From supply chain disruptions to massive third-party data breaches, one of the clear lessons learned from 2021 is that proactively managing vendor risks no longer an option. It has moved up in priority in every company and now has visibility by senior management, internal audit, and the Board.
In fact, I frequently argue that managing vendor risk is just as important as managing risk with your own employees. If you lose a key staff member, it’s going to be painful. But if you lose a key vendor, it can shut down entire portions of your operations.
But while vendor risk management is critical, mitigating vendor risk must be complementary to the primary purpose of working with vendors – which is to help you get work done better, faster and/or cheaper than you could on your own.
Great vendors provide wide-ranging benefits to your company including:
- Knowledge. They offer strategic ideas and tactical insights on how to plan, grow, manage risks and streamline operations.
- Skills. They provide technical and industry-specific skills like legal, marketing, technology (and even vendor management) that you may not have on staff or that you need for a particular project or initiative.
- Experience. They bring best practices they’ve learned from working on many projects across multiple companies and industries.
- Scalability. They give you a way to grow (or shrink) in a way that limits your investment and risk, and provide you with people, space, technology and other resources crucial to operations.
- Distribution. They enable you to extend your business and reach new markets by leveraging proven, established distribution channels.
- Cost Efficiency. They give you the ability to operate faster and cheaper, and turn fixed costs into variable costs.
The very best vendors become a strategic asset, a partner in execution, and an important member of the extended workforce.
So, as you plan for your own success in 2022, make sure it includes a strategy for finding and working with the right vendors so you can drive more value, AND less risk, from those important relationships.
Learn more about the importance of vendor relationships in the new and updated version of my cornerstone e-book, Rethinking Vendors 2.0.