Vendor risk management or VRM as the term suggests is an enterprise-wide initiative that analyzes vendor behavior and access, and thereby ensures that vendor doesn’t create a situation where it can disrupt an enterprise’s business in any way. The most common risk factors include business continuity risk, information security risk, operational risk, regulatory risk, financial risk as well as risk of losing reputation.
In a changing business environment, enterprises struggle to mitigate the risks of volatility, uncertainty, complexity and ambiguity (VUCA) on supply chain operations, where a major chunk of the effort needs to be focused on suppliers of direct materials essential to global production lines. That said, vendor risk management is a massive challenge and therefore requires significant amounts of data analysis to derive meaningful insights and an effective course of action to mitigate the risk.
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