Jamming with Jason E94: Vendor Risk Management with Rick Roybal

As organizations outsource more and more of their processes, the #risk associated with managing those vendor relationships goes up. Organizations may think they are removing the risk by #outsourcing, but they are only sharing or transferring a portion of the risk. Just ask the countless organizations that found themselves holding the bag on a multi-million dollar fine or penalty when their vendor wasn’t compliant.

In this #jammingwithjason #internalauditpodcast I speak with Rick Roybal about the importance of having mentors in your career and risk around third-party, vendor risk management.

Listen in at: http://www.jasonmefford.com/jammingwithjason/

Registration for the Fall 2020 Oil & Gas Vendor Roundtable mentioned during the episode is now open. When you are ready, visit https://www.vendoraudit.org/fall2020ogvr to see the speaker lineup (and you will see Jason’s smiling face).

Just a few details for you:

  • If you work for an operator, there is no cost to you.
  • There are a limited number of seats available.
  • Dates: October 28-29.
  • CPEs offered

Register for the Oil & Gas Vendor Roundtable at: https://www.vendoraudit.org/fall2020ogvr

Make sure to check also out The Tour Report podcast with Rick (especially if you are in the oil and gas sector) at: https://www.vendoraudit.org/tourreport

Trancscript

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Jason Mefford: Hey everybody, I am joined today by my friend Rick rival Hey Rob

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Jason Mefford: How you doing, man.

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Rick Roybal: I’m man. How are you doing,

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Rick Roybal: I get reminded me

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Jason Mefford: Well, it’s my pleasure. I know that you know I was on your podcast a little bit ago and the tower report but spelled T O you are

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Jason Mefford: Right. For those in oil and gas. They know how to spell tower. The other way.

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Jason Mefford: And yeah, excited to have you here. So maybe, you know, again, just so you kind of, you know, familiarize yourself with the with the listeners to just maybe give a little, little background, who you are, kind of, what should do and then let’s just jump in and start talking about audit stuff.

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Rick Roybal: Yeah, absolutely. Well, again, thank you so much. Jason, for having me on the show. I really appreciate it. And again, it’s interesting how we all kind of kind of connect with each other, you know,

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Rick Roybal: Again, as is great, you know, platform able to do that. Rick royal you know he if you look at his resume and I’ve caught a lot of things. I’m a resume because

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Rick Roybal: I turned 49 Monday.

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Jason Mefford: Oh, you do it so your birthday, your birthdays. Right. Okay. Mine was Wednesday.

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Jason Mefford: That’s right. So there we go, there we go, there we go.

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Rick Roybal: So getting old here. So I’ve cut some things out. But really, my, my background is sort of

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Rick Roybal: Starts here, I started off in teaching and taught over in Eastern Europe and Central Europe and places like Slovakia and Bulgaria transition to

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Rick Roybal: United States where I was continuing to teach, but at the same time I was getting more involved in the world of it and software development of all things, and

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Rick Roybal: I found it a logical segue of my career in order to a make more money and be do something a little bit more interesting than just day to day classroom work.

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Rick Roybal: I went into technical writing technical training, it made a lot of sense. At the time, what was happening while I was doing the technical writing is I was working for companies that were had you know era P jeal, you know, General general type of

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Rick Roybal: software application. And while I had shunned accounting in my whole

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Rick Roybal: Career up to that point, I found myself really enjoying it. And I also started to understand, you know what, what it meant by internal controls and specifically with it. Like if there was

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Rick Roybal: We had a particular piece where we were setting up users and you know provisioning, you know this person to do this role in this role with us. Those are controls.

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Rick Roybal: Right there. And so I was learning what this meant and where we’re kind of where people fit and an organization was really good. The problem was, I still was not doing what I’m doing today.

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Rick Roybal: That happened when a I got a phone call from my uncle. He’s a CPA down in Baton Rouge always has been a great mentor in my life, called me up on. We were living in Colorado, and he said,

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Rick Roybal: I just finished this article in the ICP a magazine about this dearth of it auditors.

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Rick Roybal: And I think that this might be a good step in your career, you can when you know your passions and but the only problem is that you need to be able to go back to school, so I found a great university up there in Colorado Springs.

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Rick Roybal: Got my MBA PTC picked me up real quickly and then that audit career just started to happen and things made sense. I didn’t stay with audit, excuse me, the it audit sees me

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Rick Roybal: Went to more operational type of internal audit environment. But that’s where I’ve kind of landed and it’s really kind of been interesting because audit is for me is working with people teaching people sometimes learning from them.

