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Data-Driven Supplier Diversity: A Financial Services Perspective

Financial services need to prove they’re investing in the community. Supplier diversity is a perfect solution

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In a recent Supplier.io webinar, Mark Morales, Vice President at City National Bank, discussed the critical role of supplier diversity in financial services, the impact of regulations, and how companies can leverage these programs to drive better business outcomes. Morales’ 20+ years of experience in the industry—from working with small businesses to running a chamber of commerce to serving as the chair for California’s Insurance Diversity Task Force—gives him an incredibly broad and insightful perspective.

Time has proven that companies who invest in supplier diversity experience better business outcomes and can provide a greater impact to their communities. Financial services companies are no different—they only stand to benefit from successful supplier diversity initiatives.

Mark Morales, Vice President at City National Bank, recently joined a Supplier.io webinar to talk about how financial services companies can leverage supplier diversity.

Measuring supplier diversity program success

Morales said companies typically handle supplier diversity in one of four ways:

  1. These companies don’t do anything intentionally, they don’t track metrics, and they get diverse suppliers by accident.
  2. These companies voluntarily track their internal procurement and categorize it with diverse suppliers. They may or may not have goals or report the information.
  3. These companies are required to report their spending because of existing legislation, but the legislation does not contain goals or mandates.
  4. These companies are subject to regulations and within the legislation are goals and mandates for spending.

Morales said the California Department of Insurance falls into the third category. California’s insurance market is actually one of the largest in the world and is far beyond the national average when it comes to diverse spend. Morales credits their success to a law that makes insurance companies disclose how much they spend with diverse suppliers.

Program Metrics to Drive Better Results

California has seen incredible results from its legislation. In 2012, insurance companies spent $930M with diverse suppliers. In the most recent report, that number is up to $3.1B. “That’s without any goals, without any mandates,” Morales said. The California utilities industry has seen similar improvements. Their target percent for utilities spending on diverse suppliers is 23%. But one company is hitting around 42%—they spent $2.41B in 2022, and $1B of that went to diverse firms.

So legislation, even without mandates and goals, can have a massive impact on diverse spend. It creates visibility and accountability, helping the bottom line and driving better business values.

Best Practices for Measuring and Improving Programs

“The more you report it, the more it gets done. The more visible it is, the more likely it is that your C-suite will understand and drive these results,” Morales said. He added that companies that have executives on board do better than competitors.

Another way to improve programs and measurement is by benchmarking your company against the industry, even looking at business-to-business level results. This can help companies quickly recognize areas to improve.

Measuring economic impact to address regulations

Financial services organizations in particular are required to invest in their communities.  Mark mentioned the Community Reinvestment Act (CRA).  The CRA was enacted in 1977, against a backdrop of urban decay and a lack of investment in communities. Congress found that banks have a continuing and affirmative obligation to help meet the credit needs of their local communities, including low- and moderate-income (LMI) neighborhoods where they are chartered.  Supplier diversity programs can be a great way to do that. 

As part of their supplier diversity program, it’s important to go beyond total spend and percent of total spend. Companies need to take a look at their total economic impact. Diverse spend ripples out into communities, so identifying how diverse spend impacts people can be extremely effective. “If we are buying from a disabled veteran’s business, there’s a good chance that that business employs other veterans. And then we’re impacting those veterans’ families, and then the communities around those veterans’ families,” Morales said.

Supplier.io’s 2023 Supplier Diversity Economic Impact found that $160B can translate to about 124,000 unique suppliers that provide 1.3M jobs. When breaking it down dollar for dollar, a $1 investment results in $1.80 in community fulfillment.

Conclusion

Morales concluded the discussion with the “4 Cs for Supplier Diversity” that he uses at City National Bank:

  • Contracts. This is the bank’s direct procurement of goods and services from diverse suppliers.
  • Capital. This is the financing arm and the bank services that can be provided to diverse suppliers so contracts can be financed.
  • Capacity. City National Bank helps businesses with financial literacy, certification, and more.
  • Connections. This is about networking and helping diverse suppliers get connected with business opportunities.

As financial services companies continue to navigate the modern marketplace, supplier diversity remains a vital component of a successful and sustainable business strategy.

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