Solutions to Common Vendor Due Diligence Problems

Vendor due diligence is a critical activity that must be done before and during the engagement. This complex process of collecting, reviewing, and assessing vendor information and controls helps protect your organization from risk, but it’s understandable that you might see some problems along the way. Solving these due diligence problems falls under the broader umbrella of vendor issue management, which is an essential component of an effective third-party risk management program.

How to Solve Common Vendor Due Diligence Problems 

Whether you’re dealing with a potentially new vendor or one you’ve worked with for years, it’s not uncommon to face a few problems during the due diligence process. Some of these problems may even be identical for both potential and existing vendors, but the solutions should be different because of the leverage you have. 

Consider this – if you’re having a due diligence problem with a potentially new vendor, it might be easier to find another vendor who can meet your needs. 

While it’s good to have a certain level of trust with your vendors, it’s also important verify the information they provide by collecting due diligence documents. This can help identify and mitigate any vendor issues that may occur after the contract is signed. 

Here are some common problems you may face and some suggested solutions for both potential and current vendors:

Best practices for Problem Solving Due Diligence Situations 

Remember that due diligence should never be treated as a “check-the-box” activity, but rather a mutual conversation between your organization and the vendor. Likewise, there’s not going to be a one-size-fits all solution to every due diligence problem. Each situation will be different, but there are a few best practices that should be considered regardless of the problem: 

1. Document your efforts. Any vendor communication regarding due diligence requests should be documented. This can help provide additional context if you continuously face the same problem and are deciding whether to end the vendor relationship. 
2. Engage a legal expert for contracting. Sometimes your organization will need to proceed with a vendor relationship, despite a few problems during the due diligence stage. It’s important to work closely with your legal team to ensure that your contract includes the necessary provisions that protect your organization from vendor risk. 
3. Establish a formal risk acceptance process. Vendor relationships can bring a lot of value to an organization, but they always carry some risk that must be mitigated or accepted. Make sure to have a risk acceptance process in place that can be repeated with other vendors as needed. 
4. Continuously monitor your vendors. Monitoring your vendors’ for both risk and performance is essential, even if you don’t have any due diligence problems. A vendor’s risk and performance can change throughout the relationship, and ongoing monitoring will help you identify any issues that can arise before your next assessment or due diligence review.

Vendor relationships aren’t perfect, and often have some challenges throughout the lifecycle. It’s not always sustainable to find alternate vendors, so it helps to understand some possible solutions to common due diligence problems. In the end, you’ll create a better partnership with your vendors and keep your organization protected from risk.