Regulations and regulatory authorities are being increased every day. The moment a business outsources to an external vendor the risks for security breach and sensitive data misuse run high. While they are ultimately responsible for all such risks it is not enough to take responsibility and offer financial compensation. What is needed is a comprehensive Vendor Risk Management Program that will enable proper and effective monitoring of third party entities like vendors, contractors, outsourcers and agents. The program will pave the way for effective risk management policies extend to all third-party vendors, ensuring their compliance.
Outsourcing does come with some inherent risks but in order to expand and survive businesses today have no option but to work with these third-party vendors. They help in reduction of operating costs and expansion of services manifold. While companies profit and refocus on their core competencies, they also need to focus on the significant liability risk that they run. Increasing number of regulators today want these businesses to focus on potential third party risks and stem the problem at the root. This means one has to incorporate a solid Vendor Risk Management Program within the organizational structure that will proactively identify these risks, ensure that their vendor partners have integrity and abide by the necessary regulatory compliance laws.
The various kinds of risks include:
* Legal risk where the vendor’s operation fail to comply with consumer protection laws and regulations. Businesses need to constantly monitor their vendor relations in order to asses and identify potential threats.
* Reputational risk where vendor noncompliance will lead to loss of brand reputation, public enforcement action, lawsuits and financial loss through compensations that have to be paid.
* Operational risk is very significant for along with loss of name and money, noncompliance would also mean damage to functional areas of business.
An effective Vendor Risk Management Program will look into all these areas and come provide a comprehensive plan to mitigate these potential third party risks. What the regulatory authorities want to see is a cohesive internal and external compliance. This means constant monitoring for changes that may lead to new risks. The program offers a deep knowledge of these laws and how to abide by them so that compliance gaps do not occur in future. It helps one to identify the right vendor and manage that relationship well for a long time.
Compliance Education Institute (CEI) is known for their excellent Vendor Risk Management Program. To learn more about this New Jersey-based training company, please visit their website.
