Launching a startup is risky, and things only get riskier when outsourcing services. Most leaders will need some vendor risk management, or VRM, to give them the confidence to succeed.
“Launching a startup is already a high-risk endeavor, and unfortunately, outsourced services bring more risk,” said Todd Boehler, senior vice president of strategy at ProcessUnity. “Even the most basic supplier risk management processes can significantly benefit a company’s longevity.”
But the exact nature of this VRM will vary from startup to startup. For example, fintech startups may need immediate vendor risk management programs to protect the processing of sensitive data and expand outsourced services to support rapid development.
Although many companies are just getting started, that doesn’t mean they can’t identify critical information about their vendors: what they do, what they can access, and how they monitor that access for misuse. abusive or abusive.
This information can reassure customers about sensitive data. In an era of growing cyber threats, transparency and vigilance go a long way in differentiating a startup from its competitors. Maintaining a strong public commitment to safety is a great step in building brand advocates.
Startups differ from large enterprises when it comes to VRM
Startups face distinct challenges and need agility from the start to quickly onboard the right partners to support growth. They must also be diligent in ensuring that the first vendors are the right ones for their needs. Large enterprises can easily overcome hiccups with vendors, but startups can be knocked back by opting for a vendor that eschews security best practices or otherwise compromises the viability of the business.
First vendors are one of the most critical aspects of a business’s success or failure, but they’re easy to overlook. Typically, founders focus on having an innovative idea, creating buzz around their business, or finding fun and memorable marketing angles. That’s all great, but if you partner with the wrong vendor early on, all that hard work might count for nothing.
3 things to consider when reviewing VRM
1. Continue to monitor suppliers.
Diligence should not end with proper vetting of vendors prior to onboarding. It’s important to Continue monitor supplier actions over time. Things change often, whether at your point of contact at the supplier or at the management level.
Also, by looking at a long-term scale, you can get a much better sense of the relationship than just basing it on the early weeks of the partnership, when vendors are likely to be at their best.
2. Be prepared for staffing needs.
Startups also face the challenge of having fewer people behind VRM processes. Large companies probably have multiple people dedicated to overseeing all of the vendors, but startups are often just a few founders who are stretched, covering all the bases for launch and the initial scaling period.
For established companies, more human power equals more time to identify suppliers in their ecosystems, understand how they contribute, and decide which ones are essential and who is responsible for each relationship. When you dedicate a significant portion of your human resources to vendor verification and onboarding, it often slows your go-to-market value of critical products or services. The trick is to gain efficiencies while maintaining proper due diligence for risk mitigation and regulatory compliance.
3. Properly assess the risks.
A clear view of the risk associated with any supplier is essential. Risk can be determined based on the nature of the supplier’s product or service. Critical information, such as access level, incident history, and type of service, indicates the type of risks providers may pose. Risk areas may include information security, financial resilience, bribery or corruption, business continuity, etc.
By using a good inherent risk management process, you can better determine due diligence requirements. This process will determine next steps, including appropriate contract clauses and monitoring requirements or even the end of the business partnership.
By doing your due diligence in VRM, you can be sure you’ve checked an essential box to protect your startup’s future. Just make sure to dungeon check it off every month as you continue to monitor your vendor relationships to give your startup every chance to succeed while focusing on the fun parts of launch and initial growth. You can build and enjoy successful partnerships with the best vendors available, but that success only happens with the right VRM, so don’t delay.