How to Choose the Best Vendor Risk Management Software
Vendors are a significant factor in your procurement strategy.
They deliver the inputs your company needs to keep running, offer you opportunities to save budget dollars, and provide market information on the supplies you need to run your company. Vendors are a key factor that makes procurement work.
This brings up an uncomfortable question.
How do you choose vendors whose products or services support your operations without offering any setbacks?
That’s where vendor risk management comes in.
What is vendor risk management (VRM)?
Vendor risk management is all about gauging suppliers to ensure the product or services they offer don’t in any way impede the operations of your organization.
This requires taking a 360-degree of how the supplier’s offering will be used within your organization to ensure there’s no inherent risk it poses.
Vendor risk management software is an automated tool designed for gauging if and how much a supplier’s offering may hinder your operations. This helps in decision-making since you can determine whether or not the risk is worth it.
In this article, you’ll learn:
- The benefits of leveraging a vendor risk management software,
- Need-to-have features a vendor risk management tool should offer, and
- The top risk management software available on the market
Benefits of vendor risk management
The key benefit of managing vendor risk using software is that it gives you a simple, scalable tool you can use to vet suppliers before acquiring their products or services. Among others leveraging vendor risk management helps you mitigate risks such as:
Mitigate financial exposure
A customer-vendor relationship goes far beyond the contract and the occasional order you make.
Rather, it ties both your organizations, making it easier to get hurt if any of your vendors do.
Say, for instance, a vendor with access to your platform suffers a breach and some of your customers’ data leaks out. It’s no longer just their problem since now, you have to spend to secure your customers, ward off lawsuits, and build up your reputation.
A vendor risk management system can help you determine just how much a supplier can affect your bottom line and as a result, help you avoid disaster-prone vendors.
Limit strategic risk
Apart from hurting your bottom line, one hitch in your supply chain can determine if the supplies you need to ship that next batch of inventory can arrive in time.
And failing to do so will hinder your organization’s strategic goals and make you less credible to your customers.
For example, say you had a supplier based in a country that was hit hard by the COVID-19 crisis. Due to government regulations, they had to shut down and as a result, you had to shut down too and could no longer meet your output targets for the year. A strategic setback.
Vendor risk management empowers you to measure different data points and decide which supplier will help keep your supply chain secure and sustainable in the long run.
Secure your brand reputation
Your brand reputation is essentially the track record you’ve built up with the quality of your products and services.
Customers come to trust that they’ll always get a good deal from you and this translates into more repeat business you don’t have to spend money acquiring or retaining.
All’s well right? Good.
Now, let’s say after a while one of your major vendors starts undercutting the quality of the supplies they make. You’re hesitant to use these supplies at first but over time, you kind of acquiesce. This leads to a drop in the quality of products you put out for the end-users and with time, you notice sales figures dropping.
This isn’t a coincidence but rather, a business setback that risk management can help you avoid.
A vendor risk management system can help you determine, even if only slightly, the outcomes a particular vendor will have on your supply chain. That way, you’ll be able to avoid suppliers whose inputs are likely to hurt your brand reputation.
Build a secure supply chain
Your suppliers are essentially the lifeblood of your business since they deliver the inputs you process into finished goods and services.
They maintain your supply chain and ensure the supplies you need to keep functioning are not just delivered but are guaranteed to be safe from disruption.
Which is another pain point where vendor risk management pops in: supply chain resilience.
Vendor risk management can help you determine which suppliers are prone to defaulting on contracts and those that can be expected to stay open. In the long run, this will help secure your supply chain and guarantee you the inputs you need, circumstances notwithstanding.
Features to look for in vendor risk management software
It’s important to note that the risk management attributes you can obtain are dependent on the features built into whichever risk management software you opt for.
That is to say, if you’re shopping for vendor risk management software, keep your eyes peeled for the features that offer the functionality you need.
What features are those exactly? Find them below.
Policies and standards
Measures the policies and industry standards your suppliers have in place as a quick pointer to whether they can meet basic risk management criteria expected of them.
People, skills, and training
Weighs how skilled your vendors’ staff are to support your operations without posing risk.
Analyzes how much risk your third-party partners pose, depending on the safety of their internal operations, systems, and process.
A robust risk management platform should be able to drive into the roots and take a snapshot of how effectively you can expect your vendors to deliver products and services without endangering your organization in any way.
Top vendor risk management software in the market
There are several software tools already built out to offer risk management in your procurement.
They’re designed to help you assess vendors and limit your exposure to strategic, financial, and reputational risk. These include:
Aravo offers robust third-party risk management and leverages automation to track and assess close partners to determine their risk rating and how their internal workings may endanger or hamper or organization.
Ideagen combines efficient workflows, APIs, and automated processes into one tool that helps you assess potential and existing vendors to determine if they’re ideal for your organization or whether you need to make a change.
Bitsight provides a unique take on risk management with security ratings that help you analyze how much risk a particular vendor poses to your organization. This is in essence a purely informational approach and you may have to run in circles to execute on the insights it offers.
Kissflow offers a procurement suite built out with advanced risk management so you can assess vendors and determine each one’s risk ratings.
This approach saves you from scattering your procurement across a dozen tools but rather, brings it all into one source of truth where you can manage everything with clarity.
Why does Kissflow stand out?
Kissflow Procurement Cloud doesn’t just offer a risk management platform for you to try and cobble together with the rest of your procurement stack. Rather, we take a comprehensive approach that guarantees security and compliance end-to-end.
Kissflow offers a procurement stack built for dynamic companies looking to manage suppliers seamlessly without throwing caution to the wind. Using Kissflow, organizations of all sizes can:
- Onboard and manage suppliers right in one tool
- Engage your entire organization around the procurement process
- Ensure maximum security and prevent fraud at a high level
Kissflow Procurement Cloud empowers you to manage your suppliers in one platform with efficient processes and cutting-edge security. As a result, you get a better grip on managing your suppliers and mitigating procurement risk.