May 30, 2018
Vendor due diligence is an added burden on retail wealth firms, but it is also a meaningful opportunity.
Today, for the majority of retail wealth firms’ vendor due diligence, it’s about filling out a checklist, and then putting the supporting documentation into storage.
Yes, making sure the checklist is filled out is a must-do. Regulators will be looking for the process and the content. However, an opening exists to elevate vendor management beyond a checklist to be a “strategic differentiator.”
What’s the criteria that influence a vendor choice within your firm? Most engage in a deeper due diligence process before implementing a new technology that results in the decision about a specific vendor. After that choice is made, for the balance of retail wealth firms, the maintenance process is somewhat minimalist.
Over the years, when we have gone into firms and asked about the decision criteria used for choosing established functional vendors, no one knows what the original decision drivers were.
Furthermore, beyond IT demands, review criteria are largely nonexistent. Without a vendor governance framework defining vendor expectations, over-or under-achievement is next to impossible to establish, and anecdotal input rules the day. We believe a vendor governance framework is a “must-have” to help firms mitigate their vendor risk and turn a negative into a positive.
So, I challenge you to morph vendor due diligence from a vertical to horizontal experience. Huh? What does that mean?
Summarized, transform vendor due diligence from a vendor by vendor experience to one where you are actively managing your vendors like you would an investment portfolio. Align your established governance principles, which typically include business, information technology, security, financials, and user satisfaction to name a few.
By constantly drawing in fresh data points across these categories and cross-referencing those packaged categories, you have a living, breathing vendor management tool that is a quantitative snapshot of your vendor.
When vendors are combined, you have a living breathing portfolio view, and can proactively coach the vendors on their strengths and weaknesses, more effectively manage your vendor relationships, and position yourself to make proactive changes when vendor underachievement has become the norm.
Perhaps the greatest benefits are that a vendor governance framework naturally mitigates vendor risk while prioritizing your functional/vendor needs supplying a working strategic technology roadmap.
If you want to continue the discussion thread, reach out. We have a lot to say on this subject.