Leveraging external suppliers is ubiquitous in the financial services industry. Strategic suppliers provide products and services like core banking platforms, mobile banking, ATM or IT services, back office operations, or customer call centers services, among others. Non-critical suppliers include office supply providers, janitorial services, lawn maintenance, and such.
Relying on external suppliers is advantageous – adding external expertise, reducing time to market for new product/service launches, and increasing efficiencies through best practices. Although beneficial to your institution, it also comes bundled with varying degrees of risk directly attributable to the products and services they provide. A comprehensive Vendor Management program is key to understanding these risks and ensuring adequate controls are in place to ensure your institution is protected. The question is, where and when do you start?
Through a three part blog series I will discuss the key elements of one of the most important and first steps in entering into a third party supplier relationship: Due Diligence.
Due Diligence, Defined
Due Diligence refers to the tasks performed before entering into a third party supplier relationship. This first stage gives you an understanding of what they could bring to the partnership, and if they are the best option to support the business and operational needs of the institution. This evaluation consists of 5 general areas:
- Financial stability
- Experience and expertise necessary to deliver the product/service
- Adequacy of controls to protect sensitive information
- Infrastructure to ensure delivery of products and services
- Risk that using the potential vendor would bring into the organization
Think about the last time you bought a car. You likely didn’t just go out and buy one; you took into consideration your budget, whether you wanted to lease or buy, the miles you would drive annually, necessary features versus extra features, who the primary driver would be and how they would use it. All of this criteria was used in your buying decision, although some criteria was more important to you than others.
When looking for third party suppliers for your institution, you need to spend the time and energy, and leverage the resources you have access to, in order to make the right decision for your institution.
In my next blog, I’ll take a few cars out for a test drive! Meanwhile, write to me on topics you would like to read about and share your thoughts on this one. All input is welcome.
I look forward to seeing many of you at one of the two upcoming user conferences. You still have time to register and take advantage of the many benefits of attending in person.
East Coast location: October 29-30, Mohegan Sun, Uncasville, CT
West Coast location: November 5-6, Mandalay Bay, Las Vegas, NV