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Rick Roybal: It’s about writing reports. It’s about making recommendations and I didn’t realize at the time, but probably somewhere in early 2000 maybe 2006 or so the teaching career and the technical writing career really laid the groundwork for what I do today.

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Jason Mefford: I think it’s, it’s, it’s always fascinating how people kind of come to this this profession, right, because the same thing. I know when I was a little boy.

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Jason Mefford: I was not going around going, hey, I don’t want to become an internal auditor Sunday or. I was like, No, I want to be a fireman or a policeman or I was going to be a general in the in the military.

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Jason Mefford: Tells a little bit about myself. But, but, you know, it’s interesting because like you said so many of us come to this in some different roundabout ways

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Jason Mefford: You know, it’s the same thing, like you said, you know, if you look at your resume.

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Jason Mefford: Yeah, there’s a lot of things I don’t tell people that I’ve done, like, you know, real estate. I was a realtor I

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Jason Mefford: You know, I, I spent a lot of years in construction because my father owned a construction and real estate company right

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Jason Mefford: And, you know, different things like that but that that at some point, we end up kind of making our way to this to this profession.

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Jason Mefford: And and just like you said, I mean I’ve loved it because I’ve met some really interesting people and work with some really interesting companies.

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Jason Mefford: And got to learn a lot more about business, how people make money what they do. You know, I remember a lot of times in public accounting. I just kind of shake my head. And I’m like, I cannot believe actually

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Jason Mefford: You know companies make money doing this. I didn’t even know this existed, you know, yeah, kind of thing, which is which is always fun.

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Jason Mefford: So,

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Rick Roybal: Yeah, no doubt about it. Well, I’m glad I’m glad I’m here. I’ve had some really great mentors along the way. You know, you know, I talked

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Rick Roybal: About that a little bit last time. But, you know, one in particular is my boss at a company in Fort Worth, and I work for in

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Rick Roybal: My camera is his name and he’s just foundational in my life where he just, you know, helped shape and mold me, give me, you know, the space to be able to make mistakes and learn put me in front of people to be able to

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Rick Roybal: Work on speaking skills and and skills, where you need to be convinced someone I mean that’s that’s a big part of our job is convincing the other

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Rick Roybal: Part of the table, you know, so to speak, but my 10 number was really great mentor in that sense, I had some great people along the way that have just helped me to be where I’m at today.

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Jason Mefford: Well, you know, it’s funny because you you bring that up. A lot of people don’t really bring that up. So maybe let’s just talk about that for just a couple minutes because

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Jason Mefford: It is so important to have mentors or people that you can look up to that kind of help guide you in your career. Right. And there’s different people at different points in time.

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Jason Mefford: Because one that I remember is you know Jim Crawford was his name. He was the the controller at the company that I was working for

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Jason Mefford: When I was going through college when I was getting my accounting degree. So, I had an accounting intern in corporate accounting at this at this company.

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Jason Mefford: And, you know, was on the track to go into public accounting and but of course you know I got married early. We had a baby on the way.

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Jason Mefford: My wife is kind of pressuring me, you know, finding finance wise you know and and an entry level accounting position came open and I was qualified for it and

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Jason Mefford: So I put in on I put in for it.

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Jason Mefford: And I remember Jim calling me into his office, you know. So here it is. This is a guy who was like the treasure of this multi billion dollar company and now he was the controller because he was moving around and finance. So, you know, he calls me in his office and says, you know, Jason.

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Jason Mefford: You’re doing a really great job here but you know I need to counsel you that this is probably not the right career move for you. And I’m like, Why you know Joe I’m qualified for it, he said. He said, You have so much more to offer than just being an accountant.

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Jason Mefford: You know, you need to stay on your on your path.

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Jason Mefford: That you’re on go into public accounting and and kind of, you know, take that career route instead

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Jason Mefford: You know, and at the time it was like, you know, damn it was like twice the money, right. So, you know, part of me wanted to kind of take that short term thing. But, you know, many, many times. Now in the last, you know, 25 plus years, you know, since Jim told me that

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Jason Mefford: I’m so grateful to him right because eventually yes I got into public accounting, who was one of my first clients. Oh, the client that I actually worked for. Right. What was my first Chief audit executive job it was for that client.

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Jason Mefford: Right. And so in a in a short space of, you know, six years or six, seven years, all of a sudden I catapulted my career and was back working for the same company.

