Why is vendor management a hot topic in the world of financial institutions right now? It’s because regulatory organizations including the Federal Financial Institutions Examination Council, Office of Foreign Assets Control, and Federal Trade Commission are focusing on how financial institutions are managing the vendors they outsource to. The Federal Deposit Insurance Corporation (FDIC) has declared that an institution can “outsource a service, but cannot outsource the duty,” making it very apparent that the responsibility for compliance rests with the financial institutions. Various regulators refer to vendor management using various terms. Even though they all ultimately want the same thing, they approach it differently. For regulators, third-party risk is a sensitive subject. There are many different types of risk that might be introduced when a bank outsources a task to a third-party. Assessing, evaluating, monitoring, and controlling those risks is the core of vendor management.
The importance of vendor management is something Strunk constantly think about, just like it is for the FIs we support. We take great pride in offering a vendor manager software and services that let our clients have an effective vendor management program. Components of Strunk’s effective vendor management program:
- Risk Assessments- Assist the financial institution in assess the risk level of the activity the vendor performs.
- Surveys- Vendor questionnaires to elevate the controls that each vendor has for the emerging risk of the vendor.
- Contract- Contract assessment, a place to capture and store the contract and its information.
- Service-Level agreements (SLAs)- tracking SLAs to make sure that the vendor is sticking to the agreement and not being fraudulent.
- Review- Reevaluating the risk the vendor has while also identify any concerns with the performance of the vendor.
- Due Diligence- central location to store and evaluate due diligence material from the vendor.
In conclusion, a properly managed vendor relationship can result in greater quality, better service, lower costs, and happier clients.