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THE MPHASIS ADVANTAGE
Know Your Vendor (KYV) has languished behind its older cousin Know Your Customer (KYC) for well over a decade. Though being very similar in concept, KYV has not received the importance KYC has received, as it does not contribute to revenue. However, times are changing. With guidance and a starting position from the OCC on what constitutes KYC, financial institutions (FI) are gearing up for upcoming KYV programs, which we call next-generation KYV. The next-generation distinction is important as tools and techniques learned in other parts of the organization would be applied to solve the KYV challenge. Typical lateral uses include the use of smart compliance i.e. risk scoring, rules-based decision making, semantic modeling; advanced analytics; machine-learning paradigms; and robotics-based operations automation. All these techniques will contribute to vendor risk management, vendor selection, vendor rationalization, vendor performance optimization, and vendor incentives and contract negotiation.
With a state-of-the-art KYV program, the following benefits would be easily achieved:
THE CURRENT STATE OF KYV SOLUTIONS
Apart from the payments systems, contract onboarding, and vendor record components, the rest of KYV process is primarily driven using spread sheets and word documents (in a semi-structured manner). The vendor profile is also evaluated using a questionnaire rather than due diligence process structures. In many organizations, most of the vendor profile records are not digitized. Large banks may have around 10,000 vendors or more. Non-usage of advanced analytics makes it difficult for decision making to reduce risk or for rationalizations and terminations. In addition, breach of contract and litigation preparation are difficult to detect and plan, due to the sheer volume of paper documentation.
On the organizational design and operations side, it is common for vendor management teams to be under-sized, over-worked, and not have the power to take vendor-related decisions based on analytics.
WHAT SHOULD A STATE-OF-THE-ART KYV SOLUTION DO?
For new vendors, it is critical to have a workflow-based onboarding process which is similar to the KYC process. It performs basic vendor identification (VIP), follows it with vendor due diligence (VDD), and ends with enhanced vendor due diligence (EVDD) for cases which merit an in-depth study based on advanced risk scoring. Watch list filtering is also recommended on key stakeholders of the vendor. Modern smart compliance solutions (like NextAngles from Mphasis) allow for negative news and conflicts of interest filtering as well. For management decision making (e.g. reduce risks associated with concentration, law, or country) an analytics-based dashboard is vital. For approved vendors, it is important to digitize their records (vendor case docket, contracts, task orders, payment schedules etc.), risk score them and schedule them for renewals/remediation based on their score. In the following paragraph, we go into the details about the key steps.
With rule and semantic model-based smart compliance solutions (e.g. NextAngles), the following activities become possible:
APPROACHING A KYV TRANSFORMATION FOR AN FI
Transforming an FI from its current state KYV to next-gen KYV requires some key activities and steps to be taken. This assumes that the FI is at the lower end of digitization.
In the case where an FI is already well digitized and has possibly implemented one of the very few off-the-shelf solutions for supplier lifecycle, contracts, requests for proposals (RFP), and payments capabilities, the transformation would begin from the smart compliance step. Assuming well-established KYV processes, the smart compliance solution can still bring key insight, which could optimize the KYV function.
WHAT MPHASIS CAN DO FOR YOU
A key expectation of end customers from a mobile-only bank, is the ability to see things from the customer’s point of view. Mphasis offers services (consulting, technology, and process outsourcing) around KYV to help: