Four C’s of Banking Vendor Management
The minute you begin considering outsourcing any service, that’s when the lifestyle of vendor management begins. Certain aspects are critical for the stability of your financial institution’s vendor management program.
Consistency
Once your vendor management policy is in place, there must be consistency in the processes for monitoring and managing your vendors. When an examiner comes in and there are spans of dates that are missing in your reports, that alerts them that the process wasn’t in place. Regardless of how well those things were analyzed with lots of comments & feedback that went to the Board, the inconsistency will send up a red flag for the examiner.
Continuous
Vendor management is a lifestyle, the monitoring and management must happen on an ongoing basis, not just prior to contract and before your financial institution is examined.
Certify
Validation that the vendor is doing everything that they are supposed to in order to manage your risk. At the end of the day, regulators will inform you that you are responsible for making sure that the vendor is in compliance. So, regardless of the assurances that your vendor provides, you need to see verification that they are in compliance with current FFIEC regulations.
Contract review
This is one time when “Auto” isn’t good! It’s a conflict of interest for your vendors to remind you to review your contract prior to the auto-renewal date. If your contract renews automatically and there hasn’t been a review, your community bank or credit union will have lost leverage in price negotiation and may not like the terms that you are locked into for another term.
Vendor management can be an especially burdensome requirement for your financial institution, but with a process in place that schedules and monitors all of these procedures, you’re less likely to drop the ball on any one aspect. Of course, automating the Vendor Management program is the best way to relieve your financial institution’s Compliance Tax™.
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