VendEx Readies VReg Tool to Shed Light on Vendor Dependencies

San Francisco-based software provider VendEx Solutions will next week unveil a new service—the second in a planned suite of integrated vendor management tools—that provides an enterprise-wide view of financial firms’ reliance on vendor products to meet specific regulations.

Dubbed VReg, the service provides a detailed “map” of how firms use third-party products to meet each section and sub-section of every regulation, and shows their overall dependence on—and exposure to—each vendor across their business. This enables firms to ensure they cultivate partnerships with vendors they rely on heavily to make sure they receive the best service, and also to ensure that anyone considering cancelling a vendor’s service is fully aware of how that service is used on a broader scale. And in the event of a firm wanting to replace one vendor with another, they can easily see the specific regulatory needs that any replacement vendor would need to fulfill.

“It allows institutions to see their reliance, and also their risk. Institutions perform risk assessments on all their vendors. They may find that they rely on a vendor more than they realized, and may not be ready to displace that vendor,” says VendEx CEO Richard Clements. “A vendor product may be expensive, but when you see the ancillary value, an institution has to look at not only whether something can be replaced, but whether you can also replace that ancillary value.”

Vendors, meanwhile, can use the service to demonstrate the value of the products they provide, he adds.

VReg shows reliances based on “instances”—which can refer to asset classes or events, or business functions such as risk or compliance—since a tool may serve more than one asset class. “So for example, with the best execution requirements of Mifid II, we would map by each instance the vendors that a company relies upon to perform this,” Clements says. “A large institution could have between 30 and 40 instances, and we apply regulation to all of them—for example, how does a firm’s credit desk meet article one, paragraph one of a specific regulation—then map vendors to each instance. Then we move on to the next desk.”

This process can take two to three months, starting with a consultation process led by chief data officer Michele Kelsey, and ending with the provision of a portal where users can view a “detailed map” of their vendor dependencies, and which vendors they rely on most.

The idea for VReg came about in an unusual way. International Solutions Network, the consultancy founded by Clements that VendEx spun out of, had written a whitepaper for fixed income ECN and asset registry DealVector, demonstrating the applicability of the vendor’s solutions to regulation. After publishing the whitepaper in January 2018, an unnamed bank approached ISN with a proposal: Instead of a solution that plugged into specific regulations, the bank wanted the reverse—a tool that would bring transparency to which vendors it relied on most for each regulation in the US and Europe.

At the time, ISN had only just launched VendorScape, the tool it used to perform consulting projects, and had not yet spun off VendEx to turn VendorScape into a suite of related solutions. But the consultancy immediately realized the potential interest from the broader financial community in better understanding their reliance on vendors, and how the tool could change the way data consumers view vendor relationships.

Future products in the works will do more to help clients match vendor services to specific needs. VSource, which is scheduled to go live in the coming weeks, will provide a “definitive” catalog of vendor products and services, allowing users to find the products that meet their requirements, while VLink, a direct vendor-to-consumer data hub planned for later this year, will allow vendors to showcase which regulations their products and services address.