In today’s banking landscape, risk doesn’t just come from inside the building. Third-party vendors are now central to how financial institutions operate. They provide everything from core processing to cybersecurity tools. But with that reliance comes responsibility. Vendor relationships can open doors to regulatory findings, data breaches, and operational disruptions if not properly managed.
Community banks are particularly vulnerable. With lean teams and limited resources, many are still relying on spreadsheets and email to track vendor due diligence, contracts, and risk assessments. This manual approach may have worked a decade ago, but it doesn’t now.
The Regulatory Lens Is Sharpening
Regulators have made their expectations clear. The OCC’s 2023 guidance on third-party risk management, reinforced by the 2024 Community Bank Guide, outlines the need for active oversight, documentation, and risk-based assessments across the entire vendor lifecycle.
In plain terms: a contract on file isn’t enough. Banks must prove they understand each vendor’s risk profile, conduct timely reviews, and track performance. And when examiners walk in the door, they expect to see a clear, consistent process.
The Risks of Getting It Wrong
When vendor management falters, the consequences stack up:
- Audit and exam findings that strain your team’s time and credibility
- Missed contract renewals that lead to unexpected costs
- Security gaps from vendors who aren’t meeting your standards
- Reputation damage if a vendor mishandles sensitive customer data
Too often, these issues stem from inconsistent tracking, fragmented documentation, and unclear ownership of the process. That’s not a people problem, it’s a system problem.
A Smarter Approach: Centralized, Streamlined, and Proactive
Leading banks are shifting away from ad hoc tracking toward centralized platforms that simplify the entire vendor oversight process. Tools like Finosec’s Vendor Governance module are purpose-built for community banks, helping institutions:
- Conduct risk-based vendor assessments with built-in guidance
- Track contract dates, renewal alerts, and documentation in one place
- Streamline reviews with templates, workflows, and reminders
- Integrate vendor data across your cybersecurity and compliance programs
Most importantly, it brings visibility to your entire vendor ecosystem, so you’re not surprised during your next exam.
The Payoff: Confidence and Clarity
Good vendor management doesn’t just check a box. It builds confidence:
- For your team, knowing reviews are complete and accessible
- For your board, seeing oversight in action
- For your regulators, recognizing a consistent, risk-based approach
By rethinking vendor oversight not as a burden, but as a strategic pillar of governance, community banks can reduce uncertainty, stay compliant, and protect what matters most.
And with the right partner in your corner, it doesn’t have to be complicated.
Want to learn how Finosec simplifies vendor governance for community banks? Contact us today at info@finosec.com.
