A basic vendor definition is someone who sells something. In terms of financial institutions, a vendor is an entity that provides a product or service the bank uses to conduct its business. Vendors play an essential role in the processes of a bank.
Vendors include all the individuals, organizations, resources and technology used by a financial institution to complete and manage its operations. Some vendors used by banks include software vendors, banking equipment vendors, and office supplies vendors.
Vendor management is essential to all banks and credit unions. A reliable vendor will get a company the hardware and software products and services it needs when it needs them. Yet, without proper management, vendors can create greater risk for the institution.
For example, if an antivirus software provider consistently fails to give needed updates, the bank is at risk of a cyber breach. Through vendor management, the habits of such a software vendor would be revealed so that they could be dealt with immediately.
Because the vendor-institution relationship is such an important one, all the activities and communications that take place between the vendor and the bank need to be managed effectively. When a vendor fails to provide effective software of services, the bank needs to recognize that and create a plan for dealing with it. They can do this either by working with the vendor to correct deficiencies or by changing to a new vendor.
Vendor management is an ongoing process that can be carried out with the use of vendor management software. Through vendor management software, banks can organize and track contracts, put controls in place to ensure value, stability, and security, and monitor vendors throughout the life cycle of the relationship.
It is the vendor’s place to provide services and products. It is up to the bank to ensure they do. After all, the bank is ultimately responsible for all the actions of all their vendors that relate to the bank’s processes. Vendor management software makes this process more effective.
Learn more about vendor risk management.
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