1. Review the vendor’s business and legal structure:
The first step in conducting vendor due diligence is to review the business and legal structure of the vendor. This includes reviewing the company’s incorporation documents, bylaws, and articles of organization. You should also examine the vendor’s credit history and public filings.
2. Conduct a background check on the vendor and its executives:
It is important to conduct a background check on the vendor and its executives to ensure that there are no red flags. This includes checking for any criminal records, bankruptcies, or civil judgments. You should also review the vendor’s credit history.
3. Evaluate the vendor’s financial stability:
You should evaluate the financial stability of the vendor by looking at its credit history, financial statements, and contracts. This will help you to assess whether the vendor is able to fulfill its obligations to your organization.
4. Examine the quality of the vendor’s products or services:
You should examine the quality of the products or services offered by the vendor. This includes reviewing customer testimonials and case studies. You can also speak with current or former customers of the vendor.
5. Investigate the vendor’s compliance with laws and regulations:
It is important to investigate whether the vendor is compliant with all applicable laws and regulations. This includes reviewing compliance certificates, audits, and licensing information. You should also assess how well-equipped the vendor is to handle data security compliance requirements.
6. Assess the risk of data theft or loss with the vendor:
One of the key risks associated with working with a third party is data theft or loss. You should assess how likely it is that data will be compromised with the vendor and what measures are in place to prevent this from happening. You should also review any insurance coverage that may be in place for losses related to working with the vendor.
7. Check references for the vendor:
It is important to check references for a potential new partner before entering into an agreement with them. References can provide insights into a company’s past performance, quality of products or services, level of customer service, and more. Ask for contact information for at least three references who have worked with the vendor in question within the past two years.
8. Evaluate customer satisfaction with the vendor:
Customer satisfaction is a key metric to consider when assessing a vendor. You can gather insights into customer satisfaction levels by reading online reviews, speaking with current or former customers of the vendor, and conducting surveys.
9. Confirm insurance coverage for losses related to working with the vendor:
It is important to confirm that the vendor has insurance coverage in place for any losses that may occur while working with them. This includes errors and omissions insurance, product liability insurance, and general liability insurance.
10. Verify that all contractual agreements are in place prior to beginning work with the vendor:
Before beginning work with a new vendor, it is important to verify that all contractual agreements are in place. This includes reviewing the terms of the agreement, confirming that both parties have signed the agreement, and ensuring that all necessary insurance coverage is in place.