Vendors under risk management microscope in downturn

Peter Dinham
Sunday, 02 August 2009 15:25

Business IT - Technology

Banks in the Asia Pacific market have increasingly put vendors under the microscope during the economic crisis, as they seek to manage risk and ensure the viability and sustainability of vendors’ businesses.

Forced by the current economic crisis in the region to scrutinise vendors to an even greater degree than usual, vendor risk management has been front and centre for the banks, and according to IDC other factors, such as expanding regulation, a consolidating vendor landscape, and more stringent vendor selection guidelines, have also pushed banks to strengthen vendor management practices.

In its latest financial insights report - “Best Practices: Are Asia/Pacific Banks Ready to Turn the Spotlight on Vendor Risk?"  - IDC says there have been several improvements in how Asia/Pacific banks assess, mitigate, and monitor risks in their vendor relationships.

IDC’s senior consulting and research manager for Asia Pacific, Michael Araneta observes that leading banks have generally followed a cohesive framework of vendor risk management, with “growing attention given to vendor due diligence to ensure that vendors will be able to sustain operations, especially amid the current crisis.

“Banks are going beyond the cursory evaluation of annual reports, but are also looking more closely at other financial and performance metrics. Evaluation of the vendor's corporate governance structure is also being taken more seriously.

“The efforts of banks to look at operational risk practices, either on their own or as part of the broader Basel II program, have put IT risk high on the agenda. Banks have recognised that technology failures, including the failure of technology vendors to deliver, can have dire implications for business continuity and their institution's reputation. As such, they are (sic) have raised the yardstick when assessing vendor risk."

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