Western Independent Banker - September/October 2008 - (Page 29)

By Anne K. Scully, WIB Service Corporation President WIB Service Corporation Report WIB Service Corporation Endorsed Vendor Evaluation Process: Helping You Meet Regulatory Risk Management Guidelines VENDOR MANAGEMENT & RISK: back in the spotlight again. On June 6, 2008, the FDIC issued its latest guidance outlining the potential risks of third-party relationships, as well as risk management principles that may be applied to mitigate the potential threats. During the past two years, the increased level of federal regulatory scrutiny over banks’ third-party relationships has paralleled the increased scale and complexity of the relationships themselves. Previously, vendor management assessments within the examination process have focused on IT and operations. However, the new guidance emphasizes the need for banks to take a broader, more common sense approach to due diligence, legal contract management and the operational management of those contracts. Although these clarifications are important, they still may pose challenges for community banks. Why? Most community banks have neither a formal vendor management program nor a specifically designated vendor management staff specialist. More importantly, even the smallest bank often may have dozens of vendor relationships, any one of which can represent a major risk to the institution. If you are facing the “vendor management” challenge, please contact us. As one of our “value-added” member services, the WIB Service Corporation provides outsourced vendor management assistance to WIB banks through the vendor evaluation process used in the selection of our WIBEndorsed Value & Income Programs (VIPs). Our vendor evaluations can help your bank reduce the time and resources you spend in your own vendor management program. Trusted Process WIB members trust WIB and WIB Service Corporation’s endorsed VIPs because they trust the quality and integrity underlying our endorsement evaluation process. WIB Service Corporation Risk-Rated Vendor Evaluation & Selection Process ✓ WIB Service Corp Board Approval ✓ Task Force Recommends Endorsement ✓ Independent Consultant Reviews High-Risk Vendor Categories ✓ IFFIEC Risk-Based Guidelines ✓ Advisory Task Force Evaluates ✓ Banker Input/Recommendations ✓ Economic Environment & Need ✓ “Differentiator” Factor VIP Endorsement Evaluation (Bankers & Industry Experts) VIP Category Selection RFP/Vendor Submission WIB Staff Compilation Formalized Risk-Based Policies We have developed formal vendor management policies and procedures consistent with regulatory guidelines, with a risk assessment being the first step in our process of identifying vendor categories to be considered for endorsement. We assess the risks inherent in outsourced product/service and tier them (e.g., Critical, Important, etc.) based on a range of considerations like the impact failure of the service would have on our banks’ operations, annual operating costs, and vendor access to non-public bank and/or customer information. Our contract specifications, due diligence, and ongoing monitoring requirements are defined by risk category: For those services/products in the top risk categories, we have more robust requirements to ensure that, among other things, the vendors are financially strong and have appropriate internal controls in place. Risk-Based Evaluation—Process Undertaken By Bankers for Bankers WIB Service Corporation employs a comprehensive, risk-based evaluation process involving the active participation of WIB Service Corp Board members, staff and dedicated banker advisory committees for each product considered for endorsement. Our Product Advisory Committees are com- prised of WIB bankers and other industry experts knowledgeable in the product category under consideration for endorsement. They assume three critical roles: • They recommend the product/service categories – and the high caliber companies offering them – to be considered for endorsement. • The advisory committee and WIB staff employ a risk-rated review aligned with FFIEC guidelines and based upon the risk inherent in the product/service. They also ensure that the regulatory requirements are covered. • They conduct ongoing, periodic evaluations to ensure the endorsed product continues to meet our endorsement standards. Additional Review for High-Risk Products/Services If the product/service is classified as “high” or “critical” risk, we engage an outside consultant to conduct an independent review. This provides one more layer of independent evaluation in our process, not to mention one more layer of comfort for our members that we have “crossed all the T’s and dotted all the I’s” in our process. The Advisory Committee selects the vendor(s) to be recommended for endorsement to the WIB Service Corporation Board. Western Independent Banker September/October 2008 29

Table of Contents Feed for the Digital Edition of Western Independent Banker - September/October 2008

Western Independent Banker - September/October 2008 Contents A Message from the President & CEO What To Do When Good Employees Go Bad! Remote Deposit Capture: What’s Your Target Market? Remote Deposit Capture: Lessons Learned Debit Decoupling: Part of Larger Merchant Funding Trend Debit at the Speed of Life: A Look at Debit Technologies on the Rise ID Theft Rule: Automating the Compliance Process Lose Paper and Gain Audit Trails Data Loss Prevention: A New Package on an Old Idea Securing Data in Transit Margin Management: Get in the Driver’s Seat Shopping for Cyber Insurance WIB Service Corporation Report WIB Calendar Welcome New Members Index to Advertisers advertiser.com

Western Independent Banker - September/October 2008

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