Vendor due diligence means your organization examines your current and potential vendors to reduce risks to your business operations. When managing your vendors, this is a key component that you must take seriously under federal law.
Aside from that, it’s something that you should want to do anyway to protect not just your organization’s interests, but those of your patients. In this article, let’s talk about a vendor due diligence checklist that you can follow.
That way you can maintain compliance, and build a robust partnership with third-party entities — ensuring the longevity of your healthcare organization.
After all, what you don’t know regarding risk management can be just as dangerous as the threats that you are aware of.
The Due Diligence Vendor Checklist
1. Prioritize Your Vendors According To Risk
A good strategy to adhere to is to categorize your vendors based on inherent risk. The higher a vendor’s inherent risk, the greater priority they become for your organization to assess.
2. Vendor Due Diligence
There is certain due diligence that you should undergo for vendors such as impact analysis. What happens if this vendor goes out of business? What happens if they lose a subcontractor? How could this impact your organization?
3. Type And Status Of Their Business
What type of legal entity is the vendor? Are they a sole proprietorship, LLC, or corporation?
Make sure your vendor has the right liability insurance, and any specialty insurance that may be required.
Have a written contract that you can refer to and use if it’s necessary to enforce on legal grounds. Service level agreements. Both parties should enter into a Service level agreement (SLA) so you can measure deliverables against something tangible.
6. Sensitive data vendor due diligence
Be extra cautious when dealing with sensitive data vendors. You should conduct third-party audits and ensure that they have additional insurance like cybersecurity and errors and omissions coverage.
There should be protocols surrounding disaster recovery and business continuity. After all, your organization should never be dependent on one vendor.
7. Strategic Vendor Due Diligence
When dealing with strategic vendors, look at their financial soundness. Also, evaluate the ownership of the company. Do they have experience in this field or do they have any previous issues that are alarming?
Continually monitor your relationship and be aware of any mergers, acquisitions, or other legal issues that may change the nature of how you interface with this vendor.
We’ll assist your organization with compliance objectives for all the frameworks that you or your partners may be subject to. That way you can focus on growing your business with reduced risk.