How credit unions select and manage third-party vendors has been a hot topic growing hotter as the need to quickly add products and services — while controlling costs and risk — increases the demand for those outside specialists.
Regulator scrutiny of those relationships is also growing, especially in the area of information security. That includes the NCUA, which is continuing its drive to win congressional permission to directly examine vendors themselves.
Credit unions have been taking a variety of approaches to the vendor management challenge, including using in-house specialists, consultants, and CUSOs. Here’s a look at some of these innovative approaches underway in the past year.
These are all critical business concepts regardless of what a regulator is dictating. We should be doing this as a business, period.
Brave New Purdue
Purdue Federal Credit Union ($954.2M, West Lafayette, IN) has not been compliant with the status quo for compliance in the past year. The Indiana credit union underwent its first audit of its vendor management programs in 2014 and, while its vendor management software system helped, it showed there was still work to do in keeping a handle on its 300-plus relationships. Kristin Edmundson, Purdue Federal’s vice president of audit and compliance says, “Even if we weren’t a credit union and we were just another $900 million asset business, we would be watching our vendors, we’d be doing all of these risk assessments, we’d be asking for all of these documents for due diligence, we would be tracking the contracts, we would be able to have a glance at our annual outlay for this particular vendor. These are all critical business concepts regardless of what a regulator is dictating. We should be doing this as a business, period.” Read more here about Purdue Federal and its brave new world of vendor management compliance.
Mazuma Shrinks Silos
Cost reductions, process efficiencies, and compliance comfort are some of the benefits of a holistic, aggressive new approach to vendor selection and management at Mazuma Credit Union ($535.7, Overland Park, KS). It’s all part of a reorganization (see Anatomy Of Mazuma Credit Union here) that has dramatically shrunk silos and given managers the mandate to work in close concert as they pick, choose, and navigate among their more than 120 relationships ranging from core processing to lawn care.
“Looking back at the way things were, vendor management had always been a sticking point for us,” says Christian Marcussen, Mazuma’s chief information officer. “A lot of our executives operated in vacuums with their own contracts and their own relationships.”
Not any more. Read more here on how the Kansas City credit union is keeping everything up-to-date.
Let’s Get Together Now
Vendor management and compliance (along with collections) were the first areas tackled by a new CUSO formed by six small credit unions and the help of Mid-Atlantic Corporate and its Rekindle initiative. With assets ranging from $57 million to $150 million, the six credit unions that own the rkGoBig CUSO are combining key back-office operations to gain economies of scale and better serve their members.
“Our focus and our first effort with this group of rkGoBig credit unions was to cut costs by merging vendors, merging processes, and merging systems,” says Peter Barnard, CEO of rkGoBig, which expects to save its six owners more than $200,000 in compliance costs over the next couple years.
Read more about this CUSO and others formed with the same goals in mind.
Looking back at the way things were, vendor management had always been a sticking point for us.
6 Rules For Maximizing Vendor Value
Credit unions pay good money for cutting-edge products and services and need to make sure they maximize the return on their investment. Here’s a look at how how some forward-leaning credit unions are making the most of existing relationships and choosing the best time and conditions under which to make new ones. Six steps are highlighted here, including one simple but powerful solution – centralizing solutions to replace multiple relationships across the enterprise — that has saved one highlighted credit union millions of dollars in the past decade.
Nuts And Bolts At BCU
A nuts-and-bolts approach to vendor selection and management has helped BCU ($2.3B, Vernon Hills, IL) fine-tune its outsourcing into a process that outlines each step from assessing business needs and requirements to drafting request for proposals (RFP) to performing due diligence and annual reviews. In this Q&A, Cheryl Turner, contracts administrator at BCU, outlines best practices the big Illinois credit union has developed. For example, she says, “Upon execution of the formal contract, we designate a business relationship owner who is responsible for day-to-day service provider oversight throughout the duration of the relationship.”
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You tell us you’re happy with the vendor and then we’ll tell you if there are any legal issues that need to be flagged.
Centralizing, Decentralizing At ORNL
ORNL Federal Credit Union ($1.7B, Oak Ridge, TN) has replaced the antiquated paper trail it long used to track vendor relationships with a hybrid approach built on software that empowers the Tennessee credit union to both centralize and departmentalize responsibilities. Record keeping, contract management, performance review … it all takes place in a system that is based on these three steps: creating a thorough process, understanding departmental strengths and weaknesses, and leaving the performance review to the impacted departments.
“I don’t know what my marketing department wants in a vendor or what facilities needs out of a vendor,” says former chief legal officer of ORNL, Wayne Hood. “They know much better than I do, and the logical thing was to split the control. So you tell us you’re happy with the vendor and then we’ll tell you if there are any legal issues that need to be flagged.” Learn more here.