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Three key areas in vendor management platforms

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SOURCE McGladrey

CHICAGO, May 16, 2014 /PRNewswire/ -- As the economy improves and financial institutions search for ways to become more efficient, the use of outsourcing is increasing.  McGladrey's The three pillars of a proactive risk-based vendor management program says regulations have not changed, but regulators are paying closer attention as outsourcing spreads, and vendor management guidelines extend to more institutions such as mortgage companies. With more outsourced functions, vendors having direct contact with clients and facing increased regulatory pressure, implementing a strong vendor management process is essential.

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Every institution must be proactive and conscious of their vendors and the services they provide, as well as how performance and expectations are monitored. A robust and disciplined vendor management program is a necessity to increase transparency and oversight, while setting benchmarks for success. A comprehensive vendor management platform should include three key areas:

  • Contract management
  • Performance expectations and monitoring
  • Contingencies and vendor replacement

A valuable tool in effective vendor management is a service organization controls (SOC) report. Many, but not all, organizations have this tool to detail controls and assess risk, and financial institutions should request SOC reports when evaluating vendors. The SOC 2 report aligns with service-level agreements and vendor management protocols, with five distinct principles that help provide assurance around outsourced services. 

With the expansion of outsourcing, both in frequency and breadth, financial institutions must be more proactive in managing third-party vendors. Implementing a comprehensive vendor management program in conjunction with a SOC 2 report can help ensure processes are sound and that they satisfy regulatory requirements. Continue to learn about these key areas in McGladrey's The three pillars of a proactive risk-based vendor management program.

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