Is your institution effectively managing vendor relationships
With institutions utilizing more outsourcing strategies to enhance efficiency, the development of a robust vendor management program is essential for several reasons. In the past, institutions have outsourced routine functions, but more critical and sensitive tasks are shifting to vendors, increasing risk exposure. Regulations have not changed, but regulators are paying more attention, as vendors have more direct contact with customers, and guidelines have extended to more institutions, such as mortgage companies.
Institutions are implementing outsourcing strategies to increase knowledge and infrastructure without the additional cost of paying for and maintaining it in-house. However, it is important to remember that your institution holds the ultimate responsibility, and is not relieved of potential liability, if functions are not performed properly.
Therefore, a proactive and disciplined vendor management program must be developed to increase transparency and oversight, and help ensure third parties adhere to your risk appetite and regulatory demands. While monitoring your vendors and the services they provide, a comprehensive program also establishes benchmarks for success. The program should include five critical areas:
- Contract management
- Documenting performance expectations
- Aligning expectations with key performance indicators
- Ongoing vendor insight
- Contingencies and vendor replacement measures
To learn more about implementing an effective program, read our white paper, The three pillars of a proactive risk-based vendor management program. As the use of outsourcing expands, vendors are working directly with more sensitive data, and regulators are paying close attention. Institutions must know the key elements of a successful vendor management strategy for a more comprehensive approach to monitoring third-party relationships and responding to risks.