What is Compliance?
Within business, compliance is defined as the confirmation that a provider of a service, or a manufacturer or supplier of goods, adheres to all the requirements, regulations, legislation, and specific standards and policies of a contract or a business relationship. Compliance issues range from ensuring your vendors’ insurance policies are up to date to having a valid W9 (W8 if a foreign entity) and a TIN or SSN validated by the IRS. In this blog we will help you to answer the question: Are your vendors compliant?
Why your business needs compliance tools
In the case of a procurement scenario, vendors who have identified as “diverse” and therefore qualify for certain contract participation, have a valid, non-expired certificate issued by an authorized agency certifying their diverse status. These are just a few examples of the compliance requirements that may apply to your vendors. Industry, customers, and the nature of products or services often drive these requirements. An example of this would be the supplier of materials used at a nuclear power plant would have a much greater compliance burden than the office supplier vendor who provides the paper for your company’s copiers and printers. The risk of non-compliance would be much greater as well!
The process of ongoing maintenance and administration to track expiring certificates, licenses, permits, and contracts is necessary to ensure compliance. These tasks can be very manual, leaving businesses prone to human error, resulting in a lapse in compliance. Such a lapse exposes businesses to a high level of risk and the potential costs in liability. An example of this was a retail store that had a snow removal vendor who accidentally struck a person in the parking lot of their business resulting in a fatality. The ensuing litigation revealed that the snow removal vendor’s expired insurance had failed to mitigate the retailer’s economic risk. As a result, the retailer took on the entire financial liability.
Compliance Tools
The good news is that there are business tools available to help your company increase the level of compliance in all areas of your vendor or supplier relationships while reducing the manual labor involved and eliminating the significant risk from out-of-compliance vendors. Implementing a solution such as ICG’s Vendor Onboarding and Maintenance solution is a great way to ensure your vendors comply with your requirements from the start. The ongoing maintenance features from this vendor portal (supplier portal) based solution include automatically tracking and notifying vendors and internal contacts in your organization of approaching expirations for insurance, licenses, certifications, or any other date-sensitive areas of compliance.
To add a higher level of diligence, this solution tracks the activity toward renewing policies or other time-based requirements needed to stay compliant. If inactivity occurs as the expiration gets closer, the solution escalates notifications until the company takes action. Additionally, these highly configurable, cloud-hosted solutions provide our clients peace of mind that their vendor remains in compliance. It also ensures that their vendor master data is up to date, reducing any risk of liability.
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