<img src="https://ws.zoominfo.com/pixel/pIUYSip8PKsGpxhxzC1V" width="1" height="1" style="display: none;">

Does Vendor Size Matter?

author Michael Berman
1 min read
Feb 27, 2017

Sometimes, but it doesn’t replace the need for vendor risk management

Some institutions try to simplify vendor management by picking the biggest vendor in each category. Going big lets them play it safe—or so they think.

But choosing the largest vendor is no replacement for solid vendor management.

Big vendors can offer a lot of benefits. They are traditionally stable, making them appealing for long-term relationships such as core processors. They are typically in good financial health and have a lot customers meaning they are experienced with the market.

But bigger doesn’t guarantee better. That’s why every critical vendor needs the same level of due diligence whether it’s big or small.

Just look at the guidance. The OCC says a bank needs to conduct due diligence so that is “selects an appropriate third party and understands and controls the risks posed by the relationship, consistent with the bank’s risk appetite.” The OCC doesn’t care about size. It cares about risk.

They key word here is critical. While some bankers think choosing a big-name vendor might get them off the hook for vendor management, other institutions are overzealous in their vendor management, failing to recognize the difference in managing a critical vendor verse a low-risk vendor, according to an article in The Wall Street Journal, “Banks Ramp Up Vendor Security.” Third-party vendors are being inundated with questions about cyber and data security, the article notes, even relatively low risk firms. This creates extra work for both institutions and their vendors.

The solution is a well-constructed and executed vendor management program. Whether you choose a large stalwart or an upstart vendor, make sure you have a solid vendor management program in place to justify your choice to regulators and appropriately deploy vendor management resources. From business continuity and data security to financial health and compliance culture, show that the vendor you’re choosing is worthy of your institution’s trust and that you’ve considered the risks.

 

Related: Vendor Risk Countdown: Top 10 Risks Third-Party Vendors Pose to Your Financial Institution

Subscribe to the Nsight Blog

All Topics Risk & Compliance Product Insight Banks Lending Compliance Credit Unions Risk Management Fair Lending Nfairlending Cluster: Risk Management Compliance Lending Compliance Management Integrated Risk Blog Nrisk Regulatory Compliance Management News & Updates HMDA Risk Mortgage Lenders Ncomply Vendor Management Business Resiliency CRA Lending Compliance Blog Vendor CFPB Ncontinuity Third-Party Vendor Management Business Continuity Cybersecurity Fintech NVendor Strategic Planning Ncyber Ntransmittal Audits & Findings Company Culture OCC Regulatory Updates Audit Nverify Regulatory Compliance Exams FDIC Compliance Management Findings Nfindings NCUA Contract Management Employee Intranet Contract FRB Business Continuity Management FFIEC Findings Management Ncontracts manager Third-Party Vendors Vendor Risk Enterprise Risk Management ABA Bank Access Control Audit Findings Board Portal Call Report Due Diligence Efficiency Employee Engagement Exam findings FIEC Inc. 5000 Internal Audit Management Nboardportal Verify Wealth Management
9 Benefits Of Vendor Management Software Vs Manual Tracking
Banks

9 Benefits Of Vendor Management Software Vs Manual Tracking

May 28, 2020 3 min read
8 Vendor Management Practices Examiners Are Looking For
Banks

8 Vendor Management Practices Examiners Are Looking For

Mar 30, 2022 2 min read
4 Features Every Vendor Management Solution Needs 
Banks

4 Features Every Vendor Management Solution Needs 

Sep 16, 2019 4 min read