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Banks Increasingly Are Creating Vendor Management Offices

The vendor management office takes on a greater role as regulators pressure banks to run tighter ships. Doing so while maintaining a climate of collaboration is the key to success.

Building Stronger Vendor Relationships

Yet Pytel emphasizes that the process is not designed to be a hammer for the bank to bring down on a wayward supplier. Rather, it's a tool to be used to foster a stronger relationship whereby KeyBank helps the vendor better meet the bank's needs, he says.

This is precisely the goal of New York-based Citi's ($1.2 trillion in assets) vendor management program. According to Michael Valentini, managing director with Citi procurement services, the bank has conducted vendor management in some manner for at least the 10 years since he joined the company. "For a while, we focused on the procurement function, supplier management and strategic sourcing," he explains. "Now we're increasing our focus on building collaborative relationships with key suppliers. The focus on innovation and risk is a key driver to strengthen our supplier relationships. We look to the supplier community to help us with challenges and gain a competitive advantage in the marketplace. When we look at this, we look at companywide vendor management policies and standards that everyone has to leverage across the business."

But standards have long been a point of contention in vendors' relationships with banks, say experts. Not only is there a lack of standards in the financial services industry around rating and auditing vendors, but this inconsistency also may be present within individual institutions. Many banks employ scorecards to rate vendors' performance, but many scorecards are proprietary, and vendors find they often have to go through similar rating processes numerous times with their many bank clients.

"Vendors don't like the fact that large banks are not consistent throughout the organization," contends Gary Roboff, a senior consultant with The Santa Fe Group. "There are a lot of cases where there may be a central vendor management program, but it's not effectively managed in the outer 'tentacles' of the firm. That drives vendors nuts."

But all is not lost. The Santa Fe Group worked with BITS to develop the Shared Assessments Program (SAP) to help banks benchmark and audit vendors in a more uniform, universal fashion. The SAP provides a standard questionnaire and criteria for banks and third-party auditors to use as they assess vendors. With the SAP, once a vendor is rated at one bank, the information can be shared with other banks.

"We have great vendor support for the SAP because of the efficiencies it brings," says The Santa Fe Group's Allen. "Vendors say the more consistency they can get from financial institutions in what they want from a product, the more [resources] they can dedicate to R&D. This also helps make the vendor more of a strategic partner to the bank."

Archer Technologies, an Overland Park, Kan.-based provider of vendor management solutions, is an early adopter of the BITS program. "The SAP is helpful because, before, everything was proprietary at banks," says David Walter, Archer's senior product manager, risk management. "Now, with the BITS program, we have available, standard content right out of the box. Banks can more easily complete the assessments."

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