By Guest Contributor
By Arthur Raguette, Vice President, Business Development, Zynapse
In recent times, increased outsourcing and heightened regulatory concern has generated a need for financial institutions to carefully manage and evaluate their relationships with vendors of all shapes and sizes. The safety and soundness of an institution is becoming increasingly contingent upon its ability to effectively select and manage its vendors. Regulatory compliance has increased dramatically, partly due to the increased outsourcing of services and technology. The economic crisis has further turned the spotlight on Vendor Risk Management, especially among financial institutions. Regulatory compliance fine-tuned corporate management and huge opportunity for bottom-line savings has substantially elevated the importance of vendor management from a department-level process to an enterprise-wide one. Banks and other financial institutions must address new accounting and compliance obligations with the emergence of new and evolving regulations, e.g., SOX, FDIC, FFEIC, GLBA, and OCC.
The banking and financial services industry, driven by these regulations, is seeing increased competition from non-traditional players, commoditization of products, and advances in technology and has experienced significant change in the last decade. This change has placed constant pressure on the industry to manage new risks, lower costs, improve efficiencies, and rethink traditional business models. As a result, institutions are searching for ways to streamline internal operations and automate their supply and resource management processes.
Vendor Management has thus evolved as a core necessity for a financial institution. It yields additional value beyond reducing risk and meeting regulatory compliance requirements. A sound Vendor Management program solidifies partnerships and relationships between customers and vendors and contributes heavily to the overall financial health of a BFSI institution. There are significant penalties for failure to adhere to these regulations and the strategic objective of protecting the highly sensitive information driving operations.
In light of these concerns, financial institutions are taking strides to create robust vendor management policies and systematically organizing their vendor relationships while at the same time, achieving and maintaining compliance and adhering to increasingly stringent regulations. But in order to achieve this, the institution should first have access to high quality and reliable information about the business partners it is dealing with, the sources of risk it is dependent on and the cost-centers with are keys to its successful operations.
This is where Vendor Information Management solutions come into picture. It is highly important that the organization choose the right software solution for implementing the vendor management program.
Financial Institutions rely heavily on IT vendors for systemic, core bank functions and their contribution to the overall strategy of the business is hence, on the rise. Managing IT vendors is more challenging than managing typical operational vendors (due to the immeasurable access to
Objectives of Vendor Information Management
Vendor Information Management
Vendor Risk Assessment
Vendor Due Diligence
Vendor Contract Review
Financial institutions should ensure that the software solutions they invest upon for vendor management address all these areas. Vendor management solutions have thus evolved as per the requirements of the banks of the areas with specific areas of focus.
A successful vendor management program led by a good Vendor Information Management solution drives many significant benefits to institutions for sound financial health.
While compliance requirements are increasingly driving financial institutions to embrace vendor information management, a real business value is also delivered in the form of improved operational efficiency, control and effectiveness.
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Nikita Saharia Chaturvedi
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