Using outside vendors to complete projects can help businesses save money on labor costs, as a contractor works on a freelance or per project basis. Bug hiring contractors can be risky. It is important to understand the inherent risks of using outside vendors to complete a project.
When deciding to use a 3rd party vendor for an IT project, a vendor risk assessment can determine any potential liabilities. Sensitive data will most likely be stored on the company’s and the vendor’s networks. Identifying any legal liability faced by the company should the information be compromised due to using a contractor for the project is vital to the company’s interests. There are four key aspects to mitigating the risks in using 3rd party vendors.
Understand what compliance regulations are currently in place for the industry, and make sure the vendor knows them and understand they are held accountable to them as well. For example, HIPAA (Health Information Portability and Accountability Act) has specific requirements to ensure patient privacy. Make sure whatever vendor management software is used for tracking contractor performance also monitors compliance.
The contract should include all aspects of the project, including compliance. Outline the specific terms of the project, what completion looks like, and the full expectations of industry compliance. This will ensure both parties understand exactly what the expectation for performance is. It should also define the exact nature of the relationship between the company and the 3rd party vendor, and how failure to perform will be handled.
Make sure the contractor understands exactly who should have access to the project and all information associate with it. There may be different levels of information each individual who is party to the contract will have access to. Ensure all parties understand what and how much information is to be given to the members of each team. Restricting access to potentially sensitive information will further ensure compliance.
4. Reporting and Monitoring
The contractor should be providing timely reports to keep the contracting company up to date on the project. Using vendor management software to keep track of these reports, as well as tracking compliance to regulations, will keep projects on track, and help mitigate risks.
Using 3rd party vendors to help your company complete projects is a great way to reduce labor costs. However, without a vendor risk assessment, the company opens itself up to potential legal liabilities. Make sure to have a specific vendor risk management plan in place to protect the company’s interests.