A vendor management framework is a logical system for developing a vendor management program. The framework includes recommendations for creating the program, acquiring vendors and divesting vendors, managing vendors, and determining and communicating the value each vendor brings.
Vendors are used increasingly in financial institutions, especially for tasks that can be accomplished through technology. Bank examinations include evaluating the bank’s use of vendors and the vendor management program they have in place. Financial institutions need to deal with vendor risks, which can include BSA/AML risk and cyber risks. Banking regulations require banks to have vendor management programs. The vendor management framework assists in developing that program.
To create the vendor management program, a bank needs to establish the objective of using each vendor. They need to define the metrics for vendor evaluation. They need to classify the vendor portfolio. Finally, the bank can create a strategic program for managing the vendors.
The framework details how to evaluate and choose vendors and negotiate and enter into agreements with them. The framework also informs banks of ways to manage the performance of vendors and manage the bank’s relationship with their vendor. Vendor risk management is also considered within a vendor management framework.
With suggestions from the framework, the bank can build and manage a communication plan to interact with vendors in a productive and accurate way. The financial institution also needs to define the ways the vendor needs to improve and manages them during the improvement process. Banks can use the framework to work with vendors in a way the drives innovation.
Vendor risk management software can be an important factor in the process of developing a vendor management program. This software works with the framework to guide bank managers and boards in developing a program that is compliant with regulations and effective for protecting the bank, its financial health, and its customers.
Learn more about vendor management software and third party risk management.
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