Evaluating technological service providers for community bankers
This week the FDIC re-issued three documents containing information on technological outsourcing for community bankers. The documents were originally issued in 2001 and were included in a Financial Institution Letter (FIL) to FDIC-supervised institutions with less than $1 billion in total assets.
The topics covered in these documents are:
1. Effective practices for selecting a service provider,
2. Tools to manage technology providers; performance risk and
3. Techniques for managing multiple service providers.
Effective Practices for Selecting a Service Provider
While there are many factors and qualifications to consider when picking a service provider, best practice is to determine the exact criteria you will use to evaluate providers before you begin the selection process. In doing this, you are able to not only streamline your selection process but you can also be assured that whichever provider you choose will fit into the strategic focus of your institution.
Tools to Manage Technology Providers’ Performance Risk: Service Level Agreements
Once you’ve selected the best service provider for your institution, the most important next step is establishing a Service Level Agreement (SLA) with them. The purpose of an SLA is to lay out the groundwork for monitoring and controlling the risks associated with entering third-party relationships. SLA’s should be dynamic documents, reflecting any changes in your relationship with your provider over time.
Techniques for Managing Multiple Service Providers
The key things to keep in mind when managing multiple service providers are that each aligns with your institution’s strategic objectives, utilize contracts to address the roles and responsibilities of each provider and maintaining open communication between you and your providers. Just as with an employee, conduct regular reviews of your relationship with any and all providers to ensure that you can identify any issues with the relationship early enough to resolve them.
To learn about the particular risks associated with entering into third-party relationships, download the whitepaper on Risk Management Guidance on Third-Party Relationships.
For more information on technological resources available to community bankers, visit Sageworks online to view their full suite of web-based risk management banking solutions.
