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With some economic indicators pointing toward a possible recession, now is the time to ensure that your suppliers, vendors and partners have the business resilience practices necessary to weather the financial storm and mitigate the risk of resulting service or delivery disruptions. If a vendor or supplier misses its financial expectations, it may be forced to lay off employees, cancel contracts, or adjust business development efforts or investments.
Even if the economy is not headed toward a downturn, having strong third-party business resilience procedures in place can prepare your organization for other potential disruptions. To help you benchmark your processes, here are 5 best practices for assessing third-party vendor and supplier business resilience.
The process of agreeing to and managing service levels, delivery timelines, and business continuity processes with vendors and suppliers can be quite complex. It starts with the contract. Manual methods of agreeing to terms, tracking changes to key provisions, and circulating for approval will almost certainly lead to missed key performance indicators (KPIs) and complicate contract renewal discussions. That’s why it is essential to automate the contract lifecycle – from distribution and discussion, to retention and review. A contract lifecycle management solution will:
Simplifying the process of managing and chasing vendor contracts, redlines, dates, and other key attributes ensures that key availability, delivery or business continuity provisions are well-managed from the beginning of the relationship. SLAs and KPIs can then be extracted from the contract for ongoing review and management, providing a central repository to proactively track key metrics. If a supplier is unable to meet its commitments because of financial challenges, agreed-upon contract provisions can help mitigate the impact to your enterprise.
Knowing which third-party vendors and suppliers are critical to your operations is an important step in assessing your risk exposure should they fail. If a vendor/supplier directly supports service or product delivery to your customers, consider the following tiering criteria:
An effective tiering and categorization process enables you to calculate inherent risk, while informing the scope and frequency of ongoing assessments and other due diligence efforts.
Once third-party suppliers are onboarded and an inherent risk assessment has been performed to determine criticality, you should then assess the third party against an industry-standard framework for business resilience. NIST, ISO, SIG, and other standards include business resilience provisions in their frameworks. A business resilience assessment solution will:
Third-party business resilience assessments should be performed regularly, not just at the start of a relationship, to ensure the vendor’s plans are up to date.
Operational and Financial Resilience Questionnaire
Determine whether your vendors and suppliers are prepared to handle business challenges with this free, customizable assessment.
Point-in-time assessments are a valuable and necessary part of third-party risk management, but a lot can happen in between regular assessments. That’s why you should continuously track and analyze public and private sources of vendor business and financial information in addition to cybersecurity data to validate assessment responses. Common sources include:
The challenge that many organizations face when trying to monitor their vendors is the sheer number of data sources that require regular manual curation. A consolidated third-party risk monitoring solution will collate data from these sources and integrate with assessment platforms to validate findings. A more automated approach will help you be more proactive in spotting potential third-party business disruptions or financial concerns and taking the appropriate action before your company is impacted.
Before chasing vendors and suppliers for their business resilience plans, make sure your company has one in place. Key elements of a business resilience and continuity plan include:
Your organization’s business continuity and resilience plan should be regularly reviewed by a multi-disciplinary team to ensure it is current and relevant to all parts of the business. It’s important to note that a business resilience plan is equally valuable in a natural disaster, pandemic, supplier disruption, financial problem or during a cybersecurity incident such as a ransomware attack.
To help you and your team get started on the path to determining your vendor’s and supplier’s business resilience practices (and to shore up your own), we have developed a 10-question assessment for evaluating operational and financial risk. The questionnaire is specifically designed to determine whether third parties have implemented business resilience measures necessary to sustain operations during recessions and other economic disruptions. The survey can also be adapted to meet your organization’s specific requirements and policies. We also offer additional business resilience resource templates to address broader resilience issues.
Download the third-party operational and financial resilience questionnaire or schedule a demo today to learn how Prevalent can help.
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