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Jason Mefford: As the chief audit executive I never would have done that, if Jim hadn’t given me given me that that mentoring at that time. So yeah, for everybody listening. If you don’t have mentors, you know, try to find people

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Rick Roybal: Out one

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Jason Mefford: Seek seek people out

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Rick Roybal: And conversely, if you are someone with some, you know, some senior esque type of experience, you know, 10 years in 15 years behind your belt. You could even be, you know, have less than that, you know,

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Rick Roybal: But really, is to be grooming and look, you know, it’s like, look at the people in your staff and no I’m not trying to be, you know, have this natural selection thing of like, I’m going to get rid of this person here.

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Rick Roybal: Yeah, this money’s going to make it this McGee’s not

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Rick Roybal: But it but really the thing is is that is looking at people an incentive saying, Look, I’ve got this group of people that I can really group and and in different ways, you know this person really needs help. And this skill set and do it in a way of that.

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Rick Roybal: That encourages them.

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Rick Roybal: Do it in a way that helps build them up gives them some good constructive feedback. I think that’s as just as a that’s one thing that we’re not really good at. Sometimes we sometimes

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Rick Roybal: Hold back on that can really true constructive feedback. So we want to hurt anybody’s feelings. Well, sometimes you need to speak the truth right and and so that and that’s part of mentoring is like, just like you know Jim said, Do you think this is not the right path for you.

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Rick Roybal: I know, I know.

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Jason Mefford: It will because it brings to mind there’s there’s two words that the sometimes get confused in the words are kind and nice. Yeah. Yeah. And

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Jason Mefford: You know it’s it’s it’s way more important to be kind, than it is to be nice and sometimes we think they’re the same, but they’re not. Because like you said, sometimes it’s kinder

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Rick Roybal: Yeah.

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Jason Mefford: To give people that constructive feedback to be hard on them because in their long term. It’s the kinder thing to do.

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Jason Mefford: For them as a person. Right.

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Jason Mefford: And so yeah, I mean I there’s been several times he’s he’s long been retired, you know, moved on to another company retired from that. But yeah, there’s a lot of times that I think back and I’m just so grateful for him.

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Jason Mefford: You know, telling me that it wasn’t what I wanted to hear at the time.

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Jason Mefford: But it was exactly what I needed to hear. Yeah, right. So, so that’s that’s a good point to for anybody you know as you as you move forward in your career, try to help people you know as well and be kind to them and help them along the way.

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Jason Mefford: As well.

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Jason Mefford: Because you know people helped us get to where we’re at. So let’s help people, you know, along the way, that’s kind of why you and I do what we do now. Now, even to right

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Rick Roybal: Right, exactly.

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Jason Mefford: Yeah, cuz I wanted, I wanted to jump in and talk a little bit about

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Jason Mefford: You know the you’ve got the podcasts, a tower report, I know you’re also running

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Jason Mefford: Around table. So let’s let’s kind of get him talk a little bit about that because that’s another it’s an opportunity for people

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Jason Mefford: You know, to be able to mix with peers to be able to get some of that mentoring maybe from people

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Jason Mefford: That are that are already doing stuff that maybe you’re not doing yet so maybe talk a little bit about that kind of explain what that is for people because I think it’s great what you’re doing now.

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Rick Roybal: Thank you. Yeah, I’m really proud of the organization. I’m or it’s and where it’s come today and come from, but

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Rick Roybal: We basically in about 2013 or so, I was working for a consulting firm and we tried to do something where we were trying to get gather you know chief audit executive together that were in oil and gas.

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Rick Roybal: But it really didn’t work very well. Not because we didn’t gather the right people. It’s just that we were. It was too salesy

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Rick Roybal: And it just, it was a turn off big time. But I knew the idea was still a viable one just had to kind of recreate it in a sense, but I love to sort of that back compartment of your mind for a while and

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Rick Roybal: I, a year and a half goes by, happened to be on a phone call with the with the pier and she now we’re talking about our audits. We weren’t, you know,

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Rick Roybal: It wasn’t bad mouthing vendors are like that. It was just the fact that we were like sharing. Hey, what are you doing

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Rick Roybal: On this type of audit. What are you doing this I bought it. What kind of, you know, technique us and tests, etc. And we were both specifically working in oil and gas as an operator, the upstream art and specifically auditing our suppliers, though.

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Rick Roybal: This conversation lasted a couple hours on phone I got fun like we need to get together, you know, collectively and be able to share ideas and best practices, etc.

