Most companies sit in the middle of a supply chain; that means they need to practice due diligence in supply chain compliance: mitigating the risk that one or more of your suppliers might pose security, financial, or other threats to your own daily operations.
By building an effective supply chain compliance program, you can reduce the threats to your business — and, by extension, be a more attractive business partner to your customer audience.
What Are the Challenges of Supplier Management?
Supplier management, also called vendor management, often proves challenging because you cannot exert much control over your third-party business partners.
For example, you can perform due diligence at the start of a supplier relationship to assure that the supply is a good fit for your needs, but the ability to monitor your suppliers continuously can be challenging.
Some supply chain risks are particularly difficult to identify and control. Regardless, non-compliance from your vendors jeopardizes the entire supply chain, including your organization and any customers you interact with at the time of a risk event.
Here are examples of the challenges of supplier compliance management:
International suppliers may operate under different national compliance requirements from your organization.
For example, the European Union General Data Protection Regulation (GDPR) is required for companies that operate within the EU or that handle the data of EU citizens. If your clientele is in the EU, you’ll need to assure that your suppliers comply with GDPR demands.
For example, the GDPR incorporates a 72-hour breach notification requirement for all “data controllers” (companies that collect personal data) even for breaches arising from their “data processors” (companies that process personal data, even if they didn’t collect the data from EU citizens directly).
This means that you are responsible for notifying your customers if one of your vendors is processing EU personal data on your behalf, and suffers a breach. If the vendor wasn’t in compliance with the GDPR, you could face fines since you’re the data controller.
Any IT device using outdated software is a security threat, including IT devices used by your vendors. So if your vendors don’t follow a strict patch management program, their devices could be the entry point for a cybersecurity breach that threatens your data or IT systems — and all the financial damage that might ensue. You should review your vendor’s patch management program to mitigate this risk.
Many supply chain management processes still happen on paper, making it all too easy to lose records, mismanage shipments, or cause other types of errors. Moving your supplier management to a digital platform will cut down on opportunities for mistakes and allow you to automate inefficient processes.
Even better, if you can share the digital platform with approved suppliers, you can communicate directly with one another, sharing metrics, contracts, and other updates as needed.
Employee Training Effectiveness
Just because a vendor has a training program, that doesn’t mean the training will always work. Phishing attacks, for example, can fool even well-trained employees. So you should review your suppliers’ training programs to understand their current training program effectiveness.
How to Create an Effective Supply Chain Compliance Management Program
As your organization incorporates more technology suppliers, you need to integrate supplier compliance management into your overall compliance program.
Quality management systems (QMS) document the processes, procedures, and responsibilities for quality and control objectives, including management of vendor relationships. Focus on the most business-critical vendors first, so you can maintain business continuity and further protect your customers.
Establish Control Requirements in Service Level Agreements
Service level agreements (SLAs) legally require your suppliers to align with your security stance. By clearly defining the controls you expect, you can more effectively manage the vendor’s compliance with your risk tolerance.
From these requirements, you can determine whether to maintain or terminate vendor relationships. For example, you may want to incorporate a level of at-rest or in-transit data encryption to assure appropriate data protection — and then hold vendors accountable to meet those expectations.
Create Key Performance Indicators
As part of monitoring of your supplier information security controls, you need to set key performance indicators within your SLAs.
For example, you may want to incorporate a baseline for restoring critical business operations in the event of a service outage. This allows you to evaluate a vendor’s resiliency as well as its monitoring and incident response program.
Supplier relationships need to incorporate ongoing communication among stakeholders, so be sure to assign responsibility for managing the relationship to specific employees in your organization.
Moving to a shared digital portal can also facilitate efficient and streamlined vendor communication, and help to reduce supplier risk events.
How ZenGRC Enables Supply Chain Risk Management
By streamlining the workflow, organizations can eliminate emails while tracing outstanding tasks.
ZenGRC’s streamlined workflow shows task managers the date when a vendor provided a response and a status. These details mean that compliance managers no longer need to spend time following up with the organization’s many vendors, and can drive better vendor compliance.
ZenGRC’s unified control management feature allows organizations to map controls across multiple frameworks, standards, and regulations to determine whether compliance gaps exist. This mapping capability allows you to manage the mundane tasks associated with vendor risk management and assure a robust program.
For more information about creating a vendor risk management program, read our ebook Best Practices to Mitigate Vendor Risk Within Your Supply Chain.