@Risk

Today’s supply chains are global and complex –and that means companies are relying on external vendors more than ever before. But, what would happen to your business if a key vendor failed to perform? Do you have contingency plans in place? Perhaps even more important, do you know the warning signs that indicate a vendor is in trouble?

These days, it’s critical that you know your suppliers inside and out. In fact, according to Gartner , which bills itself as the world’s leading information technology research and advisory company, vendor risk management is becoming nothing short of a core competency for companies today. Gartner has even identified four high-level vendor risk criteria area that you should monitor for any indications that a vendor may be in trouble. For instance, robust vendor risk management involves paying close attention to:

1. Organizational Risk –Employee turnover (especially at higher levels), routine rounds of staff reductions, severed ties with partner firms, etc. could signal vendor difficulties.

2. Financial Risk –Be careful to monitor financial metrics (including stock price, credit rating, cash in bank, days sales outstanding, etc.) for patterns associated with vendor decline.

3. Support Risk –Look for reductions in service-level performance and vendor’s failure to meet service levels.

4. Strategy Risk –Abrupt changes in sales and marketing approach, product strategy, industry focus, etc., could indicate that a vendor is in trouble.

“As enterprises increase reliance on vendors for products and services, the more they become exposed to greater risk relating to delivery disruption or vendors’ inability to deliver the goods and services for which they are contracted,” says Helen Huntley, research vice president at Gartner. “It is crucial for enterprises that use external vendors to understand the risk factors that enable them to judge the exposure they have with each vendor should the vendor go under or face challenges that may lead to delivery disruption.”