What Is Vendor Due Diligence?
In 2013, Target fell victim to a security breach that gave hackers access to millions of customers’ sensitive information. On top of the $202 million they spent on legal fees, Target shelled out nearly $20 million in a multistate settlement. Their sales also decreased dramatically.
The hackers gained access via a third party POS system. In other words, the entire scandal could have been prevented had Target practiced proper vendor due diligence. Vendor due diligence is the process of assessing and evaluating third parties against a set of specific criteria. Thorough vendor due diligence provides a platform for success when working with third parties.
Vendor due diligence must be both comprehensive and efficient, which often means countless hours spent on paperwork and spreadsheet management. However, with LogicManager’s vendor due diligence content package, you can streamline those processes across your entire organization.
Potential Vendor Due Diligence Risks
At LogicManager, we live by the fact that you can outsource processes, but you cannot outsource risk. But given the fact that vendor information can change at any time, it doesn’t matter how in depth your vendor due diligence processes may be. At the end of the day, your organization is still vulnerable to the variety of evolving risks that your third parties face.
If there is a critical change to one of your vendors, chances are that you won’t be informed immediately, which leads to blind spots. That’s why it’s critical to have processes in place for after you’ve collected due diligence information to ensure that you are performing your due diligence proactively on a regular basis.
Customers don’t care if your vendor is ultimately to blame for an issue; the reputational damage is ultimately a forfeiture felt directly by your company. Not only will a scandal like Target’s impact your bottom line, but in the absence of software, consultants and additional FTEs hired to run your vendor due diligence efforts are never cheap.
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