Banks work with a variety of vendors to operate different segments of the company. Vendor verification is an essential component of a risk management plan. Here are some highlights of why banks need to verify vendors.
The insurance firm FGIB states that vendor verification helps limit fraud by managing the relationship between vendors and banks. Limiting fraud starts with clear communication between the two entities regardless of relationship length.
Banks store a vast amount of personal data on their customers whether businesses or individuals. As such, they need extra protections in place to secure that data. Verifying vendors and what they have access to helps protect that data. A solid IT security plan can help monitor vendor activity when it comes to accessing data.
The government has heavily regulated banks since the 2008 Global Recession. With that in mind, banks need to ensure that the vendors they work with also follow those regulations whether governmental or financial. The vendor needs proper licensing as a stamp of their compliance.
Limiting the risks vendors pose to banks through proper vendor verification helps reduce any financial damages that may arise. Both short-term and long-term contracts pose similar risks to the bank. Take time to implement a verification plan for each vendor as part of the bank’s risk management plan.