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Supplier Risk Assessment – Why it is extremely important to conduct a supplier risk assessment

Supplier (Vendor) risk assessment is often overlooked in the bigger picture of things! However, active supplier assessments are a very important aspect of good enterprise management to mitigate risk and create a healthy business ecosystem. Risk assessments are extremely critical when suppliers are likely to handle important functions of your business functions. This includes accessing vital or sensitive enterprise data or customer interaction.

Business should always conduct a thorough supplier risk assessment before onboarding a new supplier. For existing suppliers, there is a need to conduct regular quality and security audits to ensure that they are functioning with integrity and efficiency. Suppliers play a critical role in a company’s ecosystem. But a chain is only as strong as its’ weakest link. If a supplier has a compromised threat management system, this creates risk throughout the ecosystem.

  • A Brief Understanding of a 3rd Party Supplier

Any participant in the supply chain of your business providing products or services to your clients but is not on the direct payroll is a 3rd party supplier!

  • Some pertinent examples of 3rd Party Suppliers are:

  1. Supplier of Raw Materials
  2. Temporary Workers, Consultants and Advisors
  3. Business service providers, IT management services and customer service providers
  4. Provider of Business Technology delivered across Cloud, CRM, Data Centres and other related Applications
  • Supplier Risk Management Checklist

    The following is the checklist for supplier risk management:

  1. Define a risk appetite by creating risk appetite statement
  2. Determine risks which are significant for your organizational environment
  3. Supplier inventory creation
  4. Supplier classification
  5. Supplier risk assessment on all suppliers and implement the most important controls to keep risks at acceptable levels
  6. Monitoring supplier performance
  • Why Supplier Risk Management is necessary?

    The suppliers introduce your organization to a large number of potential threats which the organization is not familiar with. Hence, the immunity level of an enterprise needs to encompass these threats to protect the company from prospective threats.

  • What are the consequences of not having a strong Supplier Risk Management Process?

    The possible consequences are:

  1. Lawsuits
  2. Monetary Penalties from regulators
  3. Poor Corporate Image and Business Posturing
  4. Losing Lucrative Business Opportunities

    Suppliers handling sensitive business information are the biggest threat for your enterprise. A robust internal security framework may not safeguard your business if the 3rd Party Supplier has a flawed security environment.

  • What are the benefits of Professional Supplier Risk Management Services?

    A strong Supplier Risk Management Program ensures standardization of the supplier onboarding process, evaluation, identification, risk management, risk monitoring and risk forecasting

    The broader picture would look like:

  1. Better risk management in the future – to help screen out the potential risk level of suppliers and classify them under Risk Level 1, 2 & 3.
  2. Reduce costs – Cost reduction is possible with good Supplier Risk Management. The entire process becomes streamlined and requires less involvement of monetary resources for the desired outcomes.
  3. Focus on business processes and compliance – Regulators are ruthless on businesses who are unable to keep a check on supplier risk. Such suppliers and companies face the risk of stringent fines from government regulators.
  4. Better reporting – Better reporting and governance are the key features of a sound Supplier Risk Management System. The reports help in highlighting supplier performance and potential risk levels. The management can take important decisions based on those reports.
  5. Defensibility – In the event of a lawsuit, the Risk Management System reports can be used by the defence counsel to prove that the due diligence was adhered to in supplier management.
  • ITPN - Working with a reliable Supplier Risk Assessment Service Provider

    ITPN offers advisory, consulting, and wide range of services, products, and certified IT security professionals, with pioneering expertise and rare experience to help our client's safeguard their critical assets (Infrastructure, Data, Identity & Access Management, Applications, and other Assets) by identifying, protecting, managing and adequately responding to security threats and incidents.




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