Increasingly, companies are relying on vendors to provide products and services to run their businesses. Companies large and small may rely on tens, hundreds or thousands of vendors to deliver their own product or services. Vendors may provide key components of an existing product, supply services or help with customer acquisition. Vendors provide key links in a typical business' supply chain. In highly regulated industries, vendor compliance is a key aspect of business operations. In non-regulated industries, vendor compliance is just good business practice.
Basic Vendor Compliance
In the simplest case, businesses should monitor several key aspects of their vendor relationship. They include compliance with terms of your agreement, compliance with industry standards, the viability of the vendors and an overall vendor checkup. A periodic review of the terms of the relationship should be performed. Are they insured? Are they compliant with applicable laws and regulations? Are they delivering the product or services? Finally, a viability of key vendors should be monitored based on the risk they present to the business. If they fail to execute or if they stop operating, it could interrupt your ability to operate.
Vendor Compliance in Regulated Industries
Several highly regulated industries such as finance, banking, healthcare and pharmaceuticals have laws and regulations that require businesses to monitor all of their vendors and associated third parties for legal compliance. For example, financial companies such as banks and credit unions must monitor all vendors with whom they exchange customer information for their compliance with IT, security and data management regulations. In some cases, the penalties for not managing vendor compliance can be very steep.
Vendor Compliance Policies
In both of the broad vendor compliance categories above, companies should implement a vendor compliance policy. The policy should delineate the legal terms, operational expectations and consequences if a vendor fails to perform. In a non-regulated industry it's good business practice but in a regulated industry, having a vendor compliance policy may be mandated.
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