Vendor risk management is the process of identifying and decreasing potential risks associated with the hiring of third-party, or contingent workforce solutions. Many vendors are considered contingent, or independent contractors and are part of the 40.4% of the U.S. workforce that is made up of such workers of which 66% work full-time, according to the U.S. Government Accountability Office. Legal and business-related issues should all be covered and accounted for in any vendor compliance agreement. Make sure your vendor risk management plan also has the following three aspects in order to ensure you have all your bases covered.
1.) Establish Goals: The main reason companies partake in vendor management is to complete a task or function at a more cost-effective and convenient price. The average cost spent recruiting someone to hire as a full-time employee is $3,500. Using outside companies with their own workforce can save a lot of money and stress. You need to properly establish the relationship and goals between your company and vendors before you sign any agreement. If your visions don’t align there’s no sense in moving forward. If they do it will provide a concrete manifesto to turn to later on.
2.) Evaluation: Determining how you want to evaluate and analyze performance is one of the most important aspects of vendor risk management. This will be how you can tell if they’re doing the job at an adequate level. Discrepancies and disagreements will become imminent if you don’t clearly decide how this will be judged beforehand. The best idea is to create some sort of grading rubric or checklist that can be used universally.
3.) Consistent Communication: This needs to be established from the start and continued throughout the lifespan of your relationship with any outside vendor company. Even when things are running smoothly it’s important to stay in contact and keep each other aware of any potential issues.