Control vendor risk for whole organization
For many organizations, vendors are evaluated in a piecemeal fashion. Lacking data, conclusions about vendor risk are often impressionistic. Changes in vendor ownership, management and even strategy can jeopardize business.
Contract management software allows an organization to capture information about suppliers in a central place to make informed decisions about risk.
There are four steps to managing vendor risk with contract management software:
Centralize vendor data
Storing vendor data in one database is a prerequisite to effective vendor risk management. Vendor information housed in various email inboxes, spreadsheet files and documents is not searchable or actionable.
Update vendor profiles proactively
Contract management staff, sales, finance, operations and corporate counsel should all update vendor profile information proactively and reactively so that the current view of the vendor is accurate. Staff can monitor management changes, acquisitions, major financings and material new customer relationships.
Conduct vendor reviews
With current and accurate information about vendors, organizations can report on vendors collectively, independent of a particular contract discussion. The objective is to identify risks that are not visible within a single contract, but become clear when examining vendors as a whole.
Include information obligations & audit rights
If it is not already a matter of policy, an organization can improve the flow of vendor information by drafting standard provisions that require vendors to update the organization about significant events and give the organization audit rights of the vendors’ books and operations. Not all contracts are created equally so these provisions are not always appropriate, but the implementation of the policy will improve vendor risk management considerably.