On average, aluminum cans — which can be recycled repeatedly — contain 73% recycled content, up to 20x more than recycled plastic bottles. Further, recycling aluminum takes only 5% of the energy required to make new aluminum, creating substantial cost savings as well as reducing the environmental impact.In this challenging economic climate, many community financial institutions (CFIs) are also looking for ways to make savings. Given that CFIs often rely on third-party technology providers, focusing on how best to manage these relationships can make a big difference. Depending on their complexity, core systems, and approach to outsourcing, some CFIs may manage as many as 500 different relationships, for their core banking and digital platforms, payment processors, cloud and cybersecurity services, compliance tools, and more. We look at three key ways in which CFIs can drive efficiencies across the vendor management lifecycle.1. Standardize Processes Managing all vendor relationships with a standardized framework should result in efficiency gains. This includes standardizing the following vendor management processes:
- Strategic planning. The process starts with ensuring that all vendors align with the institution’s strategic objectives — if not, this may be an opportunity for a rethink.
- Vendor selection. When onboarding new vendors, making the right selection is key. A vendor evaluation framework should include expected outcomes, timing, budget, and ease of integration with existing systems. All these metrics should be included in any request for proposal (RFP). Once a shortlist has been selected, conduct a comprehensive due diligence process, which includes assessing the financial health of the third-party organizations, the strength of its leadership and company culture, its security credentials, the scalability of its architecture, its business continuity provisions, and its track record.
- Contracting. The contract serves as the cornerstone of an effective vendor management program. It should capture the outcomes outlined during the RFP process and require the vendor to regularly provide the CFI with the information needed to assess performance. Other contract standards include regulatory compliance, data privacy and security, subcontracting, terms and exit strategy, and change management procedures.
- Performance monitoring. CFIs should develop a scorecard that includes all the metrics established during the contracting phase, such as service levels, transaction volumes, quality metrics, progress against milestones, reporting standards, and quality communication. This should be reviewed regularly against the data provided. It is equally important to maintain an ongoing dialogue with vendors to identify potential issues and find ways to improve overall outcomes.
2. Integrate Systems
To ensure timely and successful operational onboarding, it is important that institutions designate a vendor “owner” — someone in the organization who will act as a relationship manager for each vendor. Selecting the right owner, equipping them with the necessary skills, and communicating expectations clearly can make a huge difference.To ensure a seamless technology setup, CFIs must also provide vendors with access to all necessary platforms and systems, ideally through an identity access management tool. Follow this up with targeted training and support to familiarize the vendor with the organization’s processes, tools, and workflows. Lastly, perform integration testing to confirm that the vendor’s systems align with the institution’s operations — laying the foundation for effective and collaborative third-party relationship management.3. Automate Workflows
When conducted across a significant number of third parties, manual processes can lead to delays, errors, and increased risk. Workflow automation can significantly impact efficiency by streamlining repetitive tasks, improving accuracy, and ensuring consistent compliance.
To ensure timely and successful operational onboarding, it is important that institutions designate a vendor “owner” — someone in the organization who will act as a relationship manager for each vendor. Selecting the right owner, equipping them with the necessary skills, and communicating expectations clearly can make a huge difference.To ensure a seamless technology setup, CFIs must also provide vendors with access to all necessary platforms and systems, ideally through an identity access management tool. Follow this up with targeted training and support to familiarize the vendor with the organization’s processes, tools, and workflows. Lastly, perform integration testing to confirm that the vendor’s systems align with the institution’s operations — laying the foundation for effective and collaborative third-party relationship management.3. Automate Workflows
When conducted across a significant number of third parties, manual processes can lead to delays, errors, and increased risk. Workflow automation can significantly impact efficiency by streamlining repetitive tasks, improving accuracy, and ensuring consistent compliance.
- Automation can be used throughout the vendor management lifecycle. For example:
- Automated data entry and document collection, sharing, and approval can accelerate the vendor selection and onboarding processes.
- Automation can help track contract renewals, key deadlines, and regulatory obligations in contract management. Automated alerts help reduce the risk of non-compliance and missed opportunities to reassess vendor performance and contract terms before renewals.
- Automation can transform performance monitoring from an ad-hoc, subjective process into a consistent, data-driven exercise.
By automatically collecting performance data, monitoring service level agreements, and highlighting failure to meet agreed standards, institutions will be in a better position to develop action plans and prevent future mistakes.In today’s challenging environment, CFIs are under growing pressure to drive efficiency gains without compromising compliance or service quality. One area ripe for improvement is the vendor management program. By standardizing processes, integrating systems, and automating workflows, CFIs can create consistency, eliminate redundancy, and reduce manual oversight, while improving long-term scalability and risk management.
