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Bank Vendor Management Software Controls Outsourcing Costs

By December 3, 2014June 29th, 2021No Comments

Bank Vendor Mangement Software Controls

As outsourcing becomes more popular with banks, financial institutions face more risks than typically exist when using its employees to perform most tasks. Yet, one reality takes precedence over other issues. Banks and credit unions can outsource most services, but they retain all potential risks to their operations and customer requests for service. According to FDIC regulations, insured financial institutions can neither abdicate nor transfer responsibility for safe and sound operational procedures via outsourcing.

FDIC Position on Vendor Management and Risk

FDIC regulatory concerns regarding vendor management have existed for years, at least dating back to the Bank Service Company Act (1999). Since 2001, outsourcing and vendor risk management policies have taken center stage as regulator priorities. The Gramm­Leach­Billey Act (1999) further clarified the government’s position on third­party vendor services and management. Along with repealing some provisions in the iconic Glass­Steagall Act (1933), which set restrictions on financial institutions during the Great Depression disaster, banks initially welcomed many GLBA provisions, which allowed financial institutions to expand into offering investment and insurance services for customers. These landmark deregulation initiatives also added risk to financial institutions operations for those banks taking advantage of these new opportunities. These additional powers represent the birth of outsourcing as popular banking solutions. Instead of the nation’s financial institutions acquiring or funding investment or insurance startup organizations, many banks decided to offer investment and insurance products of other entities instead of establishing in­house companies. Outsourcing has proliferated from these modest beginnings. FDIC recognizes that outsourcing tasks to third­party vendors increases financial and operational risks to insured banks. The National Credit Union Administration (NCUA), which fills the FDIC role for federal credit unions, agrees that their institutions remain responsible for the risk of loss, regardless of performance shortfalls by employees or third­party vendors.

Vendor Management Software Helps Control Costs and Compliance

Depending on a bank’s size and devotion to outsourcing, vendor management can become an unwieldy responsibility. In­house bank personnel must manage the institution’s vendors, regardless of the vendor role. Whether responsible for delivering copy paper or acting as the bank’s call center, vendors must be managed properly to control both cost and risk. While inherently more critical than copy paper supplies to a financial institution’s brand and image, an outsourced call center with vendor CSRs (customer service representatives) mandates bank management responsibility for effective vendor control and performance. Enter state­of­the­art vendor management software to help control expenses and satisfy regulators. Banks seeking to achieve or maintain operational excellence can use applications from top providers, such as Banktel, to benefit from electronic management and tracking of vendor performance.Among the multiple benefits banks receive are the following features.

  • Regulatory compliance
  • Efficient cost control
  • Access to up­to­date reports and data
  • Better risk management
  • Ability to measure and evaluate management efficiency, both internally and externally (vendorservices)

FDIC has published much discourse on managing outsourcing risk, while offering multiple vendor management webinar training seminars. Understandably, FDIC focuses on risk management, not cost control for compliance reasons. However, vendor management applications can achieve an equally important bank objective, controlling costs. Instead of hiring multiple, costly W­2 employees to track and manage vendors, financial institutions can save time and money by using software apps to track vendor performance. Most top vendor management applications also track the bank’s compliance efforts and results, including tickler systems to display service and payment reminders. In most cases, the best vendor management apps also include report writer capability, allowing user institutions to better format their data to their preferred layouts. For example, larger banks and credit unions face issues tracking diverse vendor contract terms, expirations and renewals along with regulatory compliance necessities. In all cases, the cost control benefits can increase bank bottom lines while maintaining vendor control and achieving regulatory compliance. Banks that have yet to consider vendor management applications should do so to learn if outsourcing this otherwise tedious necessary function can better serve the institution and manage expenses as well as vendors, while improving profitability.   Bank Info Security:­management­part­i­fdic­explains­how­to­manage­your­out