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Rick Roybal: Um, she wouldn’t reach out to a few people. I started reaching out to people again thanks to LinkedIn and all of a sudden we had 10 people that were going to meet in a hotel conference room and Dallas, Texas.

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Rick Roybal: I had asked her, I said.

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Rick Roybal: Hey, you know, come up with a presentation, I’ll come up with a presentation, etc. And we’ll, we’ll meet for the whole day. So that’s how it went. And I thought it would. All right.

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Rick Roybal: It was a the best presentations in the whole world, you know, mine was, you know, just something I had put together a couple weeks before but what what what was doing, is it was creating a

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Rick Roybal: Group of people that didn’t normally kind of meet up in such a way that we were having a good solid conversation without the

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Rick Roybal: The, the booths of sales. The people talking to you and the clattering of the ice glasses in the big hotel conference room.

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Rick Roybal: So an idea of birth that day where we wanted to have a model of how can we get together. It’s a peer based presentation. It’s not are not seeking out the

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Rick Roybal: The President of some fraud organization or whatever else is

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Rick Roybal: True, we are in the weeds. We are the people that are doing the work. We have the ideas and we want to share that with our peers and vice versa. We want to hear what you’re doing, peer or colleague there that says so.

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Rick Roybal: We started meeting every six months and I would get these emails together and send them often. And then, you know, and we’d meet and

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Rick Roybal: It’s what what what happened was it started growing organically where somebody else would say, Hey, we got this group so that 10 people was then 30 people a year later, and then it went, you know, on and on and on. And today.

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Rick Roybal: last count, or over 400 people were over with over the whole world. Now we have people in the UK. We have people in Africa.

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Rick Roybal: And a couple people in in Asia where it’s just, again, it’s just word of mouth that’s happening. It’s a great environment because

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Rick Roybal: The platform is this, we are trying to get oil and gas vendor risk management, and that includes audit that includes contract management procurement anybody to talk about the risks that are involved with

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Rick Roybal: vendor management and and we also are want to invite the vendors themselves because they have a piece of this puzzle and that is

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Rick Roybal: When they are implementing best practices and more auditing those as an operator or third party or operator, we’re finding that

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Rick Roybal: These audits go a lot better. You know that we’re not finding these issues that can, you know, continue to occur over and over again.

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Rick Roybal: So the vendor or the supplier hearing these these best practices being shared by the people that are auditing. We all kind of start off and start to build an industry standard that we can all kind of work on

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Rick Roybal: So now, now we’re we meet still continue to meet every six months. It is still really kind of based on the members are presenting for the most part.

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Rick Roybal: And it’s, I would liken it to a very much of a university setting where you have the instructor, the professor speaking, but the students. In this case, the members.

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Rick Roybal: Can ask questions. It’s really there’s none of this again that clunky, or you know water cups, you know, the waiter coming by with a big trade.

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Rick Roybal: You know,

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Rick Roybal: Happy thing, you know, you know,

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Jason Mefford: I don’t know. Yeah.

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Rick Roybal: And he was like, let’s get rid of that stuff. Let’s really peer to peer communication. So,

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Rick Roybal: It’s, it’s fantastic. I love the members, we’re doing a lot of neat things we’re building content. Now we have a content development team that’s that’s

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Rick Roybal: That’s a part of it. We’re building an advisory board where members are the guys and the gals that are saying this is what the themes that we want to talk about here are the people that we want to invite so it’s really member driven organization that I’m just so proud of its, it’s great.

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Jason Mefford: Well, you have to thank you you know you say you’re doing them every six months, I think your next one is actually coming up here pretty quick, too. Right.

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Rick Roybal: Yeah, it’s an October. October 28 and 29th and obviously cove. It is then it’s thing on you know meetings like this and we prefer to meet obviously in person, but it will be a virtual round table.

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Jason Mefford: Yeah, well, which is good. And again, you know, like you said, the, the whole Clanking of the water glasses and you know people getting up and everything else you know it’s it’s it’s distracting enough

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Jason Mefford: As a participant right when that’s when that’s going on, you know, in the person’s, you know, but you like coffee, you know, and

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Jason Mefford: All this kind of stuff. Imagine being the speaker up on the stage where people are eating too. Right. It’s like, yeah, it’s not a fun situation, it’s not

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Jason Mefford: You know you’re hearing the client gang and the everything else. And it’s harder to hold attention so

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Jason Mefford: You know, it’s great for opportunities like that, you know, and so again I mean there’s oil and gas all over the world. And so, you know, yeah, if you’re not aware of it, you know, try to join on October 28 and 29th.

