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CUNA unveils comprehensive due diligence guide
WASHINGTON (12/10/08)—The Credit Union National Association (CUNA) Tuesday unveiled its comprehensive guide to help credit unions successfully negotiate the important and difficult territory of third-party vendor relationships. About nine months in the making, the guide has three core functions: Risk Assessment and planning; a focus on due diligence and contract formation; and risk management monitoring and control. The guide is the product of CUNA’s Due Diligence Task Force, formed by CUNA Chairman Tom Dorety and the CUNA Board of Directors in response to regulatory concern over how to best meet credit unions’ due diligence responsibilities involving third-party vendors without unnecessary duplication of effort. Third-party vendor relationships and strategic planning were identified in January by the NCUA as a key credit union examination issue for 2008. Task Force Chairman Henry Wirz, who is president/CEO of SAFE CU in Sacramento, Calif., identified the following as the top two elements of the extensive due diligence guide:
* First, credit unions must look at their strategic plans and sure whatever service they wish to offer through a third-party relationship is consistent with that plan. “Sometimes a credit union should just say no,” Wirz said: and * Second, once a credit union has determined a new service is consistent with its plan, it must establish a process to manage that service just as it would monitor and evaluate any employee.
The group vice chairman, Bill Raker, noted that the new guide can be considered a template and a set of best practices that will establish consistency in vendor relationships. Raker, president/CEO of US FCU in Burnsville, Minn., added the guide will enable credit unions to proceed with vendor relationships without having to look at each situation in a vacuum. However, Raker also stressed that the guide is not a “formula for making decisions.” “Credit unions must still make their own calls on whether to proceed with a relationship,” he said. The guide was developed by the task force and CUNA staff in consultation with federal and state regulators, credit unions and state leagues. The practices of other federal depository institution regulators were studied to provide a “360-degree view” of due diligence best practices, according to CUNA staff. Mary Ann Clancy, senior vice president and general counsel of the Massachusetts CU League and a Due Diligence Task Force member, noted that the 360-degree review aspect of the guidance is particularly important. “The Guide is applicable to all kinds of credit unions, not just federal charters,” she noted. The guide also includes appendices on SAS No. 70 audits and vendor management software prepared for CUNA by the accounting firm BDO Seidman LLP. Titled simply “Third Party Vendor Management Guide,” the 94-page resource is available online through the CUNA website. Use the resource link below.

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