Publications & Resources

September/October 2008
Focus: Technology

WIB Service Corporation Endorsed Vendor Evaluation Process:
Helping You Meet Regulatory Risk Management Guidelines

By Anne K. Scully, WIB Service Corporation President

Vendor Management & Risk: back in the spotlight again. On June 6, 2008, the FDIC issued its latest guidance outlining the potential risks of third-party relationships, as well as risk management principles that may be applied to mitigate the potential threats. 

During the past two years, the increased level of federal regulatory scrutiny over banks’ third-party relationships has paralleled the increased scale and complexity of the relationships themselves. Previously, vendor management assessments within the examination process have focused on IT and operations. However, the new guidance emphasizes the need for banks to take a broader, more common sense approach to due diligence, legal contract management and the operational management of those contracts.

Although these clarifications are important, they still may pose challenges for community banks. Why? Most community banks have neither a formal vendor management program nor a specifically designated vendor management staff specialist. More importantly, even the smallest bank often may have dozens of vendor relationships, any one of which can represent a major risk to the institution. 

If you are facing the “vendor management” challenge, please contact us. As one of our “value-added” member services, the WIB Service Corporation provides outsourced vendor management assistance to WIB banks through the vendor evaluation process used in the selection of our WIB-Endorsed Value & Income Programs (VIPs). Our vendor evaluations can help your bank reduce the time and resources you spend in your own vendor management program. 

Trusted Process
WIB members trust WIB and WIB Service Corporation’s endorsed “Value & Income Programs” (VIP) because they trust the quality and integrity underlying our endorsement evaluation process. 

Formalized Risk-Based Policies
We have developed formal vendor management policies and procedures consistent with regulatory guidelines, with a risk assessment being the first step in our process of identifying vendor categories to be considered for endorsement. We assess the risks inherent in outsourced product/service and tier them (e.g., Critical, Important, etc.) based on a range of considerations like the impact failure of the service would have on our banks’ operations, annual operating costs, and vendor access to non-public bank and/or customer information. 

Our contract specifications, due diligence, and ongoing monitoring requirements are defined by risk category: For those services/products in the top risk categories, we have more robust requirements to ensure that, among other things, the vendors are financially strong and have appropriate internal controls in place.

Risk-Based Evaluation – Process Undertaken By Bankers For Bankers
WIB Service Corporation employs a comprehensive, risk-based evaluation process involving the active participation of WIB Service Corp Board members, staff and dedicated banker advisory committees for each product considered for endorsement. Our Product Advisory Committees are comprised of WIB bankers and other industry experts knowledgeable in the product category under consideration for endorsement. They assume three critical roles:

  • They recommend the product/service categories – and the high caliber companies offering them – to be considered for endorsement.
  • Risk-Rated Review (based on FFIEC Guidelines). The advisory committee and WIB staff employ a risk-rated review aligned with FFIEC guidelines and based upon the risk inherent in the product/service. They also ensure that the regulatory requirements are covered. 
  • They conduct ongoing, periodic evaluations to ensure the endorsed product continues to meet our endorsement standards.

Additional Review For High-Risk Products/ Services. 
If the product/service is classified as “high” or “critical” risk, we engage an outside consultant to conduct an independent review. This provides one more layer of independent evaluation in our process, not to mention one more layer of comfort for our members that we have “crossed all the T’s and dotted all the I’s” in our process.

The Advisory Committee selects the vendor(s) to be recommended for endorsement to the WIB Service Corporation Board.

After endorsement, we continually monitor and review our VIP partners to ensure ongoing compliance as well as continued user satisfaction. The frequency of our compliance review is based on the product’s risk-rating, i.e., more frequent reviews of critical risk-rated products.


WIB Service Corporation Risk-Rated Vendor Evaluation & Selection Process 


WIIFY?
WIIFY – What’s In It For You? Right now, we are compiling, updating and reviewing information on all of our endorsed VIP Partners. Our goal is to be able to provide you with a full “vendor evaluation” package for each VIP. We believe our process will ultimately save you time and money. More importantly, we want it to give you a confidence level – and we believe it will – knowing that our endorsed VIP partners have already been reviewed and “passed muster,” financial, contractual, regulatory, reputation, etc. 

BancVue and FIRST ROI Named as Endorsed VIP Partners
WIB Service Corporation is pleased to announce that BancVue and FIRST ROI have been selected as WIB-Endorsed VIP Partners to provide reward checking and Internet e-marketing programs to WIB member banks. For more information, contact Anne Scully, WIB Service Corporation (anne@wib.org; (415) 352-2323).

Unauthorized reproduction of all or part of this material without the express written consent of the author is strictly prohibited. All rights reserved.