What is Supplier Risk Management?

BLOG 5 MINS March 18, 2021
What is Supplier Risk Management?

Businesses are increasing their use of suppliers to execute key corporate initiatives with the goal of improving their service delivery for customers, increasing efficiency for employees, and streamlining operational costs.  That said, the use of suppliers can present a variety of risks given their criticality, as well as opens the door for potential data security issues, ethical concerns, and more. As a result, supplier risk management (SRM) is essential to protecting an organization from new risk and operational inefficiencies.

So, what is supplier risk management ? Supplier risk management is the process of identifying, measuring, and mitigating risks that are posed to an organization by their supply chain. In some organizations, supplier risk management may be referred to as third-party risk management, vendor risk management, supply chain management, or vendor management.

Supplier risk management should address many different areas where risks may arise, including everyday issues as well as more uncommon concerns. Some of these risks include: regulatory, information security, privacy, financial, reputational, social, environmental, continuity, geographical, political, performance, and many more.

Watch the Video: SRM Best Practices Video for Manufacturing

What are common supplier risk management challenges?

Supplier risk management is no longer an option for businesses – it’s essential. The security, performance, and compliance of an organization becomes increasingly dependent on its ability to identify and manage their suppliers. The challenges an organization faces in managing these risks include:

  • Poor visibility into the supply chain
  • Lack of resources to maintain proper oversight
  • Budgetary restrictions hindering supplier management
  • Lack of monitoring capabilities
  • Inefficient tools that are not purpose-built for supplier management

What are supplier risk management best practices?

There are dozens of best practices organizations can implement to better manage their suppliers. The most fundamental of these best practices include:

  • View risk management as an ongoing initiative, not a point-in-time event
  • Create an information sharing plan that places an emphasis on supplier risk management
  • Implement tools and technology to measure, monitor and mitigate risk by using a repeatable and scalable process
  • Incorporate risk mitigation and dependency evaluation into your supplier sourcing strategy and qualification process
  • Monitor your most critical suppliers on a regular basis
  • Observe the market, industry, and compliance requirements relating to your suppliers on a regular basis

How do you implement a supplier risk management program?

Organizations need a supplier risk management that addresses the entire supplier engagement lifecycle. There is no one-size-fits-all approach to managing supplier risk because every organization is different. That said, there is a common methodology including:

  • Integrate risk mitigation into your main sourcing process
    • Ensure your vendor risk assessment asks “hard” questions
    • Cross reference your suppliers against your internal risk appetite
  • Identify suppliers that have the greatest impact on your organization
    • Segment your suppliers into risk tiers based on criticality and impact
    • Apply risk categories (financial, reputational, environment, etc.) to each supplier
    • Determine who, when, and how each supplier will be monitored
  • Evaluate supplier performance on an ongoing basis
    • Measure customer satisfaction with each supplier
    • Create a supplier tracking process aligned to your risk matrix
  • Ensure transparency and communication with high risk and critical suppliers
    • Schedule regular calls with your suppliers to remain informed of business operations
    • Meet with your suppliers every six months or on a cadence that’s right for your business
  • Establish a business continuity plan and offboarding strategy
    • Identify back-up suppliers in the event of an incident
    • Ensure all documentation is up-to-date and in a centralized location

Watch the Video: Supplier Risk Management Best Practices Video for Manufacturing

What are the benefits of implementing a software?

By implementing a supplier risk management software like OneTrust Vendorpedia, your organization can establish and scale a successful program that adds to your bottom line and reduces risk. To learn more about how Vendorpedia can help, request a demo today!

Further reading:

Next steps:

Follow OneTrust on LinkedIn, Twitter, or YouTube for the latest news and information.

Onetrust All Rights Reserved