By Nick Petheram, Founder & CEO, Nomia
Financial institutions have spent the past decade strengthening their risk posture around cybersecurity, data-sharing, operational resilience and third-party oversight. Yet even as banks, insurers, asset managers and fintech businesses invest heavily in controls for their most strategic vendors, a significant portion of their supplier base still sits in a blind spot.
This is the long tail of non-strategic spend: the thousands of small, low-value suppliers that collectively represent 15–20% of third-party expenditure across the sector. These vendors provide office services, recruitment support, consulting, cloud tools, facilities, testing and ad-hoc information communications technology (ICT) services. Individually minor, they accumulate into a fragmented vendor ecosystem that is lightly governed and risky.
Regulators on both sides of the Atlantic are raising the bar for third-party oversight. The EU’s Digital Operational Resilience Act (DORA) has elevated ICT resilience expectations across Europe, while US regulators continue to sharpen requirements through the Federal Financial Institutions Examination Council (FFIEC) and Office of the Comptroller of the Currency (OCC) guidance. Layered with expanding Corporate Sustainability Reporting Directive (CSRD) obligations and ongoing General Data Protection Regulation (GDPR) enforcement, the message is unmistakable: financial institutions must move beyond patchwork vendor management and establish full visibility.
The hidden risk inside tail spend
Procurement and risk teams typically prioritise major technology partners, outsourcers, and material service providers. Meanwhile, small vendors often enter through decentralised or expedited routes, as business units seek quick solutions to immediate needs. This creates three common risks:
- Compliance inconsistencies: Small suppliers may not pass through formal onboarding, leaving gaps in cybersecurity, anti-money laundering, data-handling, insurance, and environmental, social and governance (ESG) documentation – issues that surface quickly under audit.
- Untracked ICT exposure: Under DORA, even niche platforms or one-off digital tools fall under ICT oversight requirements. Tail spend is full of these unnoticed dependencies.
- Cost and inefficiency: Fragmentation leads to duplicated suppliers, inconsistent pricing and slow onboarding cycles. Procurement and risk teams spend disproportionate time validating vendors and collecting documents.
These weaknesses rarely cause issues in steady-state operations, but during regulatory inspection or a minor vendor failure, their impact is amplified.
Why tail spend needs a system of record
The core issue is not the suppliers – it is the absence of structure. Tail-supplier data is often spread across spreadsheets, inboxes, legacy databases and business-unit tools. No team has a complete view of who is providing what, their risk posture, contract status, performance, or documentation.
A system of record resolves this by centralising information, due-diligence outputs, and documentation – creating the structured foundation that procurement teams or specialist outsourced partners need to manage tail spend with consistency. With a consolidated view, financial institutions gain insight into:
- which vendors the organisation relies on
- which suppliers fall under DORA’s ICT scope
- where mandatory controls are missing
- where duplication or non-compliance exists
This foundation improves audit readiness, planning and strategic decision-making.
AI + human expertise: accelerating onboarding without compromising due diligence
Tail spend is time-consuming to manage because of its volume. Thousands of suppliers must be classified, risk-assessed, documented and periodically reviewed. AI can streamline this work by extracting key contract terms, flagging missing documents, categorising suppliers and detecting anomalies in transaction data.
But automation alone is insufficient. Regulatory nuance and contextual judgement require human oversight. A blended model – AI for scale and speed, human intelligence for validation – ensures faster onboarding without lowering due-diligence standards, whether that expertise sits within in-house procurement teams or specialist outsourced partners.
Visibility as a driver of resilience, compliance and cost control
Full visibility into the long tail of suppliers enables institutions to meet regulatory expectations and reduce risk while improving cost performance. Clearer data exposes redundant suppliers, outdated contracts and fragmented tooling. It also strengthens incident-response preparedness by revealing supplier-related vulnerabilities earlier.
Visibility supports ESG and CSRD demands as well. A structured approach ensures this information is collected consistently across the supplier base – even from small vendors.
A strategic priority for a more demanding regulatory era
Financial institutions have made significant progress in managing strategic suppliers, but regulators are increasingly clear: risk exists across the entire vendor landscape. Tail spend has become a material compliance and operational issue.
Bringing structure to this category – through a system of record, intelligent automation and expert oversight from internal teams or outsourced partners – reduces risk, improves resilience and helps firms meet evolving regulatory obligations while supporting cost-efficiency.
In an era defined by digital transformation and regulatory tightening, tail spend is no longer peripheral. It is essential to risk management for a future-ready financial institution.