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Jason Mefford: You know, where, where, where would people actually go to be able to find out information and kind of get registered for it.

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Rick Roybal: Good question, they can go to vendor roundtable calm. Okay. The

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Rick Roybal: Table calm and there’s we you know we have a an oil and gas Roundtable. We also have a construction roundtable as well so

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Rick Roybal: We’re building this out industry by industry and know that there’s this huge need to talk about and share best practices with vendor risk management amongst different and and and that the participants are different in each one.

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Rick Roybal: I mean, when you start getting into it if they’ll say healthcare goes next or a bank that you’re really talking more about those people that are it’s more it related as opposed to somebody contractors out in the on the oil field so

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Rick Roybal: It. So it’s an interesting place to be at as far as

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Rick Roybal: Being able to share and discuss and ask those questions because goodness knows without things like podcasts and roundtables and such.

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Rick Roybal: Remember those days when we didn’t have the answers. You know, we talked about this last time. It’s like those days that we didn’t have any answers. What do we do, how do we get to it. You know, so

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Jason Mefford: Now you can type into Google search or you can, you know, listen to podcast to other stuff.

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Jason Mefford: Well, I think, I think, to you know that one of the things that you

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Jason Mefford: Kind of mentioned before that I know people are struggling with is is they say, oh, now I’m in a virtual environment. I’m stuck at home. I’m working from home. How am I going to develop relationships. Right. Well, you and I did it.

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Jason Mefford: This way right we’ve never met in person.

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Jason Mefford: Right, we happen to know a common person.

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Jason Mefford: And that person said, hey, Rick and Jason, you guys should know each other. Yeah. So kind of connected us we chatted back and forth on LinkedIn, a little bit set up a virtual video call we talked

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Jason Mefford: liked each other. I came on your podcast. You’re coming on mine.

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Jason Mefford: You know, and it’s like, that’s you can still develop these relationships people, even though it’s virtual and it’s the same kind of stuff.

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Rick Roybal: definitely encourage people to do that because I mean it’s just we’re so stuck in the house. Nowadays, I mean, we have our friends and all that kind of stuff. But there are people to develop relationships with. I mean, we live in a very

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Rick Roybal: Polarized country for everything right now and it’s hard to have good conversations because at the end of the

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Rick Roybal: We clean the glasses of wine and each share each other’s bread. But eventually we get to that point where it’s like either you’re on my side, or I’m on your side of this type of thing. I was listening to something like NPR this morning, the same thing. And it’s like,

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Rick Roybal: It’s so polarized and it’s like

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Rick Roybal: But we need to develop more and more friendships, you know, because

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Jason Mefford: Well, we do. And it’s the, it’s that divisiveness that you’re talking about, because people are looking for things that are different about the other person right

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Jason Mefford: And so even again, you know, I mean, you just talk to your birthday was this week, you know, on Monday. Mine was on Wednesday. Hey, we’re both Leo’s

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Jason Mefford: Hey, we’re both, you know, I’m

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Jason Mefford: I’m one year younger than you. Okay.

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Jason Mefford: I don’t usually tell people how old I am. But, you know, somebody might be able to do the math now.

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Jason Mefford: But you know. So already we know that we have some things in common. Right. And so, as we’ve as we’re developing and growing our relationship.

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Jason Mefford: We’re not worrying about or trying to talk about things that were different on or that we disagree on we’re trying to find things that we have common interests on

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Jason Mefford: That’s and that’s why it’s great that you know things like this Roundtable. You know, the roundtables that you’re doing, where it’s like hey if you’re in certain industries.

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Jason Mefford: Well, let’s get together as industries. Right. Yeah, just like I do with CA’s but in a different way. Right. It’s like, look, if you want to focus on

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Jason Mefford: Your executive presence and developing your leadership skills and working better with the relationships. I’ve got the CA forum. Right.

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Jason Mefford: They’re two different things. They don’t compete. They have different kind of, you know, reasons and some people are going to want to go to one. Some people are going to want to go to the other. Right, right.

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Jason Mefford: But there’s options now that are out there.

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Jason Mefford: That people can get together with like minded.

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Rick Roybal: People

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Jason Mefford: If they want

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Rick Roybal: If they want to like you. Yeah.

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Right.

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Jason Mefford: You know, which is great. So, well, and I know you know another one of the things is you guys are kind of focusing on some of the vendor risk management stuff. Yes.

