Managing the Cycle of Vendor Compliance
For property managers and people who are responsible for vendor oversight, one of the biggest headaches is keeping up with the vendor credentialing and compliance process. In day-to-day operations, supplier governance may not be at the top of the list of things staff have time to work on. Time-critical tasks such as handling incoming owner and tenant-related complaints and issues can take over most of the day. Whether a company has already identified the need for a new third-party vendor, such as a plumber, electrician or pest control contractor or is working with an existing set of contractors, the cycle of credentialing and maintaining their details is an ongoing process.
Organizations may be at the beginning of a vendor relationship or already have a long-term arrangement with an active contract. Read on to learn some key tips to managing the relationship cycle.
Better Late than Never
Know that it’s better to reframe vendor relationships now by ensuring each contractor is in compliance than waiting until the unexpected happens. Stabilizing the vendor monitoring process to make sure everything is up-to-date is critical.
Start off Right
Resist engaging with a vendor who has incomplete documentation, or promises to send it in after he or she completes the job. Having a proper W-9, Certificate(s) of Insurance, required financial documents and a clear background check on file, with a review for correctness establishes trust in the vendor relationship. Confirming the agreements are signed by the principals is another important step. Taking shortcuts to save time will put the organization at risk should something happen before the paperwork has been verified.
Be Prepared for Vendor Changes
Even preferred contractors who once passed background screening with flying colors may have had a change to their professional license status, their financial profile or encountered a bankruptcy proceeding, court judgment or lien. They also could be subject to a reputation change, such as a criminal conviction or landing on an excluded party watchlist sometime after your initial review and approval process.
Continuous Monitoring Limits Exposure
Even the smallest oversight can lead to trouble. Organizations are vulnerable to financial exposure by continuing to work with vendors who are in a non-compliant status. If a company overlooks a date related compliance event, such as monitoring for expired insurance policies, trade license renewal periods or other critical benchmarks, it can open the firm up to experiencing financial loss.
One such company recently hired a roofer to do work on a pool house that needed repair, and the roofer accidentally burned down the structure. The roofer’s insurance policy was no longer in force. Imagine the impact to the hiring company’s premiums and deductibles after that. Another instance was a plumber who had let his trade license lapse. When the building experienced water damage due to his work, the building’s owner was found liable and sued, not the plumber.
Key Areas for On-boarding and Credentialing
Five key areas to inspect while on-boarding and credentialing vendors are:
Corporate screening, financial stability, background and exclusion checks, insurance coverage levels and professional licensing status.
Corporate screening includes obtaining and validating W-9’s for vendors, knowing the entity’s corporate tax I.D. is valid.
From a financial standpoint, confirming there are no recent bankruptcy filings, liens or judgments is valuable information that may prevent starting or continuing a relationship with a vendor. Knowing the state of active contracts verifying that the signatures on agreements are valid and exist and being aware of potential conflicts of interest or non-compete clauses in place could be tantamount, depending on the business need.
Background checks may involve researching the principals and any key officers of the company. Are there recent convictions including misdemeanors or felonies? Does anyone exist on sex offender registries? Do the names appear on excluded party databases as debarred, decertified or suspended parties? What about other official watchlists such as OFAC? OFAC is known as the Office of Foreign Assets Control and is part of U.S. Treasury. This governing body determines whether or not an entity or individual is permitted to do business in the United States.
Insurance coverage status can change overnight. For many reasons, a vendor may choose to cancel their policy altogether, reduce their coverage limits to a more financially acceptable rate or switch to a lower-rated carrier, days, weeks or months after meeting a company’s established criteria. Here it is critical to make sure that active policies thought to be in force continue as stated in a Certificate of Insurance (COI) submission.
Trade license monitoring involves verifying the vendor carries a legitimate professional license required for the scope of work he or she will perform. Many times subcontractors who are unlicensed take on work for other contractors who get hired, so you must know exactly who is working on your property, what trade licenses they carry and what supervision is taking place.
A Burden of Proof
Managing a daily workflow to measure the ever-evolving state of vendor compliance is a daunting task. Many companies and property managers soon recognize the weight of maintaining a strong credentialing process with the frequency needed is outside their area of expertise. Managing the vendors to prove up all the touchpoints required for an adequate vendor compliance program can become a burden. Setting metrics and acceptance criteria for contractors is unique to each company, and knowing what to expect and performing to that standard can be difficult to handle on your own.
Having background screening experts to gather the right materials is key. Knowing fraudulent tactics unscrupulous vendors use to bypass screening measures is another aspect of the mix. Confirming that any hold harmless agreements are in place and required signatures are on file is important too. Developing the technology tools required to gather, assess and report on variances is another chore most companies don’t want to ask their IT departments to take on.
A 360 Degree View
ERC is a firm that provides visibility into the entire vendor credentialing process. With ERC’s robust suite of software and a well-qualified support team to handle the full cycle of vendor credentialing and onboarding, companies can mitigate the risk associated with incomplete or ad hoc vendor requests and review processes.
Also, by providing transparency with ERC’s intuitive dashboards, property managers and companies with a portfolio of commercial properties can quickly address the vendors who do not meet their criteria. With better decisioning tools, companies can determine if it’s in their best interest to continue to work with vendors that don’t meet their criteria, and can confidently move forward with business as usual for the ones that do.
Reliable Vendor Relationship Management
What ERC delivers to the entire vendor relationship process is the ability to communicate reliably with stakeholders, principals, insurance agents and vendors. Criteria are established for the unique needs of a company. Early on, ERC collaborates with firms to assess the various business scenarios related to their vendor management needs. ERC helps organizations with gathering, evaluating, following up and informing companies about their vendors’ credentialing results no matter where they are in their vendor on-boarding and maintenance process. Metrics are established and measured throughout the process -- making data points available to evaluate if company requirements are set too high or too low. Refining the steps along the way is also important as vendor changes are bound to happen and can occur swiftly in the very dynamic world of business.
Enterprise Risk Control brings to market one of the most advanced, feature-rich vendor management solutions in the industry. Our technology, coupled with our unparalleled service, allows you to automate the collection of vendor information based on their risk exposure. This information is continuously evaluated against your criteria, thus reducing your exposure while giving you the tools to effectively manage your vendor database. ERC services all sizes of business across all business verticals. Small oversights can have enormous consequences; let ERC provide you with the peace of mind that comes from knowing that you are proactively protecting your business with our accurate, intuitive and customizable compliance solution.