Reinforcing Your Business’ Cybersecurity through Effective Vendor Management

Cybersecurity demands are evolving at a dizzying pace. And in today’s tech-centric world, safeguarding your business against threats of phishing, scams and malicious activities has become more critical – and complex – than ever.

But cybercrime isn’t always a neatly packaged, direct attack on an organization – no matter how robust your organization’s security is, it’s only as strong as the weakest link. Frequently, it secures entry through other channels, an opportune one being your vendors.

A robust vendor management program is necessary to proactively protect your organization against these costly threats. Collaborating closely with vendors and leveraging the insights of trusted banking advisors, such as those at Alliance Bank of Arizona, can create a formidable first line of defense for many businesses.

Common Vendor-Related Scams

Ironically, those who believe they are safe are often at the highest risk of falling victim to fraud. Vendors may unwittingly serve as conduits for cybercriminals, making them accidental accomplices in nefarious schemes.

A few examples of typical schemes include:

• Check washing

  Criminals tamper with paper payments, altering crucial information. In a more modern twist, cybercriminals recreate checks initially meant for vendors, maintaining the same monetary value and serial numbers but changing the payee to benefit themselves. 

• Bogus invoicing

  Fraudsters monitor company or vendor emails to identify opportunities for submitting fake invoices. Without the proper checks, these fraudulent invoices easily fly under the radar and can lead to unauthorized payments.

• Business email compromise

  A cybercriminal requests to change the payee information for a vendor disguised as someone at the vendor organization. Even if your company has a callback process to confirm details, fraudsters may attempt to deceive the victim into calling a number under their control.

Ultimately, avoiding traps like these boils down to one simple concept: verification. 

Implementing tools like Payee Positive Pay can help mitigate various forms of check fraud. Similarly, creating a bulletproof process for vendor invoicing and contact verification can keep employees processing invoices alert to the telltale signs of a scam.

Implementing such processes for due diligence in vendor management can act as a unified defense against fraudulent activities, significantly reducing the risk of falling victim to these schemes.

5 Strategies for Effective Vendor Management

Irrespective of your business’ size, a robust vendor management system is crucial in guarding against cyberattacks. Understanding the specifics of each vendor relationship ensures their legitimacy and scrutinizes their fraud protection measures. Your plan should encompass the following components:

1. Centralized Vendor Management

   A central point of contact can closely monitor all vendors within your company’s ecosystem. Depending on the size of your business, this may be the responsibility of a dedicated individual or an entire department. The key is to avoid haphazard vendor management, where each individual or department manages their vendor relationships, potentially allowing fraud to go unnoticed.

2. Segregation of Duties

   This time-tested financial management practice also applies to fraud prevention. The same individual should not be responsible for both receiving invoices for payment and authorizing payments. Similarly, the same employee should not oversee onboarding vendors and processing their payments. These measures create a system of checks and balances to monitor financial processes closely.

3. Vendor Classification

   Implementing a well-structured framework enables you to categorize vendors into low, medium and high-risk groups based on their significance to your business. Tailored procedures can then be established for each category. It is essential to periodically review and update these classifications to adapt to changing circumstances.

4. Strong Onboarding Policies

   During the vendor selection and payment processes, involving vendor management is a prudent approach. Engage the company’s legal department or counsel to review and validate vendor contracts during onboarding. Once the contract is fully signed and validated, forward it to the bank for payment setup, ensuring W-9 information is verified for accuracy.

5. Consistent Vendor Management

   Maintaining consistency is paramount. Regularly reviewing vendor accounts can detect potential issues early, such as unexpected or repeated activities. Ensure that your team documents appropriate processes and uses them consistently. Vigilant record-keeping is essential for reviewing each payment, especially new vendor payment requests or any unusual requests from a board member.

Bank Support to Keep Your Business Safe

At Alliance Bank of Arizona, we are deeply committed to assisting our clients in safeguarding their businesses from fraud. As an integral part of our Treasury Management services, we provide a comprehensive suite of fraud protection options. Your dedicated banker and relationship manager can assist you in implementing the following:

• Sophisticated digital treasury management solutions

  These solutions are designed to enhance efficiency, bolster your accounts against fraud and safeguard your financial assets. Discuss with your banker the available solutions, such as AP automation, ACH Debit Block, ACH Positive Pay, Check Positive Pay, Payee Positive Pay and API integrations.

• Secured payment and deposit methods

  Implement secure payment and deposit methods, such as paying vendors through ACH credits rather than ACH debits and using a dedicated computer for essential online banking functions.

• Direct integration with bank accounts

  Streamline your financial processes by directly integrating with bank accounts, eliminating potential avenues for fraud.

Discover how our knowledgeable banking experts can help fortify your business’ resilience against cybercrime through enhanced vendor oversight and management. We also take pride in our unwavering commitment to maintaining robust cybersecurity practices to protect confidential client information. Reach out to an Alliance Bank of Arizona relationship manager to explore the range of services our bank offers to businesses like yours.