Organizations often have very few employees working in vendor management, leading to heavy workloads. Manually tracking, monitoring, and reviewing vendors assumes vast amounts of time and resources. About half of financial organizations do not utilize an automated vendor management platform for tracking and assessing vendors. Adopting an automated vendor management system not only allows organizations to become proactive while easily staying on top of due diligence, but also delivers insight into the effectiveness of your compliance strategy.
Here are three ways your organization can create a competitive advantage with an automated vendor management system.
1) Cost Reduction
Each year, money is spent unintentionally because vendor contracts automatically renew, committing companies to pay for services they no longer want, as well as annual price increases that are not monitored, understood or validated. According to a VendorInsight® case study, on average, companies lose $300,000 annually on contracts that renew for unwanted and excess services. Here’s some perspective – automated vendor management software costs less than a single employee, yet companies still struggle to move automation up the priority list. Automation will give you the tools you need to understand exactly which costs will increase, by how much, and on what date. In addition, ineffective vendor risk monitoring is likely to put your organization at an even greater risk of penalties and hefty fines from government regulating entities. When monitoring vendor risk manually, it becomes difficult to simultaneously compare and analyze vendors. Some vendor management systems are built with decades of regulatory knowledge. Automated vendor management software also allows at-risk companies to quickly identify areas needing an in-depth, full-scope review. This will optimize time and resources, and creates a source of competitive advantage.
2) Increase Productivity
When you spend less time monitoring and categorizing your vendors, you’ll have more time to analyze their impact on your organization. Automation will allow you to quickly gain insights and increase productivity when generating and integrating information from different areas of business on one platform. When you identify a vulnerability in one vendor, it can pinpoint a vulnerability in other vendors. Similarly, uncovering information in a particular segment of risk oftentimes correlates with information in other segments of risk. An automated vendor management software will allow you to track the effectiveness of your compliance strategy in order to determine areas where it can be updated or modified to increase productivity. Third-party risk data, predictive modeling, reporting and visualization will generate insights that help procurement and supply chain to make better decisions and identify risks at contract initiation. Increased risk intelligence will drive operational change and reduce risk throughout all stages of the vendor life cycle.
3) Performance Growth
According to an EY Survey of 101 organizations around the globe and across a variety of industries:
“70% of respondents cite some level of difficulty in formally establishing policies, procedures and guidelines, as well as maintaining consistent compliance with the policies that are in place.”
We’ve already mentioned that compliance strategies are highly ineffective unless you have the tools to measure their consistency and effectiveness. Having the ability to report on and modify your strategy with the right people will drive organizational growth. An automated vendor management software allows you to get risk alert updates in real-time. This will help you to deliver important information and timely updates to your senior management, board of directors, regulators and auditors. It is important that your software offers intuitive reporting and visualization. This will help deliver critically relevant data in a concise manner, reducing the time it takes to analyze. Timeliness of risk identification is essential so that management can address a particular risk before it creates a financial loss.
Keeping up in a consistently changing regulatory environment is a challenge for most organizations. Due diligence is a necessary practice. It consumes a lot of time, but it doesn’t need to consume your company’s time. Adopting an automated vendor management system will not only allow your organization to become more efficient by saving time and money, but will also give it the competitive advantage it needs to become (and remain) an industry leader.