Why Effective Vendor Management is Critical to your Fund’s Success

The Growing Size of the Vendor Management Challenge, and How RMS Can Help Find Efficiencies

Behind every company is a long list of vendors and suppliers helping it succeed.

Whether you’re a road-side coffee cart, an organic mushroom farm or a mutual fund, outsourcing and procuring services critical to your own success is now a matter of course.

We all choose, and assess, our vendor ecosystem carefully. And rightly so; there is a causal relationship between your supplier relations and your bottom line. The stronger relationship you have with your vendors, the higher the likelihood they make a positive contribution to your operations.

The characteristics of a strong vendor relationship are straightforward. Expectations are agreed, benchmarks set and met, bills paid on time, documentation up to date, SLA’s are honored, reports accurate, issues are identified and resolved, and communication is timely.

Perhaps in the early days of running your single-site coffee cart, maintaining this level of relationship with a handful of core suppliers is straightforward. But when you’re in the business of dealing with hundreds of vendors in a highly regulated industry like investment management, vendor management is complicated.

The continued drive to reduce costs, optimize operations and deliver on heightened cybersecurity and compliance demands, has made effective vendor management a vital discipline in our industry.

The Growing Size of the Vendor Management Challenge

A recent bench-marking study from Cutter Associates into the subject found “keeping pace with the growing number of providers” among the top three challenges (74%) for the asset management community, with one third citing it as their number one challenge.

It’s easy to see why; Investment Management firms oversee a rapidly growing list of third party vendors. As a taster these can include:

  • Prime brokers
  • Data providers
  • MSP’s/Managed infrastructure services
  • IT support
  • External contractors
  • Expert networks
  • Fund administrators
  • Compliance consultants
  • Software vendors for RMS, PMS, order management etc.

Among our client base we have funds managing 70 suppliers and funds managing upward of 800. Regardless of whether there’s a dedicated vendor manager or team, a departmental firm-wide program or not, all attest that managing vendors is an increasingly complex but essential business component.

A significant part of this is the focus on vendor management from the regulators. It ultimately comes down to mitigating risk; you can’t outsource compliance or cybersecurity.

Recognizing that some of the largest data breaches over the last few years have originated from the hacking of third parties, SEC examiners will also assess businesses practices and controls for vendor management. Specifically, examiners will look at vendor selection, contract terms, monitoring, and oversight.

So you have to wonder, if vendors are so critical to operational success, and compliance and due diligence intensifying, why are so many funds still lagging behind when it comes to implementing tools and technologies to manage them effectively?

 

A Single Source of Truth for Vendor Management

The same 2017 Cutter Associates report found low adoption of supporting technology for vendor management across the board. The majority of asset management firms still use spreadsheets to track and report on their vendor service metrics.

From conducting due-diligence, to negotiating contracts and service level agreements and monitoring costs and performance, these ad hoc work arounds and manual spreadsheet approaches introduce data silos, make collaboration across teams difficult, and monitoring and reporting resource-intensive.

In speaking with our clients, we’ve found a universal need for a consolidated view of all vendor-related content and context; a single source of truth for vendor management, if you like.

Here at Bipsync, we’re working with clients to help them use the Bipsync platform to provide a system of record for vendor management. Taking our smart, centralized content repository, with integrated process management, and extending its in-built functionality and automation capabilities enables them to manage vendors – contacts, content, context and communications – in one place. Essentially, the way Bipsync can be configured to support vendor management requirements is two-fold:

  1. Consolidate vendor records and centralize associated content: Build a single place for your complete vendor profiles for one unified view of all your vendor information. With a central vendor list, funds can associate all relevant content and context for that vendor, so you  – or anyone on your team – can one click access or update subscription agreements, DDQs, invoices and other documentation.
  2. Coordinate processes and automate workflows: First we define processes for diligence, procurement and renewals. Then we incorporate automation – rules, tasks and reminders – to assign, approve and progress vendor management actions. These can include supplier communication, diligence actions, contract review/renewals, and so on.

It’s clear that as the speed of regulatory change quickens and the proliferation of vendor numbers continues, those hampered by cumbersome or siloed systems and processes are struggling to keep pace. If you’re looking  for a more efficient way to to track, maintain and effectively manage a compliant vendor program across the supplier life-cycle, let’s talk.