rating System at your organization to get vital background due diligence data of vendors in your supply chain
- Implement an automated Vendor Risk Rating Monitoring solution to get any updates and changes to Red Flags of Criminal Records, Sanctions, PEPs, Lawsuits, Judgments, Liens, Bankruptcies, etc.
By implementing an automated VRM solution, your company drastically reduce the manual and repetitive work to track Risk and Compliance and gain access to real-time data that will help you determine when risk levels are elevated for any vendor. Moving to an automated system will help you move beyond mere compliance into continuous Vendor Risk Rating, Vetting Monitoring, providing your organization the vendor data intelligence, it needs to detect varied risks early and to mitigate them quickly. With an intelligent, automated VRM solution, your organization will be able to streamline and enhance its overall Third-Party Vendor Risk Program.
Today, it is vital for companies to take a more proactive stance with Thid-party Risk and assess a vendor before any contract is executed, but they also need to apply continual monitoring process of vendor risks.
Conducting vendor due diligence vetting during the onboarding process can help identify risks that a new vendor/supplier may pose. Ongoing due diligence vendor risk rating and monitoring provides the detailed information companies need to determine whether to continue a business relationship. Doing business with a high-risk vendor can be extremely detrimental to any companies bottom line, reputation and enforcement actions by international regulators are often costly.
The Modevity Vendor Risk Management Services will provide clients with a powerful automated branded process for vendor assessment questionnaires and a powerful due diligence vendor risk rating reporting service with continuous vendor monitoring.
Modevity has implemented the full range of powerful database technologies, AI and open-source tools that enable our team of research analysts to quickly obtain a complete vendor risk profile. Our client companies will no longer need to implement Vendor Risk Management & Assessment software and staff resources – providing substantial organizational cost savings to their organization.
Modevity Contact info:
Tom J. Canova, Co-Founder, CMO
Office: (610) 251-0700