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Jason Mefford: And I know that’s been a hot topic right now, people may not use the word vendor risk management, they might use third party risk is another one that you hear a lot about. So maybe, you know, in the time that we have left. Let’s, let’s just kind of talk about that a little bit.

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Jason Mefford: You know, in you know maybe why people are talking about it. Now, why aren’t we talking about this 50 years ago you know why it actually is a big deal. Now why there is risk around vendors or third parties as well.

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Yeah.

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Rick Roybal: I’d say for I’ll kind of jump around a little bit here. And then since let’s start, we can start with oil and gas just cuz I know best, but

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Rick Roybal: I would say that it’s it’s a very important subject for upstream midstream and answering those are drilling or transporting. Those are refining refining because

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Rick Roybal: These different segments of the oil and gas industry rely heavily on third parties to perform their services not that

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Rick Roybal: Oil and gas companies are lazy and we just sit up and not your little ivory tower and tell me what to do. It’s not the case at all. It’s that

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Rick Roybal: Oil and gas like a lot of industries, but specifically with oil, gas goes up has ups and downs and if for let’s say for example, an upstream company.

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Rick Roybal: Pad all of the services that were provided by third parties in house, it would be extremely costly to produce, you know, a gallon of

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Rick Roybal: Gasoline, and because they’re having to pay for all of the benefits and all the salaries and we may not even be using them for that sense. So, for example, right now, a lot of operators are

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Rick Roybal: Up in the exploration part don’t use a lot of not fracking a lot. They’re not drilling a lot right now because the prices so low. It’s not cost effective.

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Rick Roybal: If, if that service were in house we would either have to be laying people off or we would have to be paying paying for them to just sit around

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Rick Roybal: And so in if we were laying them off, we’d have to bring them back on and train them, and this kind of thing. So it’s much more cost effective for companies like an upstream company to hire out the expertise.

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Rick Roybal: That exists with third parties. So now why is it risk management part of it. Why is that important. Well, first of all, they are in an environment that’s very extremely high risk you’re talking about hot in something that’s flammable.

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Rick Roybal: You’re talking about machinery that could kill you if you’re not paying attention. I’ve, I’ve read reports that would come in and some crane would be swinging something around with some guy was in the wrong place at the wrong time and

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Rick Roybal: You know, so that happens quite often. Um, so you’re high pressure, you know, with gas pressure and things like that. So it’s a very dangerous environment. So that’s part of that risk right there. Secondly, there’s a risk financial risk.

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Rick Roybal: That’s, that’s part of it you know you’re paying these people millions of dollars to perform these services. You want to validate that that you’re on.

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Rick Roybal: That what they are charging you is accurate. So you get the invoice and let me see the backup. Did you do this, was this person on that site. Okay.

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Rick Roybal: And then there’s just a an operational slash in a reputational risk that goes along with it as well. Operationally, is like if they can do it right then.

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Rick Roybal: It’s like

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Rick Roybal: Well, and that’s and that’s the case to it’s like hey, we can you know fracking and this kind of thing. And then the fracking doesn’t work. Well, that just cost you millions more dollars right yeah reputational wise.

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Rick Roybal: Have a

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Rick Roybal: Service provider that’s out there that spilling water or, you know, hydrocarbons that are it will it’s going out in the ground, there’s a there’s a

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Rick Roybal: An owner of that land. Who doesn’t want that. And then the company itself doesn’t want the reputation, like, well, that companies always

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Rick Roybal: You know, spilling stuff. So that’s why risk management’s important. I would say in on oil and gas perspective, let’s even go out a lot farther and it’s not the case that this doesn’t happen to own gas because

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Rick Roybal: There it is situation, but it’s let’s talk about the all of the laws that are happening right now with data privacy and it’s happening, you know, obviously, it started off kind of birth in Europe, and then, you know, California would be the most logical next place for things to happen, right.

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Jason Mefford: And the rest of the country. You’re welcome.

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For some

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Rick Roybal: Some of this clothing styles know things, but it

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Rick Roybal: But it but you know but it that that’s what’s happening. It’s this domino effect that that data privacy is important. I mean, there’s no doubt about it. Right.

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Rick Roybal: Yeah, and and so

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Rick Roybal: Who is it just the, the company that has the data inside know we are so many different third parties out there that have your data. Think about the companies like Iron Mountain or something like that, where they are.

