Why Vendor Risk Management Is Essential for a Stable Global Supply Chain

Oct 14, 2024

In October of 2024, a major supply chain strike across key U.S. transportation hubs caused significant delays in the delivery of essential goods. This three-day strike for higher employment wages rippled across the world. Why? It caused massive supply chain disruption, at scale.

supply chain

Without the ability to trade goods, business-as-usual became business-as-unusual. In the U.S., ports from New York to Miami to Houston came to a standstill. Goods impacted included perishable goods like bananas which could not be shipped out to consumers on time. Industrial and consumer goods like auto parts and electronics were also delayed.

Did you know? Nearly three in four U.S. exports and over half of containerized U.S. imports pass through East and Gulf Coast ports. Source: American Association of Manufacturers

Besides shipping time and product losses, also lost was revenue. The aftermath of damage, reports ncronline, could top $5 billion.

When supply chain disruptions like this become reality, three key things happen:

The timely delivery of goods becomes compromised

New risks emerge from both an international security and individual health perspective

The continuity of critical infrastructure may become compromised

The interconnected nature of global supply chains and its impact on global economies means a single disruption can ripple across multiple industries and countries.

Of course, this strike is merely one of many examples of what happens when vulnerabilities in supply chains are exposed. Recent media headlines are chock full of additional examples. CrowdStrike’s global outage in July of 2024, for example, resulted in widespread system outages for everything from retail stores to manufacturing to financial systems to healthcare organizations to the airline industry. Daily business functions were put on hold, with losses reaching as high as $4.5 billion per day for certain industry sectors due to operational slowdowns and halts, shipment delays for goods, and increased costs that stemmed from trying to acquire data access and ensure systems remained secure.

What’s Next? Businesses Must Prioritize Vendor Risk Management to Mitigate Risks and Ensure Resilience

Vendor Risk Management (VRM) or Third-Party Risk Management has become crucial for organizations looking to assess and mitigate vendor vulnerabilities before—not after—significant disruptions emerge. VRM looks at individual vendor vulnerabilities and how interconnected risks can combine to cause widespread disruptions. Again, it goes back to that global ripple effect.

A structured vendor risk taxonomy is vital for assessing the overall risks posed by suppliers. VRMs provide clarity and structure in risk evaluation. This taxonomy helps businesses assess risks in critical areas such as IT infrastructure, compliance, and reputational risks.

IT Risk: As supply chains become increasingly digital, cybersecurity risks introduced by third-party vendors are a growing threat. According to Security Scorecard, 98% of organizations have a third-party partner that has experienced a breach. VRM assessments ensure vendors are complying with strict security standards.
Compliance and Reputational Risk: Recent legislation like the EU Corporate Sustainability Due Diligence Directive is holding companies responsible for human rights violations that occur within their supply chain. According to Carolyn Kitto, director of Be Slavery Free, “Almost every business has a risk of slavery in their supply chains.” VRM assessment include a vendor’s labor standards or lack thereof as well as measures they take to ensure compliance.

How Can SAI360’s VRM Solution Help Your Organization?

SAI360’s Vendor Risk Management solution provides a comprehensive and structured approach to managing third-party risks across supply chains. Our platform helps organizations onboard, profile, and assess vendors based on specific risk categories including cybersecurity and reputational risk. With features like customizable questionnaires, advanced risk assessments, and real-time dashboards, businesses using our solution can better evaluate vendor criticality and ensure operational continuity.

Did you know? SAI360’s solution can identify and alert your company of potential third-party risks.

Customizable dashboards give critical insight into vendor performance, risk exposure, and supply chain health. This includes monitoring how well vendors adhere to contracts, security, and compliance standards.

Final Thoughts

Organizations have a responsibility to build a more resilient supply chain that is better equipped to withstand disruptions, whether labor strikes, IT system failures, or cybersecurity threats. By screening potential third party partners and monitoring existing partners, businesses can head off potential disruptions and maintain a strong operational posture.

Ensuring continuous operations in an unpredictable global environment can be done. It’s just about whether or not you have the right tools in place today to be prepared tomorrow.