The digital age is seeing an increased dependence on third-party service providers of varying sizes – including start-ups – to meet the challenges of technological innovation, cost, demand for service excellence and heightened competition.
Organizations are often locked in a love-hate relationship with their vendors as they struggle to meet expectations, sometimes both ways. In today’s digital journey, no organization can thrive on its own.
“To create true value for your organization and help meet business objectives, your organization will need to build a lasting relationship with your third parties. Organizations will need to adopt the art and science of engagement.”
The business ecosystem is experiencing a fundamental shift. Organizations are moving away from purely cost-savings partnerships to value-generating risk-sharing partnership models. As the third-party ecosystem grows, the ability to manage and govern third parties is becoming more critical to success.
Without an effective governance framework backed by a technology solution, organizations and their third parties will be locked in endless discussions, which often will lead to relationships turning sour.
In many organizations, third-party governance is being driven by a vendor management office (VMO) that neither possesses the right skills nor the tools to drive third-party governance. Worst, some VMO leaders are not empowered.
As dependence on third parties becomes increasingly critical, organizations are being compelled to play “catch up” in enhancing their governance processes. More often than not, the innovative initiatives of these newly empowered vendor managers remain immobilized between business stakeholders on one side and disengaged vendors on the other. And this paralyzing paradox is what we should aim to solve.
Vendor management leaders will need to take the lead and drive governance. This will entail influencing your internal information technology, business leaders and other enterprise functions such as risk, compliance and legal.
Third-party governance involves setting up periodic reviews and monitoring that focuses on the following nine core components:
More and more organizations are now taking a closer look at current technology platforms. Automation has been there for a while, but AI-driven digital and cognitive enablement are evolving and is likely to further redefine engagement experience involving third parties. The challenge has been integrations with in-house systems.
Here are the ways that a technology solution can help:
If your organization is one that is ambitious, then it can leverage artificial intelligence and machine learning technologies to help perform an Engagement Maturity Assessment (e.g., how well your organization is managing third parties) and Engagement Value Assessment (e.g., what value your organization is getting from third parties).
The ability to leverage the art and science of engagement to manage your strategic vendors has become more critical than ever before. Governance is not just about setting up a regular cadence with your third parties, it is more about how your organization can unlock value, mitigate risk, control costs and drive excellence with your third parties.
While emerging digital and artificial intelligence technologies can assist in the “science” of engagement, the “art” of engagement will largely depend on human intuition.
Publicly available information from the below two sources are referred to in this article and the link to the source is included.
Jai Chinnakonda is the co-founder of ENGAIZ – a technology startup that firmly believes that effective Human-Led Engagement powered by AI-Driven digital and cognitive technologies can help build lasting and mutually beneficial relationships.
ENGAIZ has developed an AI-Driven SaaS platform to help Enterprises mitigate Third-Party Risks such as Cybersecurity, Data Privacy, Regulatory plus several other risks through an effective Governance and Engagement framework. We help organizations gain increased value from their third-party vendors by way of effective governance, mitigating third-party risks, controlling costs, driving service excellence and innovation.
Jai is a Certified Third-Party Risk Management Professional and advises organizations on third-party governance and risk management. He has over two decades of experience in the technology and business process outsourcing industry. Jai is a member of the Harvard Business Review Advisory Council, an opt-in research community of business professionals. He was also a contributing member to the first draft of The Standard for Program Management released by the Project Management Institute (PMI).