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Rick Roybal: Either doing the storage from a facility standpoint, or they are taking off site documents to destroy them. That’s part of it. What about

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Rick Roybal: Healthcare records insurance types of records for employees. Well, that’s not you know the Edna’s and the other insurance companies are out there that’s. Those are third party risks for sure nowadays with companies being very Lean and Agile and things like that you have

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Rick Roybal: A lot of companies outsourcing their accounting and a few other companies, small or large and there is that risk. It goes with it. So I think that’s, I think we’re finally get it’s always, I don’t know, say it’s always been there, but I think it’s just grown so much that accompanies

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Rick Roybal: Economically, it’s makes a lot of economic sense to be able to give those types of jobs and services to third parties to manage and then you’ve got that risk that you’re pushing out to those groups. I think that’s why, that’s why it’s come to such a to the forefront.

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Jason Mefford: Well, it’s interesting because if we if we

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Jason Mefford: You know when I, when I talk about risk management, you know, a lot of times people

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Jason Mefford: You know, if you if you just kind of start back from the high level right kind of tie this together. Right.

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Jason Mefford: You know, normal. You think I talked about this 40s terminate tolerate treat or transfer right as far as like the four ways that you

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Jason Mefford: You know, like, like you said, the beginning. Let’s take the oil and gas example. Right. Okay. It’s a very highly capital intensive

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Jason Mefford: Business. I mean, you’re spending millions and billions of dollars billions of dollars. Sometimes on some of these fields and other stuff like that and so

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Jason Mefford: You know companies at that point. Come up with a strategy and say, look, we want to help transfer or share some of that risk with someone else.

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Jason Mefford: Right. So like you said upstream

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Jason Mefford: EMP companies usually joint ventures my

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Jason Mefford: Friends, they’re spending billions of dollars.

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Jason Mefford: If they don’t get a return

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Jason Mefford: They want somebody else to help share in the laws. But then they also have to share in the profit as well. Right.

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Jason Mefford: Or, like you said, you know, you’ve got a high fixed cost for a bunch of the the highly technical people

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Jason Mefford: To be employees or we hire a bunch of independent contractors where we’re sharing or transferring some of that risk outside of the organization.

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Jason Mefford: Now in classic risk management that’s usually where people kind of stop. Yeah, and that’s why vendor and third party risk management is now becoming a big deal because it’s like, no, no, no. Just because you’re sharing that are transferring a part of that you’re still the one that’s ultimately

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Jason Mefford: Liable right and so, like you said, if you get a contractor that ends up leaking out stuff you have an environmental claim they’re not going back to the contractor. They’re going back to the Big Oil Company.

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Rick Roybal: That’s right.

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Jason Mefford: To be able to get the money. And so now companies have finally realized, hold it. I actually have to do something.

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Jason Mefford: About this to make sure that people are representing me the way they’re supposed to. They’re doing the things they’re supposed to. So I don’t have some back end liability come in.

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Jason Mefford: That I wasn’t anticipating right and this even goes into there’s been a lot of different cases around, you know, an independent contractor that breaks the law.

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Jason Mefford: And the government comes in. Who do they find not the contractors. They go back against the deep pockets.

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Jason Mefford: And finally, people are starting to realize, hold it. Well, I thought I was. I thought I was offloading that risk. But I guess I’m not fully

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Jason Mefford: And so, you know, again, the need for these kinds of discussions, but it ultimately goes back to the strategy right if you change your strategy, you’re going to change some of your risks to

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Jason Mefford: End, even in your strategies of how you’re choosing to interact with some of those third parties as well.

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Jason Mefford: But yeah, and privacy just throws a whole nother layer on this for everybody.

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Jason Mefford: Hasn’t it examine

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Jason Mefford: Some of the biggest data breaches. It wasn’t the company who got blamed. It was the cloud service provider that breached, it that’s

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Rick Roybal: That’s exactly right. I just got an email the other day, I don’t know what it even though it was for. And there’s an arc provide our service provider their cloud backup.

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Rick Roybal: data breach. You know, it’s like you’ve been affected like okay, great. Yeah.

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Rick Roybal: So it’s it. That’s right. So it’s, there’s a lot of risk that that’s associated with that third parties. Yeah.

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Jason Mefford: Well, so let’s go. The we’re having these discussions, right, because again, I mean, you don’t. You learn from others. You learn from others mistakes. She learned from others successes as well. Yeah, right. And that’s where some of these roundtables and other stuff can be so valuable for people

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Rick Roybal: Well, and it’s different. I may just interject a little bit more that it’s it’s one thing to talk about it. I think it’s also going to do about it to

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Rick Roybal: You know, that’s what’s interesting that’s happening in the in the oil and gas industry is that a lot of these operators.

