Vendor Management Hot Take

Hey, GonzoBankers. Tony DeSanctis here to talk a little bit about service interruptions from our vendors.

For those of us who may or may not know, there was a vendor outage here in the last couple of weeks. How do we address that? We don’t have a lot of control over it, but I did ask Josh Lane to join us to talk a little bit about how smarter bankers use vendor management to improve and minimize some of the impacts of service interruptions.

So, Josh, thanks for joining us.

Thank you for having me.

So, Josh, how do we think about managing service interruptions? We obviously can’t prevent them. The biggest banks in the country are dealing with this. Most of our clients aren’t going to be able to mitigate it completely. But what are smarter bankers doing to address these types of service interruptions in their vendor management process?

I think the first point I really want to make is that you can’t out-vendor-manage a service interruption. They’re going to happen, right?

So there’s this sort of belief, and a lot of it comes from a compliance lens of vendor management, which unfortunately is just sort of the world we live in. You’ve got to do some compliance activity.

But make no mistake, a lot of that compliance vendor management focus really has one goal, and that’s to pass your audit, pass your exam.

During a service interruption, it doesn’t really matter how deep you went into a SOC report. It doesn’t matter how many pieces of documentation. Service is down, cows are out of the barn. So we’ve got to put them back in and close the door.

I think if I’m thinking about the best, smartest bankers out there doing that, there are really a handful of things they can focus on.

First, absolutely do some fundamental vendor management. You’ve got to report it. So first things first, make sure you’re reporting that. If you’re an FDIC bank, if you’re an NCUA credit union, there are tools, there’s a methodology to report an outage, an event like that.

The second really big thing is to know what to expect and be ready for that outage.

So the way I think of that, it’s a little adjacent to vendor management, but put your business hat on, put your strategy hat on and pregame a little bit about, if A goes down, what does B look like?

So with the recent event, if a payment system goes down in one channel, what’s the next channel? What’s the most obvious next channel?

You start thinking about it that way. Then, what do those vendors do for me if there is an interruption?

Once you’re kind of past that initial, let’s map out what Plan B looks like, let’s dig in and find out what our vendor promises. Now we’re talking really about contracts.

We’ve been saying this for a long, long time, but you’ve got to have insight into all of your contracts. You’ve got to make sure they’re current. You’ve got to make sure you know what’s in there.

And most importantly in these situations, what’s not in there? What is your vendor committed to do, and what are they not committed to do?

Now that you know those things, the next big step is, how do we execute a communication strategy to our customers, to our members, about what happened?

So with a recent event, we’re kind of talking about, and we’re not going to name names, of course, but there was a lot of news about how great they were communicating every 15 minutes, every half hour.

That’s cool. They’re communicating to you, your bank, your credit union. You need to translate that to your members, to your customers.

My opinion is the banks that just plan for service interruptions, rather than trying so hard to outmaneuver them through vendor management and compliance, are going to be better prepared. Risk and risk management, do that. Pass your exams, but that’s not going to solve it.

So the ones that are going to excel in the space when these things happen, those are the bankers that are going to be ready for that service interruption. They execute their Plan B, and they communicate really, really well.

They communicate fast, they communicate directly and they do it effectively.

It’s a little adjacent to sort of bread-and-butter vendor management. If you’re trying to separate the good from the bad, the bad from the ugly, that’s it. The ones that respond quickly, decisively and communicate really well, that’s the secret sauce, I think, to really making it through one of those interruptions.

And let’s face it, everything’s more interwoven and interconnected than ever. Customers and members are expecting that experience when they’re banking with you. It’s just sort of the way the world’s going.

And the side effect to that is service interruptions.

So obviously, Josh, we barely scratched the surface on the vendor management side of things. A lot more information is out there. Certainly folks can go to our website and dig into that as well.

But if you’d like to dig deeper and potentially take part in other events that we might have around vendor management, let us know below. There’s a signup sheet there, and the next time we do something on vendor management, we’ll let you know from that signup sheet.

So sign up below and stay tuned, because we’ll continue to talk about this and other challenges that we see our friends in the bank and credit union space facing.