3 Critical Stages of Third-Party Vendor Management

By Vanessa Stanfield, Insurance Solutions powered by Affinion

Did you know your credit union could be responsible for the performance of your vendors? No credit union wants to encounter regulatory trouble or face reputational risk; especially as a result of vendor activities. It’s because of that fact that vendor management due diligence is a topic of increasing importance.

But what is the right way to go about choosing  third party vendor? The National Credit Union Administration (NCUA) has provided clear direction regarding vendor due diligence. Additionally, the NCUA has deemed the following areas as critical in third-party vendor management: Risk Assessment & Planning, Due Diligence, and Risk Measurement, Monitoring and Control.

Risk Assessment & Planning

Risk Assessment

Prior to engaging a third-party relationship, assess the current risks and document how the vendor will relate to your credit union’s strategic plan. When conducting a comprehensive risk assessment, the key areas of focus are: credit, interest rate, liquidity, transaction, compliance, strategy, and reputational risk. In this discovery phase, your credit union can identify the current risks and establish expectations of the new relationship.

Due Diligence

There are four fundamental due diligence elements to consider when choosing a vendor: organizational, business model, financial health, and program risks. In these areas, your credit union can assess what degree of due diligence is required.

But remember- not all vendors are created equal. More complex vendor relationships with more risk will typically require increased due diligence; less complexity and risk means less rigorous due diligence. For a comprehensive report and the five key due diligence questions you need to ask your vendors, read the full whitepaper here.

Risk Measurement, Monitoring and Control

Credit unions must be able to continually measure performance and risk throughout the relationship with the vendor. To do this, your credit union should clearly outline the vendor’s responsibilities and policies before taking on the vendor. In the end, this will allow for proper vendor performance management so that you can ensure expectations are being met.

Credit unions should not think of vendors as a third party, but as an extension of their organization. Because of this, it is important to consider the three critical areas above when deciding on a vendor. As the NCUA has conveyed, the utilization of vendors does not in any way diminish the credit union’s level of responsibility and for that reason, credit unions should carefully select their vendors.

What Should We Ask Our Vendors?

To be confident that the vendor’s management programs are the right fit, credit unions must discuss the vendor in great detail and ask the hard questions. Failure to conduct thorough due diligence and effectively monitor these vendors place the credit union at risk. Again, not all vendor relationships call for the same level of due diligence and ongoing monitoring, but in order to determine what level is necessary there are key questions that your credit union must contemplate.

For an in-depth look at the five key due diligence questions that credit unions must ask when selecting a third-party vendor, read the full whitepaper here.

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InsuranceSolution_4CAffinion is the NAFCU Services Preferred Partner for AD&D Insurance

Preferred Partners to Shine at the 47th Annual Conference in Las Vegas

Join the more than 1,200 credit union leaders, experts, and solution providers gathering next week at NAFCU’s 47th Annual Conference and Solutions Expo to discuss the most pressing issues impacting the industry. A wealth of education, innovation, and networking opportunities will energize you and your team and positively impact your operations and bottom line.

Be sure to schedule an hour on Wednesday afternoon to hear John Ulzheimer’s thoughts on Credit Scoring: Separating Myth from Reality. John, a nationally recognized credit expert, always gives fascinating insights on the credit union universe. This session, presented by VantageScore Solutions, is scheduled at 1:00 pm and repeats at 2:15 pm.

Many of our Preferred Partners will also be in Las Vegas to meet you and to share their innovations and solutions at 16 educational sessions outlined below. Note that many sessions will be repeated this year so you don’t have to choose. Download a schedule at a glance with times and room locations.

It’s not too late to join your colleagues in Vegas. Register for the convention here.

Accelerate Your Credit Union’s Auto Loans

Guest post written by Wayne Conte, Executive Vice President, Affinion Group

With over 12 million Americans still out of work, it should come as no surprise that consumers are hanging on to their cars for three to four years longer than they did in pre-recessionary times. Yet America’s long-standing love affair with cars continues — and that
presents plenty of opportunities for credit unions.

Despite the fact that consumers spent an estimated $36 billion to keep their clunkers on the road in 2011, auto purchases are making a comeback. The National Auto Dealers Association forecasts that over 13 million new cars will be bought in 2012. As many Americans start thinking about their next car, observers note that it isn’t just new car purchases that are improving — used cars and auto leases are also seeing strong increases.

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The Best of the Best – 2012 NAFCU Services Innovation Awards

Innovation can be hard to define, but you can think of it as “the successful application of new ideas.”  ‘Application’ is the key word there – new ideas are the easy part – figuring out which are the good ones, and then applying them successfully, is more difficult.

So innovation is more than just an academic exercise or a tally of patents. The application of a new idea in the real world leads to new products, services, processes, systems, or attitudes that improve something or add value. With all of the changes that are occurring in financial services generally, and in the credit union business model specifically, being (and staying) innovative is more important than ever.

Every year at the NAFCU Annual Conference we recognize the very best innovations among our Preferred Partners that help credit unions thrive in an increasingly crowded financial services marketplace with the 2012 NAFCU Services Preferred Partner Innovation Awards.

We had another exceptionally competitive field of entries this year, and the difficult task of judging was undertaken by the NAFCU Services Advisory Committee, which is composed exclusively of credit union executives. I didn’t envy them in the challenge of picking the winners, and greatly appreciate their bringing a real-world perspective to the value offered by the innovations. No surprise as to what is top-of-mind – all three winners have solutions that help credit unions with marketing and growth.

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Data Breach Preparedness and Response – A Handy “How-To”

With the recent headlines about yet another data breach affecting credit unions and their members, I wanted to point you to a resource that might help you respond effectively. Because this isn’t the first data breach and it certainly won’t be the last.

We’ve posted a recording and accompanying slides from a Data Breach Preparedness presentation from the 2012 NAFCU Technology and Security Conference for your information, as you look to how to address this most recent incident.  The presentation was made by Christine El Eris, Director, Product Management for Affinion Group (one of our Preferred Partners, for ID Theft solutions), and focuses on best practices for responding to members, partners and stakeholders during and after a breach. Not surprisingly, Christine stresses the importance of putting steps in place in advance and provides tools and guidelines for breach preparation and response.

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