There is no such thing as a perfect choice when it comes to partnering with a third-party vendor, according to Daniel Loritz, Esq., managing partner, Okun Loritz LLP, a Glendale, California-based law firm that represents financial institutions. Loritz suggests credit unions take six steps to ensure their final selection is the best one possible for their organization.
1. Do due diligence. After the credit union’s initial risk assessment and planning is complete—which should determine whether the contracting vendor poses a low, moderate or high risk— leaders should conduct due diligence on prospective vendors’ financial heath, general background and business model, Loritz says.
2. Do a background check. Your credit union should consider a third party’s experience providing the proposed service or program. A well-respected third party may have little or no experience implementing and supporting a new service offering, Loritz points out. In these cases, the qualifications, competence and training of key individuals within the third party’s organization become even more important to verify.
It is also important to understand how a third party has performed in other relationships, he adds. Credit unions can request referrals from the prospective third party’s clients and evaluate them. Also review and consider any lawsuits or legal proceedings involving the third party or its principals.
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