Economic uncertainty is driving many companies to consider reducing costs and improving efficiencies across their enterprises. One area that organizations are focusing on is vendor consolidation – also known as supplier rationalization. Vendor consolidation is the process of reducing the number of vendors that a business works with by combining its purchases and sourcing from fewer providers. For many companies, the consolidation/rationalization process involves offboarding vendors, suppliers or other third parties.
This post examines the benefits of vendor consolidation and reviews best practices to ensure sound third-party risk management when offboarding vendors or suppliers.
Vendor consolidation and supplier rationalization processes can help businesses navigate economic uncertainty by:
Minimize Risk After the Contract Ends
Download the Vendor Offboarding Checklist to gauge your program against 40+ recommended offboarding tasks.
It's important to weigh the benefits of vendor consolidation against the need for supplier diversity to avoid unacceptable levels of concentration risk. And it’s equally important to recognize that offboarding vendors during vendor consolidation can pose security and compliance risks if not handled properly. Consider these best practices to minimize those offboarding risks:
Focus on offboarding vendors that are no longer critical to your business operations. This will reduce the risk of disruption to your business processes. Criticality is typically determined by performing an inherent risk assessment to identify key suppliers early in the relationship.
Review all vendor contracts before offboarding. Ensure that all contract terms are fulfilled, and that you are not in breach of any agreements. Review KPIs, pending deliverables, and payments. If the vendor is supplying parts, then make sure warranty and support agreements that survive termination are clear.
Notify vendors of the offboarding process and the reason for it. Provide a timeline for the offboarding process, any support they may need during the transition, and final payments. Ensure timelines are reasonable and not too aggressive, which could lead to business disruption, compliance violations or increased security risks. Keep records of all offboarding activities, including the notification process, data transfer, vendor attestations, and contract termination.
Ensure the secure transfer all data and intellectual property back to your organization, or that the vendor has deleted or destroyed all data they hold about your organization. Ensure that any retained data is protected according to your organization's security policies and compliance requirements. Revoke any physical or system access provided to vendor employees.
Perform a vendor risk assessment to identify potential risks and vulnerabilities associated with offboarding vendors. Offboarding is often overlooked when it comes to third-party risk management, however a lot can happen in the last days of a vendor relationship. Conducting a final risk assessment can validate that your systems and data are securely decommissioned, while also providing records for demonstrating compliance with data privacy mandates.
If the vendor had system access or managed your data, be sure to monitor for data exposure on the internet and Dark Web. Receiving alerts to potential compromises will enable your organization to be proactive in its incident response efforts.
By following these best practices, you can minimize security and compliance exposures during the offboarding process. For more, download the Vendor Offboarding Checklist for a prescriptive list of 40+ recommended offboarding tasks or contact Prevalent to schedule a demo today.