What is one major risk associated with an inaccurate vendor master file?

An inaccurate vendor master file can lead to reduced regulatory compliance because it may contain incorrect or outdated information about vendors. This situation might result in issues such as failing to adhere to necessary regulations regarding tax identification, business licenses, or industry-specific compliance requirements. When a company does not have the correct data for its vendors, it can misreport information to regulatory bodies, which could lead to penalties, fines, or other enforcement actions. Furthermore, inaccuracies in the vendor master file can hinder proper due diligence, making it difficult to vet vendors adequately for compliance with applicable laws and regulations.

In contrast, the other options present outcomes that are unlikely to arise from inaccuracies in the vendor master file. Higher employee morale does not stem from inaccuracies; rather, it may decrease due to frustrations with issues arising from vendor data discrepancies. Improved vendor relationships could suffer due to poor communication or interactions triggered by incorrect information. Finally, lower transaction costs typically result from streamlined operations and accurate vendor information, while inaccuracies often lead to inefficiencies and potential additional costs.