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Rick Roybal: Recognize that there is a great need to manage and mitigate third party risk. And so they, you know, they either ring in house or

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Rick Roybal: They, you know, give it to someone else, another type of provider to help them with those risks. So I think it’s important to be able to be

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Rick Roybal: Doing with third party risk assessment and also third party audit, sir, just

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Rick Roybal: It’s it’s imperative that you do it because otherwise you’re just always relying on this this company may not know who they are. It’s like, Are you sure and

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Rick Roybal: And many times I’ve seen it and it’s and I understand we’re busy. We’re, we’re always busy and if you have the responsibility of signing off on an invoice.

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Rick Roybal: But that’s just a part of your job. You may not always give it the attention that it’s that’s required to do that because you just think it’s this routine thing. And what we, you know, call it as this that rubber stamping approval and I’ve seen where

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Rick Roybal: Some employees would be looking and reviewing at 500 invoices in a day, how in the

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Rick Roybal: You get any comfort over that. But the thing is is that that’s one area that says a problem. But if you need to have somebody that’s going on behind the scenes.

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Rick Roybal: validating that those that those records are corrected the invoices have meet all the standards prices are correct. The following your policies, etc. So it’s just, it’s just a much needed process that’s needed in in in all companies.

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Yeah.

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Jason Mefford: Well, and kind of the caveat on the other side of it because I tried to, you know, look at both sides of everything to is that we have to do it.

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Jason Mefford: It’s a risk, it has to be address, but it has to also be done in a practical means that makes economic sense. Right. And what I mean. From that is, is I’ve seen a lot of companies in their zeal to manage all third party risk they have created very onerous accounts payable processes.

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Jason Mefford: And I’ve seen hundreds of examples of this now of companies and let’s say it’s a $10,000 invoice for you know hundred plus million, if not billion dollar organization.

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Jason Mefford: And the vendor setup time the approval from legal the

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Jason Mefford: The PO the this, the that the whatever else they’re spending at least five grand.

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Rick Roybal: reviewing it.

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Jason Mefford: Reviewing a $10,000 invoice. And so, you know, you also have to kind of balance that and make it practical. Because you know it there, there is risk, but we need to manage risk intelligently as well.

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Rick Roybal: Good point. That’s excellent. Yeah.

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Jason Mefford: Because like I said, I don’t know how many times I’ve seen this and I’ve

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Jason Mefford: Literally, this one one company. I was working with. It was a $10,000 buy

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Jason Mefford: It took six months to get the approval.

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Jason Mefford: It’s like, Come on, people pull out a credit card and pay for it. You know, it’s like, how much risk is there on a $10,000 purchase. Well, I can tell you the maximum is 10,000 yeah

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Jason Mefford: You

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Jason Mefford: Don’t spend five or 10,000 trying to mitigate a $10,000 risk.

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Jason Mefford: So anyway, yeah. All right. That’s just, just to the just the other side of it, too, because like I said I’ve, I’ve seen a lot of very well meaning people

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Jason Mefford: waste a lot of internal resources.

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Jason Mefford: Trying to do some of the stuff

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Jason Mefford: Well, Rick, as it always does. Time flies by when we get to talking but you know I really, really appreciate you coming on what you’re doing.

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Jason Mefford: You know how you’re trying to help the industry as well. And so, yeah, especially if anybody’s in oil and gas. Make sure you know go out and check out vendor roundtable calm.

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Jason Mefford: There’s the October event coming up. So get included in that and like you said, it doesn’t really matter where you’re out in the world, either. Right. I mean, if you’re in the oil and gas industry.

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Jason Mefford: Whether in any and to even regardless of which which part of the industry you’re in, as well, right up

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Jason Mefford: Mid or downstream doesn’t matter as well. Yeah.

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Rick Roybal: It’s a very, very inexpensive way to build it to connect with your peers very inexpensive way to get connected with your peers get CPS um and grow professionally. So I would encourage if you’re involved in the industry to join up with us.

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Jason Mefford: All right, well, sounds good. Well, hey, Rick. Thank you again.

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Rick Roybal: And I really appreciate it. It’s nice talking to you.

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Jason Mefford: Well, I’m sure we’ll have you on again in the future to you’re not getting out of it again.

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Jason Mefford: Part two part two. All right, well hey thanks

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Rick Roybal: I’m afraid. Right.

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Bye.