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Due Diligence

Back to Basics: 5 Core Elements for your Vendor Management Program

Mar 30, 2016 by Branan Cooper

Vendor management has been around for years. Having a firm grasp on the companies with whom you are doing business is not new, but the regulatory expectations continue to evolve and grow.

Whether you’re dealing with the very basic supplier or the most cutting-edge high-tech company, there are certain things you should discern about every vendor. 

The Core Elements

The basics of vendor management are well-explained in regulatory guidance (e.g., FDIC FIL 44-2008, FIL 3-2012; OCC Bulletin 29-2013), but to summarize some of the guiding principles, let’s review… a well-managed and functioning program should include at least these 5 core elements:

1. Due Diligence Standards 

Know the company with whom you are doing business. Determine their good standing and licensing to conduct business. Learn about their reputation and gather documents to show they are a well-managed and compliant operation.

2. Assess the risk 

As you gather the various due diligence documents, start looking for gaps or areas that may cause concern. Use a rating system to be objective and consistent. Where you identify risks, determine what you can do to address and minimize exposure.

3. Ongoing Monitoring 

How will you manage this vendor going forward? Are there performance metrics that will require regular reporting? Is there some sort of quality of service you need to measure? 

4. Contract Standardization 

Be sure that the vendor has certain obligations, such as notifying you of a breach or changes in ownership. Make sure each party’s roles and responsibilities to one another are clearly defined.

5. Board Involvement 

Senior management and the board of directors must be kept informed of the status of your vendor management program. Inform, seek guidance and approval when needed.

Navigating Vendor Management Infographic

Branan Cooper

Written by Branan Cooper

Branan Cooper is the Chief Risk Officer at Venminder. Branan has nearly 30 years of experience in the financial services industry with a focus on the management of operational and regulatory processes and controls—most notably in the area of third party risk and operational compliance. Branan leads the Venminder delivery team as the third party risk management subject matter expert in residence. Branan also serves as an industry thought leader. He's a member of InfraGard and the Professional Risk Management Industry Association (PRMIA). And, he was selected in 2018 as an advisor to the Center for Financial Professionals (CEFPro) and board member for the Global Sourcing Resource Network (GSRN).

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