The value of an effective vendor risk management program
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The value of an effective vendor risk management program

3 months ago · 1 min read · AICPA Insights Blog

Have you tried to buy a new car lately? How about a new couch for your living room? Even if you’ve found these products, the selection has likely been limited, or you have to wait for months for the final product. Whether it’s a chip used in a new car or foam to fill a sofa cushion, supplier shortages are affecting all consumers. But consumers are not the only ones feeling the pain. Organizations that manufacture products are suffering, too. If they can’t get the components, they can’t manufacture their products; they don’t have a product to sell and can’t meet their revenue goals.

Among other things, the pandemic has highlighted the importance of identifying and managing supply chain risks. Implementing an effective vendor risk management (VRM) process and related controls is the key to managing those risks. An effective VRM process helps ensure that using service providers and IT suppliers does not create an unacceptable risk of business disruption or a negative impact on business performance.

CPA firms are best equipped to develop an effective VRM process for clients. Depending on the risks your clients face, an effective VRM program:

  • Identifies and evaluates current supply chain risks

  • Prioritizes risks by their probability and potential impact

  • Considers supplier quality, including its long term viability

  • Diversifies suppliers, when possible

  • Considers suppliers’ risks, including whether they have disaster recovery and business continuity plans in effect to mitigate them

  • Periodically reviews supply chain risks identifying changes or improvements in the supply chain

To learn more about providing VRM services to your clients, join us at the AICPA & CIMA’s inaugural SOC & Third-Party Risk Management Conference, to be held virtually on May 3–4, 2022. In “The Value of an Effective Vendor Risk Management Program” session, we’ll discuss how CPAs can help clients manage their supply chain risks by implementing an effective vendor risk management program.

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