A vendor compliance audit is an important due diligence measure that flags any potential vendor, which can harm your company’s reputation.
Compliance audit mechanism helps organisations find gaps or risks, which if left unattended can lead to reputation damage and problems with the authorities.
A vendor compliance audit allows organisations to understand a third-party ecosystem and protect themselves from any liabilities that may arise from a vendor’s operations. Nowadays, vendor audits are becoming the best practice across industries because it helps to comply with stringent laws, finance risks, cybersecurity, and data privacy.
A good vendor management policy accounts for regular risk assessments to ensure that vendors are managed properly. These assessments identify any potential risks arising from the vendor’s compliance, finances, operations, or cyber-security. Mynd Solutions offers compliance services in India. With their in-house developed Compliance Automation Platform, expert front-end team, and shared service center; Mynd helps businesses manage organisational compliance efficiently and cost-effectively.
3 Vital Components of Vendor Compliance Audits
Internal audit processes should ensure that appropriate mitigation controls, according to the size of the third party/vendor, is implemented. Your internal audit program should include the following elements:
1. Documenting vendor processes
Your internal compliance team needs to document every process across the vendor lifecycle. Maintaining records helps both parties meet the optimum contract standards. A good vendor management software or service provider can help you automate manual processes while increasing the transparency of the vendor lifecycle.
2. Performing a vendor risk assessment
Evaluating your vendor’s risk management processes will help you determine if the risk mitigation procedures are being deployed according to the agreed-upon contract. This ensures a smooth relationship between both parties, where vendor contracts and all local laws are complied with.
To evaluate vendor risk, account for record management, people screening, cyber security, and physical security during vendor risk assessment.
3. Using technology to remove risks
Managing vendor compliance on an enterprise level is a difficult task. A comprehensive vendor management software leverages technology to automate manual and repetitive tasks. Many compliance professionals rely on spreadsheets to track and manage compliance-related processes. Relying on manual methods, such as spreadsheets, puts your vendor management program at greater risk of errors. A good vendor management software serves a single source of truth; that is, all up-to-date information regarding the processes can be accessed from a single dashboard.
Steps involved in Vendor Compliance Audit
A vendor audit may include the following:
- Checking the vendor’s books and records
- Site visits
- Questionnaires, phone, or in-person interviews
- Background verifications
- The signing of non-disclosure agreements (NDAs)
- Evaluating contracts, policies, and other related documents
- Security clearances
Expected Results from a Vendor Audit Program
A compliance-focused vendor audit accounts for privacy consideration, risk assessment, and impeccable documentation. It targets high-risk vendors. Due to the increased count of vendor fraud, audits are a way to strengthen your organisation while limiting your liabilities.
With an average of 10+ years of experience in labour laws and compliance-related activities, Mynd provides compliance-related support for different industries across the globe. We provide customized compliance outsourcing services to cover all of our client’s obligations under various federal or state-specific labour laws.
