Hello everyone and thank you for joining me today for our Third Party Thursday podcast. I’m Wendy Davis, Operations Manager here at Venminder. Today we’re going to discuss the importance of vendor due diligence. We all certainly understand that vendor vetting and ongoing monitoring are both important stages of the vendor lifecycle and due diligence process, however, why exactly is due diligence so important? Here are five reasons:
- It’s really the most critical activity in third party risk management. Collecting the right documentation on a vendor can impact your vendor selection process immensely. All may look fine from the outside looking in, but as we’ve all heard, never judge a book by it’s cover. It’s important to review your vendors with a fine-tooth comb.
- It is a regulatory expectation. Regulators expect you to review the guidance and implement due diligence best practices into your overall program. While it’s very important to understand your regulator’s recommendations, it is also encouraged to look at other regulator recommendations as well for guidance. All of the regulators look to one another comparing notes to make sure they are on the same page as far as the newest and greatest information goes. OCC Bulletin 2013-29 is the gold standard therefore it’s a must read, as well as OCC 2017-7 and the FFIEC guidance on managing outsourced technology.
- It’s not a check the box exercise. Due diligence should never be approached with a checklist mentality. There is a dire need to have subject matter experts analyze the reports in order to properly mitigate the risks found. By simply collecting the documentation without further analysis, you are doing your institution a disservice.
- Performing due diligence helps to protect your institution. By taking the time to perform due diligence on your vendors, you are working to prevent unnecessary and unwanted exposure to risk.
- It makes good business sense. Overall it just makes sense to complete due diligence. There are so many benefits that your institution receives by following the guidance and performing cautionary reviews on new and existing vendors.
Once you’ve set due diligence standards and expectations, the entire third party risk management process becomes much more manageable.
I hope you found this podcast helpful. Again, I’m Wendy Davis at Venminder. If you haven’t already done so, please subscribe to our Third Party Thursday series.