Case Study

Procurement Practice Setup and Implementation
A Regional Bank sought guidance to develop a framework for an effective Procurement division. The bank identified this function as the primary gatekeeper to screen and validate prospective vendors (the initial risk management line-of-defense), and to oversee and manage the annual vendor budget.

We created and implemented a Procurement organization that thoroughly vets each prospective vendor to determine their risk profile in the follow risk categories: reputational, operational, regulatory, and financial risk. The division also was given joint responsibility to negotiate the financial terms of each contract to ensure that budget constraints are considered. Additionally, a vendor annual review process was implemented that rationalized the number of vendors and services in order to control the annual spend and reduce the population of unnecessary vendors. Lastly, a contract review process was implemented to review all services at contract renewal to determine if: 1) the services were still necessary, 2) to determine if other vendors could provide the same or similar services. This process allowed the Procurement division to invite a similar cohort of vendors to participate in a competitive bid via an RFP (request for proposal) or RFI (request for information).

The Procurement division was successfully created and implemented at the bank, and the division proved to be a foundation for the larger third-party risk management effort in the organization. The procurement processes that were implemented transformed the risk management effort required over all third parties to be more consistent and efficient. Lastly, the division realized multi-year expense savings of approximately $30 million by the end of the fourth year. Expense savings continued to increase with approximately $180 million saved by the sixth year.