NEW YORK --The most effective evaluations of outside service providers involve risk assessment, effective due diligence review and close monitoring.
That's the advice Dominic Nigro, the NCUA's information system officer, gave during a session at America's Credit Union Conference and Expo.
Nigro said the benefits of those arrangements include expanding product services, savings, and leveraging skills and expertise. Before entering a relationship, CUs should ask whether it meets goals and objectives and how critical the relationship is to the credit unions, he advised.
The risks of using outside providers include inadequately managed relationships resulting in unanticipated costs, legal disputes and financial losses, he noted.
In performing due diligence, credit union executives should consider the vendors' past experience; request references and ensure their licenses and certifications are in place; evaluate a vendor's business model; focus on and delineate the responsibilities of both parties; and look at the way vendors report information to you.
"Risk assessment and planning should be dynamic and nonstatic," he added.
